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Russia's Monetary Solution
Submitted by Alasdair Macleod via GoldMoney.com,
The hypothesis that follows, if carried through, is certain to have a significant effect on gold and the relationship between gold and all government-issued currencies.
The successful remonetisation of gold by a major power such as Russia would draw attention to the fault-lines between fiat currencies issued by governments unable or unwilling to do the same and those that can follow in due course. It would be a schism in the world's dollar-based monetary order.
Russia has made plain her overriding monetary objective: to do away with the US dollar for all her trade, an ambition she shares with China and their Asian partners. Furthermore, in the short-term the rouble's weakness is undermining the Russian economy by forcing the Central Bank of Russia (CBR) to impose high interest rates to defend the currency and by increasing the burden of foreign currency debt. There is little doubt that one objective of NATO's economic sanctions is to harm the Russian economy by undermining the currency, and this policy is working with the rouble having fallen 30% against the US dollar this year so far with the prospect of further falls to come.
Russia faces the reality that pricing the rouble in US dollars through the foreign exchanges leaves her a certain loser in a currency war against America and her NATO allies. There is a solution which was suggested in a recent paper by John Butler of Atom Capital, and that is for Russia to link the rouble to gold, or more correctly put it on a gold exchange standard*. The proposal at first sight is so left-field that it takes a lateral thinker such as Butler to think of it. Separately, Professor Steve Hanke of John Hopkins University has alternatively proposed that Russia sets up a currency board to stabilise the rouble. Professor Hanke points out that Northern Russia tied the rouble to the British pound with great success in 1918 after the Bolshevik revolution when Britain and other allied nations invaded and briefly controlled the region. What he didn't say is that sterling would most likely have been accepted as a gold substitute in the region at that time, so running a currency board was the equivalent of putting the rouble in Russia's occupied lands onto a gold exchange standard.
Professor Hanke has successfully advised several governments to introduce currency boards over the years, but we can probably rule it out as an option for Russia because of her desire to ditch US dollar relationships. However, on further examination Butler's idea of fixing the rouble to gold is certainly feasible. Russia's public sector external debt is the equivalent of only $378bn in a $2 trillion economy, her foreign exchange reserves total $429bn of which over $45bn is in physical gold, and the budget deficit this year is likely to be roughly $10bn, considerably less than 1% of GDP. These relationships suggest that a rouble to gold exchange standard could work so long as fiscal discipline is maintained and credit expansion moderated.
Once a rate is set, the Russians would not be restricted to just buying and selling gold to maintain the rate of gold exchange. The CBR has the power to manage rouble liquidity as well, and as John Butler points out, it can issue coupon-bearing bonds to the public which would be attractive compared with holding cash roubles. By issuing these bonds, the public is in effect offered a yield linked to gold, but higher than gold's interest rate indicated by the gold lease rates in the London market. Therefore, as the sound-money environment becomes established the public will adjust its financial affairs around a considerably lower interest rate than the current 9.5%-10% level, but in the context of sound money it must always be repaid. Obviously the CBR would have to monitor bank credit expansion to ensure that lower interest rates do not result in a dangerous increase in bank lending and jeopardise the arrangement.
In short, the central bank could easily counter any tendency for roubles to be cashed in for gold by withdrawing roubles from circulation and by restricting credit. Consideration would also have to be given to roubles in foreign ownership, but the current situation for foreign-owned roubles is favourable as well. Speculators in foreign exchange markets are likely to have sold the rouble against dollars and euros, because of the Ukrainian situation and as a play on lower oil prices. The announcement of a gold exchange standard can therefore be expected to lead to foreign demand for the rouble from foreign exchange markets because these positions would almost certainly be closed. Since there is currently a low appetite for physical gold in western capital markets, longer-term foreign holders of roubles are unlikely to swap them for gold, preferring to sell them for other fiat currencies. So now could be a good time to introduce a gold-exchange standard.
The greatest threat to a rouble-gold parity would probably arise from bullion banks in London and New York buying roubles to submit to the CBR in return for bullion to cover their short positions in the gold market. This would be eliminated by regulations restricting gold for rouble exchanges to legitimate import-export business, but also permitting the issue of roubles against bullion for non-trade related deals and not the other way round.
So we can see that the management of a gold-exchange standard is certainly possible. That being the case, the rate of exchange could be set at close to current prices, say 60,000 roubles per ounce. Instead of intervention in currency markets, the CBR should use its foreign currency reserves to build and maintain sufficient gold to comfortably manage the rouble-gold exchange rate.
As the rate becomes established, it is likely that the gold price itself will stabilise against other currencies, and probably rise as it becomes remonetised. After all, Russia has some $380bn in foreign currency reserves, the bulk of which can be deployed by buying gold. This equates to almost 10,000 tonnes of gold at current prices, to which can be added future foreign exchange revenues from energy exports. And if other countries begin to follow Russia by setting up their own gold exchange standards they likewise will be sellers of dollars for gold.
