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Russia Shocks With Emergency Rate Hike, Boosts Interest Rate From 10.5% To 17%
Following the biggest rout to the Ruble in ages, Russia - unlike Mario Draghi - instead of talking the talk decided to walk the bazooka walk and shocked all those long the USDRUB by unleashing an emergency rate hike (at 1 am in the morning) from the recently raised interest rate of 10.50% to... hold on to your hats... 17.00%, a 650 bps increase!
From the press release:
The Board of Directors of the Bank of Russia has decided to increase from December 16, 2014 the key rate to 17.00% per annum. This decision was driven by the need to limit significantly increased in recent devaluation and inflation risks.
In order to enhance the effectiveness of interest rate policy loans secured by non-marketable assets or guarantees for a period of 2 to 549 days from 16 December 2014 will be granted at a floating interest rate established at the level of the key rate of the Bank of Russia increased by 1.75 percentage points (Previously these loans for a period of 2 to 90 days, provided at a fixed rate).
In addition, to enhance the capacity of credit institutions to manage their own currency liquidity was decided to increase the maximum amount of funds to repurchase auctions in foreign currency for a period of 28 days from 1.5 to 5.0 billion. US dollars, as well as on similar operations for a period of 12 months on a weekly basis.
And for the Russian-speakers, the full breakdown of rates.
Few markets are open but the 1month forward Ruble market just dropped (Ruble rallied) over 2.5 handles...
RSX (ETF) is starting to rally after-hours...
Chart: Bloomberg
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That means "my real good friend", right?
China.. what is your move?
http://hedgeaccordingly.com/2014/12/why-russia-dances-to-beijings-tune-o...
System is not yet far enough out of whack for China to make a play, nor is Russia yet "isolated" enough.
When China makes its move it will be "game on". Currency war = trade war = shooting war. I hope we get some bank casualties (insolvencies) this time anyway.
We have several very large pools of capital in the hands of sovereigns, but most of it is denominated in USD. Saudis = $800 Billion, China = $Trillions, Kuwait etc $hundreds of billions more. This one is for all the marbles.
The MENA sovereign wealth funds are actually now held in SDR accounts.
Very quietly done just before the oil price started falling.
A lot more is going on behind the scenes.
Source ?
I think Skousen has this one analyzed well
https://www.youtube.com/watch?v=L0lU84AlmUc
SWRichmond.
Si... don't tall any one that China won hand-down. She hole all the balls.
if they play with the colors-re, China kills a bank.
there aren't no one own any land in China, you can take the BRICS home if wanna to, She can make some more.
that depends on what your definition of "worked" is...
by the way... I told everyone here some time ago that when oil hit $US 60 bbl that Russia's CB would intervene aggressively... hate to say I told you so, but I told you so, anyone here spinning this as a sign of strength and expert strategy on Russia's part is a fucking fool, you only pull stunts like this when you're desperate and have no choice
Russia is desperate and has no choice.
I saw Vlad a few minutes ago consulting street corner psychics.
WARNING Amerikan Patriot is a troller check his history
He might be a troll, but he's still an idiot...
"you only pull stunts like this when you're desperate and have no choice"
Oh, you mean like ZIRP & QEInfinity?
What would it be your options to atract cash, buy gold and repay later?
If you want to do this, the move is great!
Fuck you Putin.
Go ride your pony without your shirt in the mountains again. The people need some more propaganda.
.
Thank you for that dazzlingly brilliant insight from The World of Television.
hope Borris
is ok....
https://www.youtube.com/watch?v=IGYaFMFU63U
Paul Volker was the first person I thought of when I saw this article. I mean wtf else can they do. It's a fucking pissing contest with the West in grand fashion. I hope it's worth it.
It's Volcker, Bob.
It worked for America because America was a real country