The rate of increase in the cost of living for the Russian population should begin to drop as the rouble stabilises, particularly for life's essentials. This has powerfully positive political implications compared with the current pain of food price inflation of 11.5%. Over time domestic savings would grow, spurred on by low welfare provision by the state, long-term monetary stability and low taxes. This is the ideal environment for developing a strong manufacturing base, as Germany's post-war experience clearly demonstrated, but without her high welfare costs and associated taxation.
Western economists schooled in demand management will think it madness for the central bank to impose a gold exchange standard and to give up the facility to expand the quantity of fiat currency at will, but they are ignoring the empirical evidence of a highly successful Britain which similarly imposed a gold standard in 1844. They simply don't understand that monetary inflation creates uncertainty for capital investment, and destroys the genuine savings necessary to fund it. Instead they have bought into the fallacy that economic progress can be managed by debauching the currency and ignoring the destruction of savings.
They commonly assume that Russia needs to devalue her costs to make energy and mineral extraction profitable. Again, this is a fallacy exposed by the experience of the 1800s, when all British overseas interests, which supplied the Empire's raw materials, operated under a gold-based sterling regime. Instead, by not being burdened with unmanageable debt and welfare costs, by maintaining lightly-regulated and flexible labour markets, and by running a balanced budget, Russia can easily lay the foundation for a lasting Eurasian empire by embracing a gold exchange standard, because like Britain after the Napoleonic Wars Russia's future is about new opportunities and not preserving legacy industries and institutions.
That in a nutshell is the domestic case for Russia to consider such a step; but if Russia takes this window of opportunity to establish a gold exchange standard there will be ramifications for her economic relationships with the rest of the world, as well as geopolitical considerations to take into account.
An important advantage of adopting a gold exchange standard is that it will be difficult for western nations to accuse Russia of a desire to undermine the dollar-based global monetary system. After all, President Putin was more or less told at the Brisbane G20 meeting, from which he departed early, that Russia was not welcome as a participant in international affairs, and the official Fed line is that gold no longer plays a role in monetary policy.
However, by adopting a gold exchange standard Russia is almost certain to raise fundamental questions about the other G20 nations' approach to gold, and to set back western central banks' long-standing attempts to demonetise it. It could mark the beginning of the end of the dollar-based international monetary system by driving currencies into two camps: those that can follow Russia onto a gold standard and those that cannot or will not. The likely determinant would be the level of government spending and long-term welfare liabilities, because governments that leech too much wealth from their populations and face escalating welfare costs will be unable to meet the conditions required to anchor their currencies to gold. Into this category we can put nearly all the advanced nations, whose currencies are predominantly the dollar, yen, euro and pound. Other nations without these burdens and enjoying low tax rates have the flexibility to set their own gold exchange standards should they wish to insulate themselves from a future fiat currency crisis.
It is beyond the scope of this article to examine the case for other countries, but likely candidates would include China, which is working towards a similar objective. Of course, Russia might not be actively contemplating a gold standard, but Vladimir Putin is showing every sign of rapidly consolidating Russia's political and economic control over the Eurasian region, while turning away from America and Western Europe. The fast-track establishment of the Eurasian Economic Union, domination of Asia in partnership with China through the Shanghai Cooperation Organisation, and plans to set up an alternative to the SWIFT banking payments network are all testaments to this. It would therefore be negligent to rule out the one step that would put a stop to foreign attempts to undermine the rouble and the Russian economy: by moving the currency war away from the foreign exchanges and into the physical gold market were Russia and China hold all the aces.
*Technically a gold standard is a commodity money standard in which the commodity is gold, deposits and notes are fully backed by gold and gold coins circulate. A gold exchange standard permits other metals to be used in coins and for currency and credit to be issued without the full backing of gold, so long as they can be redeemed for gold from the central bank on demand.
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As they turn into the home stretch its
Guantanamo Bay
waterboarding
extraordinary rendition
droning the suspicious
'contractors' aka mercenaries
The Tuskegee syphilis experiment
recently America has a lot to be proud of.
remember, It's not the quantity that counts. It's always been the quality.
DCRB made a good point:
It's true. One of the hazards of reading history is that it can shred cherished illusions which have been held and reinforced since childhood. One of the benefits of reading history is that multiple perspectives can help one understand past events which seem senseless and/or inexplicable.
One disturbing trend that I've noticed, at least as far as the Western society in which I live, is the extinction of empathy. It seems like people are not just unwilling, but actually unable to see any conflict from a point of view other than their own. This lack of empathy is dangerous because it impairs judgement, curtails critical thinking, and leads to bad decisions. A better understanding of history could, in my opinion, certainly help with the empathy deficit.
Of course, when it comes to man's inhumanity to man, Asians are no different than anyone else. If you look carefully at the historical record, you will find humans have an impressively brutal history of mistreating not only foreigners they conquer, but their very own peoples.
The Japanese experimentation with plague bombs on China is just a continuation of humanity's sordid history, preceded by things like giving smallpox blankets to American Indians or catapulting plague-infected corpses over the walls of besieged European cities.
While I can't excuse the mistreatment of prisoners of war, I can certainly understand the entirely human response of seeking revenge exhibited by the North Koreans and North Vietnamese.
It is interesting to compare, for example, what Americans know and remember about the Korean war and what Koreans know and remember.
http://www.atimes.com/atimes/World/WOR-03-130214.html
http://antiwar.com/blog/2013/03/05/north-korea-and-the-united-states-wil...
While I don't want to overburden readers of this comment with too many links, I would be remiss if I didn't mention the book Gruesome Harvest. Written in 1947 by Ralph Keeling, it details the Allies' treatment of Germans after the end of the Second World War, which Time magazine then referred to as "history's most terrifying peace". It can be read online below:
http://digicoll.library.wisc.edu/cgi-bin/History/History-idx?id=History....
Be careful, though, as it can shred cherished illusions.
Good post 4 todays Torture announcement.
Thanks for the different perspective
Ur full of shit, we suppress our Socialist workers & communist.
- U must be fantasizing.
- U never met a communist in ur life.
- We don't tolerate Communists and we will fuck U
- Get a clue, USA is as both Rs & Ds want it
- maybe focus on one area 4 comments
- Finance, Banking, Fraud, Accounting, Politics, Lobbying, Ratings Agencies, Right Wing War Mongering Interest Groups, Monopolies, Anti-Trusts, Federal Reserve, FINRA, SEC, FTC, CBO, GAO, US Congress, DOJ, FBI...
No Real Americans want to Vote?
That Occupy Wall Steet crowd eally have suffered from the jail sntences.
As a "Gold Bug", I really want to see Russia force part payment of energy to the west in gold .... that would put a burr into some Central Bank butts....
I love when people show thier ignorance of history and geopolitics
Wake up there is no East vs West
Um, it's happening:
https://syrianfreepress.wordpress.com/2014/11/27/putin-golden-trap-1/
OK, they're taking USD, but then are turning around and buying gold. As the article notes, the US is pretty much fucked, it's stuck in a trap.
Let's see I can buy 10% rubel bonds that pay 10% in a country that has a future, or get almost 0% from the bonds of a country that has none. Hard choice eh?
pouvoir d'achat
that is an ideal currency interest rate swap that i am sure someone with bigger guns than everyone combined here is probably taking advantage of. that might be a fun trail to follow.
The article lost me here -- "Russia has some $380bn in foreign currency reserves, the bulk of which can be deployed by buying gold. This equates to almost 10,000 tonnes of gold at current prices"
If Russia, or anyone, started to spend even a fraction of $380bn for physical gold, well, not only would it all dissapear but it certainly would not stay at the same price. You would not end up with 10,000 tonnes. You could spend it all on paper gold though....
A plummeting currency, rising inflation and sagging oil prices — that's the stuff Vladimir Putin's nightmares are probably made of.
The former KGB operative has staked his reputation for years on Russia's spectacular economic growth throughout the 2000s, thanks to its dependence on increasingly lucrative energy exports.
As the price of oil, Russia's most important export, climbed from $16 a barrel in 1999 to more than $140 in 2008, a new middle class enjoyed the fruits of prosperity, eagerly burying the memories of the impoverished 1990s.
But as the Kremlin now lords over Ukraine and stares down the West, Putin's nationalist gambit is finally being felt on the home front, threatening the central notion that's helped keep him in power so long.
"The myth of 'stability' has now been broken," says Anders Aslund, a senior fellow at the Peterson Institute for International Economics.
While Putin's grip on power is still far from tenuous, the steady stream of gloomy economic news is probably causing at least some concern in the Kremlin.
The effects of Western sanctions and steady drop in global oil prices to a five-year low of below $70 this week are costing Russia some $140 billion annually, according to the government's own estimates.
Russian officials on Tuesday warned the country faces a recession in 2015 that could see the economy shrink for the first time in five years.
They believe it will contract by 0.8 percent next year, down from a previous estimate of 1.2 percent growth.
Ordinary Russians have watched as their currency lost nearly 40 percent of its value since the beginning of the year. They can also expect double-digit inflation by early next year, officials predict.
Taken together, these stats are why Putin has long stopped trumpeting his country's economic statistics in order to boost popular support, says Alexander Baunov, an editor of one of Russia's only remaining independent news outlets.
Instead, the third-term president harps on the historical injustices he claims Russia has suffered at the hands of foreign powers, part of a nationalist drive casting his country as a bulwark against the West and shielding him from domestic contempt.
"The frustrated president-economist has turned into the president-historian before our eyes," Baunov wrote Tuesday on Slon.ru. "And usually this portends nothing good."
Even those with ties to Putin are warning about the dangers of his current political strategy, which has spooked investors and boosted capital flight to nearly $130 billion this year.
Late last month, a well-respected former longtime finance minister under Putin argued in a newspaper editorial that the president's "populist approach" would slow economic growth in the long term.
To be sure, most Russians haven't registered the developments quite yet. A majority of the population still credits Putin for restoring what it sees as Russia's rightful role on the global stage.
Thanks to a fierce propaganda campaign that's played out over state-controlled media here, few people realize the economic malaise is the Kremlin's own fault, says Denis Volkov, a researcher at the independent Levada Center think tank.
Instead, many remain resentful of what state television insists are aggressive and irrational Western policies toward Russia.
"Almost no one understands the point of view of the other side," he says. "People do not even understand why the West is imposing sanctions, for example."
The Kremlin has bolstered its narrative with an ongoing onslaught against the last vestiges of independent media. Critical outlets have been emasculated or shuttered and their editors threatened or cowed.
That helps explain why even though 60 percent of Russians say they've noticed the hike in consumer prices, a whopping 82 percent of decided voters would reelect Putin in a snap presidential heat, according to fresh Levada statistics.
Some observers suggest Russia's economy can still float along while depending on its substantial foreign currency reserves — which hover around $400 billion — to stave off economic depression and widespread discontent.
But Aslund says the usable sum of those reserves is actually much smaller, while the price of oil may continue its steady slump.
"I think we are likely to see much more decline than anybody now predicts," he says.
Other observers say that while Putin can still count on the propaganda coup his state media machine has pulled off, it's only because Russians haven't had to cope with the downturn for long.
What comes next, says Volkov, is still anyone's guess.
On one hand, Putin has already successfully weathered a mass protest movement and defanged his political opposition. On the other, it's the first time his 14-year rule has been put through such economic trials.
"We're only in the very beginning of this situation," Volkov adds, "so it's rather hard to forecast how it will develop."
Russian are nationalist, they are intelligent enought to understand that this situation is NOT Putin's fault, but the imperialist West who try to poke the bear.
You obviously don't know Russian mentality, for them a few year of depression is nothing, they will prefer to DIE than to let Russia being bullied and controlled by the USSA and NATO imperialist: they got it right.
Wish my country could do the same (France), but apprently my president with the dutch name can only suck Obama's balls, what a disgrace.
I sympathize with your disgust for Hollande, but I can't generate much sympathy for an autocrat like Putin who utilizes state-controlled media to get his message out without dissent and dispenses with any semblance of rule of law.
Where's the honor in that?
Find me a single genuine anti-Putin in RussiaToday.com. Just one. You can't. However, I can find any number of anti-Obama articles, even on liberal sites. Why? Because for all America's flaws, folks are still able to voice dissent through mainstream forums.
This is all about Putin attempting to reconstitute the Soviet state, which means piecing together the fragmented states which he sees as rightfully Russia's.
Do you see America attempting to add a 51st state or additional territory? America lives in peace with its northern and southern neighbors. Russia subjugates its neighbours.
At least Ukraine shares a border with Russia and Russia has moved men and weapons to its side of it. (Show us acceptable proof that Russia has crossed the border and has dug in. Not hearsay or the lying propaganda of NATO generals, who retracted 3 claims that Russia violated Baltic air space last week alone.)
The United States does not share a border with Iraq but invaded that sovereign country 8000 miles away to remove a dictator it had dirty dealings with in the 80's.
I don't see the US trying to add a 51st state. It already has one. Yiddle diddle diddle.
But this week alone it let it be known that the Hungarian government had better change its direction. Ditto the Czech Republic. And that it forced the EU and NATO to threaten Bulgaria if it did not terminate the South Stream pipeline, all the little, retarded kindergarten children know, if you don't.
I'd advise you to get down off your high horse about Putin, and read some of the intelligent comments here.
Whatever this country has today, it has because it borrowed $18 trillion WHICH IT HAS NO INTENTION -- OR MEANS -- OF PAYING BACK
WHERE'S THE HONOR IN THAT?
Two post removed.
USSA put puppet regime everywhere in the world, and kill their puppet when they start do bite or threaten the petro-dollar.
You have more than 900 bases around the world and you pretend to be peacefull ?
I'm proud that the general de Gaulle told you to go home and send you two fregate in NY searching for OUR gold, we need more people like this in France.
France need top cut relation with USSA and NATO for our own soverignty, but all our politics (except maybe Marine Le Pen) are USSA and Jew (Sionist) sucker...
BTW thanks for assinating Christophe de Margerie the CEO of Total, and put a 10 billion fine on our banks just because we wanted to trade the "mistral" with Russia.
The day your Empire will collapse I will drink champagne until I'm drunk.
Disc: I have nothing against the average American but those in power and those who vote for them can suck my ass.
.
Vive le France! Of course, I mean the French people, not the idiots that have seized control of the French government.
BTW, even though Hollande obediently rolled over for Obama regarding the Mistrals, don't expect a refund on the 10 billion fine. Friends, partners, and allies of our occupational government in Vichy DC need to get used to things like that. It's what abusive relationships are all about.
GoldSilverBitcoinBug:
Nailed it...
The amount of work and journalism carried out by the state sponsored RT news is keeping the public informed on the real issues at hand. They are far superior to the shit coming from the western media.
If anything the Russians will be pissed if Putin doesnt start striking back effectively.
You rreally think it's going bad for Russia? Guess again:
https://syrianfreepress.wordpress.com/2014/11/27/putin-golden-trap-1/
Funny how even Bloomberg reluctantly admits that the declining ruble offers benefits to Russia's domestic economy.
http://russia-insider.com/en/politics_business_opinion/2014/12/01/10-04-...
In 1999 the dollar was worth .06 cents.
Today it's worth less than a penny.
Put it back in your pants, Amerikan Patriot. You got all excited for nothing.
Russia is now forced to pay almost 11% yield in order to finance its debt. With Russia's $400 billion currency fund, you'd think they'd take a pass on those terms, but nope....
Any idea why Russia is forced to pay such usurious rates? Because RUSSIA IS A BAD CREDIT RISK AND MARKETS KNOW IT.
Russia has defaulted (recently) before and will likely do so again.
American Patriot:
Putin plays Chess, Obama plays checkers, hopscotch jumps Europe, Japan is the third round of Russian roulette.
The rest of the world watches this insanity with apprehension.
Make no mistake, everyone has sided.
Turkey last week.
As a FAL or AR-15 you are with a finger on the other trigger lock prepared to shoot in burst or intermittent.
For now the shots are intermittent.
The whole world knows that the AEGIS system does not work, that F-16s will not know what hit them, know that GRAD do mizéria on war tanks, know that Russian submarines visited the Atlantic coast for two months and Chinese submarines tested missiles on the Pacific coast.
The whole world knows that the F-22 and F-35 are one shit.
They know that coastal attack ship aluminum with three hulls - trimaran - is a tremendous shit.
The whole world visiting the US in search of cheap Chinese products concentrated in one country sees that it is a very strange country, most would be better off wearing Burka.
Could write fifteen pages about my impressions of these people "exceptional".
: - /
Oh, another thing:
The Russians know where and how deep is Dimona.
hehe.
Your translations are getting much better.
Ow!
I'll tell you one thing:
http://vineyardsaker.blogspot.com.br/search/label/Alexander%20Mercouris
hehe.
ZeroHedge loses for not posting this!
:-)
Yeh that was good. The soft Europeans are about to find out who runs barter town.
Sounds like Russia has just issued a Declaration of Indepence. To bad nobody in the US Government remembers what that is.
That is a good article on a major development which, for obscure reasons, has barely been mentioned in the Anglophone press.
It seems that the economic dynamo that is the EU is really kickin' Russian butt re energy markets. /s
How many times Putin was in Israel?
If I'm not mistaken the last time was in 2012.
: -
Why not just abandon the FOREX and adopt a Eurasion currency exchange system with rest of the anti-dollar bloc? They've done everything else needed already. And within that market, let the market price gold (or let gold price the currencies) relative to one another.
In case we have all forgotten, this IS how a free market in currencies works, alongside a FREE MARKET in PHYSICAL gold. EURASIEX doesn't need to trade with FOREX - aren't they de facto in a cold trade war already?
All this other nonsense is the old science of the dying paradigm.
Read FOFOAs latest post to better understand the new ...
But read about fiat 33 and the dirty float for background if you need to.
Why not to start by removing RUB currency (acting on the supply side) from circulation with the tax revenue ?
Let's say 1% of the tax money goes in reserve and go out of circulation and when we are at it buy gold with it ?
Actually the flat tax is very low, 13 % to 14 % shouldn't be hard to implement.
Of course as soon the situation is better tax is reduced back to 13 %.
In accordance to economy101 if you reduce supply for a given demand price rise no ?
Wot? I must be drinking to much. Nobody in ZH seems to explain themselves.
Simple: central bank remove currency from market by tax, an IBM share buy back if you prefer...
Look I lost money in stock market and you will make fun of me: it was GLD, MLP in oil & Gas, ... and other stuff, never invest in small caps...
I still don't know what your saying...
- Cost of living is up from 2009
- Taxes on property are up from 2009
- Never owned IBM Stock
- Never owned GE or GM, what the hell are you on about?
Maybe I can't understand people if they don't have bullet charts to prove or back up their thinking... sorry my father was a science dude... but this is common business language and thinking... where are the lists, Bullets?
I've drunk half a 750 ml bottle at this point, but see I am clear.
I speak about Russia not USA, buying back currency to strengthen it like IBM making share buy back to prop up the rate.
Don't worry I don't do stock, I'm rather into bonds and currency.
Actually oil isn't the moment to enter, waiting that Saudi cut the production and a stable global demand persective...
"...as fiscal discipline is maintained..." Ah ha ha ha ha!!!!! Wow, that's a good one. Yea, this from the same guy that spent, what, $50 billion on the Winter Olympics to show his is bigger's than everyone else?
Appears the FSB Tyler has been promoted from the weekend gig.
this is stupid. you know, all putin would have to do if he really wanted to strengthen the ruble is to demand payment for gas in rubles. in other words, russia is benefiting from the weak ruble in the dollar market and its dollar value doesn't matter in the exdollar market.
I assume you mean future contracts.
No doubt, previous contracts, not expired, have the agreed on currency stipulated.
NeoCons and Friends want World Domination; and War/Intimidation has been a Method Well Used.
Many Westerners will experiment/"Insure themselves" with the RUS_CHN Alternative. A Ukranian War might prevent that.
Imagine that - a Petrodollar Curtain (already happening to US Customers in European Banks) - courtesy of our MIC.
"rape by fraud" is that a golddigger? I'm so confused..
Yes, Russia could defend the ruble by so restricting supply of rubles as to make them effectively unobtainable. Just tell everybody to use gold as currency. Fine. But what if nobody has any gold, or not enough gold to do business? You can always starve the economy of money to keep the currency strong. But what good is that?
"But what if nobody has any gold, or not enough gold to do business?"
This is a distraction from the REAL issue, that being that the world's reserve currency is no better than toilet paper. Why would anyone want to trade precious resources for paper?
Europe is sunk. China, if it isn't already obvious, is where Russia is shifting focus toward. And China has gold.
https://syrianfreepress.wordpress.com/2014/11/27/putin-golden-trap-1/
That would be Putins grassy knoll to come event. Just as Ghaddafi bought the farm for dreaming of the Gold Dinar or Saddam Hussein wanted to trade oil for Euros.
Will never happen unless it does.
Looney: "I can hear the voice of Nigel Farage screaming his hemorrhoids off into Cameron’s left ear,"
Priceless !!!
+ 1000
This isn't a solution for anything. It's a scheme by the Banksters to get their hands on Russia's gold.
anyone think putin got down moochelle obamas pants yet?
inquiring minds want to know
I have never seen a scenario where any "whale" in the gold market (which Russia certainly is) could view blowing up the LBMA and Comex gold rigging enterprise as a realistic option. But the cuurent war on Russia in the form of sanctions and FX attacks might just put them in a frame of mind to do it. Wouldn't take that much money to create a substantial position, stand for delivery, and burn the whole enterprise to the ground.
Adding gold to one's reserves would be like adding more people to your side of the tug-of-war rope. In this environment there can be little if any downside risk for any CB to add gold in substantial amounts to their reserves.
No one disagrees that the physical stores of gold that are available for delivery have been drawn down to a low but unknown level.
There is an erie calm in the PM markets over the last day or two. I am looking for another smack-down, or should I say, attempted smack-down of the metals but I wonder if there is any wind left in the sails of the smackers-downer and also wonder, would they take a chance on some unknown entity once again entering the market to scoop up another big chunk of their shorts and demand delivery if they should attempt such a thing. http://kingworldnews.com/kingworldnews/KWN_DailyWeb/Entries/2014/12/3_Mystery_Gold_Buyer_Took_On_%26_Crushed_All_Paper_Shorts.html
The charts at Kitco look very strange over the last 2 days. It looks like both sides are waiting for the other side to make a move.
I don't wish for an even greater economic crisis than what we have already experienced but we know one is coming. Everything will change, but we don't know what it will actually change to. We do know the PMs will have a place in the future economic system, maybe a little, maybe a lot, but definitely a place.
"Everyone has a plan until they get punched in the mouth."... Mike Tyson
Bitcoin Last Price $377
Notice the low volatility in this moment.
Also the difficulty of mining decrsed first time since two year !
In BTC I wait for halving mining rate supply in half 2016 to invest, if demand is stable, price should adjust :)
Bullish !
Putin said in a recent speech that he wanted Russia treated as an equal partner by the G20 "partners" not go it alone and fuck the rest of the West...Gold is a acceptable hedge strategy to defend Ruble .....no nation is returning to a gold standard....some are definitely threatening to return to national currency based on said nations full faith and credit(real economic output).Central banks would not go away in that scenario...borrowing would still take place..lol
https://syrianfreepress.wordpress.com/2014/11/27/putin-golden-trap-1/
"Ferguson (I would add markets, currency, economies etc.) is only a distraction from what is actually going on - World War Three. As soon as Ukraine becomes officially a part of Nato - the world will descend into complete darkness. Therefore, do not be so enamored by what is transpiring in Missouri - it is only one fraction of the entire scenario - which is to break out quite shortly. "
This is an opinion from an orthodox Jewish blog that I read to see when the end of the world is coming http://yearsofawe.blogspot.com/2014/11/the-death-of-sheker-hachein-false...
You're welcome...
http://etfdailynews.com/2014/12/03/new-signs-gold-and-silver-are-returni...
I'm amazed Asia hasn't rolled out of bed one morning and just told the COMEX to eat fuck, put up or sht up, then bump gold up to 2800.00 or whatver they choose, forcing COMEX to take one in the shit chute.
Why should they? They might be players on the CONeX, on the short side, and as long as the physical flows why stop it now ?
barter is the oldest system of commerce.
when the BIS's currency doesn't churn they bleed.
i'm not rooting for america to be in ruins.
this is rather simplistic but america has gone to war against people who were doing just what america is doing now.
what barter means ?
it means money is secondary, economy can function without money.
House trading is in reality barter - money is incidental
Russia may back their currency with gold.
Barack has a ljst of enemies, and orders drone strikes on American citizens.
Something just doesn't quite jive, here.
gold standard is like a stone around your neck - you would not be able to print money to develope your economy which russia needs now badly
gold standard is a bad idea. good idea is to keep your savings in gold
In 1906 general Nechvolodov
http://ru-facts.com/news/view/34181.html
Alisdair Macleod, of the clan Macleod, always has interesting articles. There can only be one.
Somebody is going to go to a gold standard and it won't be the West. Right now they're playing chicken and jockeying into position, but somebody is going to pull the trigger.
With Hong Kong as a money centre it is a different game nowadays anyway. Russia and China have the growing markets and can develop especially if Oligarchs return their funds ti new ventures. The US industrialised behind the McKinley Tariff 1890 shutting out manufactured goods - even those it did not manufacture itself.
Poor ruskies... but, well it's their fault they keep that Putin regime in power over them.
"Olga Kupriyanova, a 35-year-old law professor at Moscow State University, says her family of four feels the pinch particularly when it comes to putting food on the table. Inflation is estimated to reach 10 percent by early next year, and food is rising fastest. According to the Federal Statistics Service, chicken costs 27 percent more than it did last year, pork 25 percent, and the beloved staple of buckwheat 48 percent. Russians on average spend about 30 percent of their income on food, compared with 6.7 percent in the United States.
"We've started to economize on food, but nonetheless because of rising prices our expenses have grown by about 10 percent," said Kupriyanova, who has replaced red meat with chicken and cut most cheese and fish out of the family's diet.
Russia's economic woes stem from a trifecta of problems. First, oil and gas exports, which finance half of Russia's budget, have been hit by the plummet in world markets: the global price of crude oil has fallen some 25 percent since the summer. Renaissance Capital analyst Oleg Kouzmin says if prices stay there, Russia could see its economy shrink by 3 percent next year.
Second, Russia's banks, which were slapped with sanctions this summer as a response to Moscow's role in Ukraine, have to pay off $90 billion in external debt before the end of 2015, which is becoming harder by the day as the ruble loses value. The central bank had tried to support the ruble but after spending $29 billion in October alone it gave up and floated the currency last month."
"Politicians and state-run television have pushed a narrative that only the rich will be affected by the depreciation of the ruble. But slowing growth and rising inflation have affected average Russians like Kupriyanova and Antonov, who both earn less than the average Moscow salary of 50,000 rubles a month, now worth about $925."
"Politicians are trying to make the best of the situation, but this attacks low-income households more than middle- and high-income households," said Konstantin Sonin, an economist at Moscow's Higher School of Economics. "They spend more on consumption and food, and they are the most vulnerable."
http://news.yahoo.com/western-sanctions-ruble-crash-hit-russians-hard-14...
One joke making the rounds on Russian social media: "What do Putin, the price of oil, and the ruble have in common? They'll all hit 63 next year."
I note a certain... glee in your (excellent) comment
I thought Americans give 11% of their income for food? you claim 6.7%, that is a bit new for me. Anyway, your 30% in Russia ties in with my numbers, for both Russia and the relatively high numbers in the whole world, including in a certain degree Europe. It's funny how food-obsessed America can be, if you take their exceptional numbers
"Politicians and state-run television have pushed a narrative that only the rich will be affected by the depreciation of the ruble. But slowing growth and rising inflation have affected average Russians like Kupriyanova and Antonov, who both earn less than the average Moscow salary of 50,000 rubles a month, now worth about $925."
well, that is rubbish, of course. The rich not only can laugh about food prices, they can even bet on a further downward fall of the Rouble and rationalize it as a careful hedge for their portfolio positions. In the greater scheme of things, they are on the side of the "enemy", from the view of the Russian national bank, as I try to explain in my comment below
"Russia faces the reality that pricing the rouble in US dollars through the foreign exchanges leaves her a certain loser in a currency war against America and her NATO allies"
I disagree
yes, the FX markets involving the Rouble are a reality. but it's not "a currency war against America and her NATO allies"
the "currency war" is perhaps a misnomer, by using that loaded word that is "WAR", implying fronts, friends and foes
reflect for a moment. who can trade FX crosses involving the Rouble? well, in our globalized world, nearly everybody with cash to do that
I was writing here and here about the similarites with the Swiss dilemma
I'll recap: Russia has a national economy and a national (fiat) currency. both have a certain size
and it has international trade, again of a certain size
meanwhile, the amount of cash willing to bet on certain outcomes has a humungous size, incomparable to the realities of Russian economic calculation, import/export, etc.
for the real Russian economy, the problem is to find stability in it's price calculation, as for all real economies. entrepreneurial activity always starts with price calculation
and this is the reason why "bad money drives good money away", which means that a currency that is more stable even when losing value beats a currency that stores value but fluctuates more as Numéraire in it's use by the real economy
this is wonderfully visible in gold coins that have a face value of fifty USD. if you really get someone to pay you a debt of fifty dollars with such a coin... you keep it. you don't spend it again for a debt of fifty dollars
now "financial markets" have started to play with the Rouble. and they are big. so financial market "casino rules" apply... more then real economic calculations involving Russia. the market logic of Bulls and Bears supersedes all, because of it's size
and this is a "game" that the Russian National Bank can only counter with managing the price of the Rouble. and for that, it needs FX Currency Reserves. and no, gold is at the moment not useful, because it's price is already the playball of the financial markets, and currently depressed, from a Russian CB perspective
which, perversely, means that Russia would be better off having more dollars in reserve, instead of gold. one trillion dollars in reserve, coupled with a national bank tradition of gleefully trashing at the right tactical moment the most exposed position by the markets would probably do the job. note the psychology involved: "you bet against me, I'll trash your position"
so yes, it is a "war", but it's the Russian National Bank against everybody that bets against the Rouble, similar to any "price war"
which can of course even include Russians in or out of Russia, if they are "hedging" their exposures
A "currency war" is really just this: a price war about the "correct" valuation of currencies. lay off your "market fundamentalist" glasses, if you have them on, and realize that a market price is an agreement among participants. it's not "divinely ordained". it can be "managed" by "big players", if they are big enough. Just see the current price war in the oil market, and Saudi Arabia's role as "price maker". and a CB is really just that: the "natural" price maker of it's product, the currency
now, if China had a currency widely traded and would tie that one to gold, the situation would be different. but again, see what this would mean: China, by that, would set itself as the "price maker" of gold
note, in all this, how careful the Chinese are. they have the long-term goal of establishing their currency in the international markets. and they started to do this by carefully stocking up a couple of trillions of USDs... first. the equivalent of stocking up ammo as a... deterrent
yes a basket sounds good . screw the western banker pos . time to take the gloves off
Come on ...lets face it, Putin screw up bad in his strategy. For Russia to play hard ball the way they are playing, they would have had to be a lot more self sufficiency than they are now. If they had a strong industry capable of supplying the internal market, a weak Ruble would make Russia flourish not impoverish. I guess Putin played all his cards based on energy and military power. He is learning that the energy side is commanded by bigger players. Now at the military level, Russia can make some serious damage if they want. I don't think they are willing to the hassle of a nuclear war. The Russian oligarchy will depose or kill Putin before it.
Nuland 2.0 -- F**k the RU.
Bizarro world:
A country with abundant natural resources (oil bitchez), little debt (no debt?) and gold "has a collapsing currency".
While another country with monstrous debt, little to no resources for export, no gold, a huge entitlement class, and almost no manufacturing (except for financial products) has a strong currency ?
Ok.
Russia as any country on planet Earth has limited resources and it is getting more expensive to extract these energy recourses, and BTW for that Russia need West tehnologies because they lack knowledge & tehnology (don't give me that single example about rocket engine). And Russia big companies are in huge debt to Western banks in USD, so they have to earn those USD somewhere. Gold? Wel, they doesn't have the amount to back currency by gold and in first day anyone would rush to exchange that paper to gold, and what then?
So who thinks the US should have a strong currency? What the actual fuck?
Somebody's been watching CNBC and Foxnews a bit much IMO.
He is a one trick pony.
They have Western know-how. Exxon and BP and Shell are not going to walk away from their business there.
"her foreign exchange reserves total $429bn of which over $45bn is in physical gold"
So riddle me this. With about 32 billion they could take delivery of 2 billion ounces of silver and crack that market open like an egg. Why haven't they?
http://rt.com/business/211335-russia-limits-american-poultry/
Putin: Missile shield deployment in Europe threatens US itselfhttp://rt.com/news/211383-putin-russia-deterrence-policy/
The US is hoping the suckers in Europe will take all the flack, allowing Russia and Europe to destroy themselves. Putin and Russia know this and won't be playing by US rules. If TSRHTF, Russia's prime targets will be New York, Washington, London and Tel-Aviv.
I'll repeat/paste the solution as I see it, and I do believe its coming:
The Big Move I look for should come like this, likely after a brief Bank Holiday, Research The Group of 77, now some 130+ Nations, and I will refer to all the nations, the 133+, as the BRICets or EastBlocAll the BRICets nations, not just Russia, (over 130) would simultaneously, same day, same time, Hard Peg to China's Yuan, and China would ReValue the Yuan to 2 to $1/USD
(I'll use 2 to 1, though of course its my best example, and you may be surprised to note that this was the Exchange Rate when Nixon Closed the Gold Window and ). Of course by all these nations Hard-Pegging to China's Yuan/renmimbi, they get the same benefits in Purchasing Power and on Commodities.And keep in mind that Nothing changes at all with these countries as far as Trade goes, since the Exchange Rate, for them, remains as it is. It is only the FIAT Printers, the same ones that make up the IMF's SDR, that will see a changeThe USD remains Reserve Currency and will be used (kind of pimped) since it is what's used Globally to set Commodity prices, but those prices would change. The BRICets would also move to a similar type of Balance of Trade Settlement as it was intended and agreed on until the 1971 move by Nixon to Close the Gold Window (and expect the same Globally).
( there is more I could add, but this is the main part, requires you to seriously think about it )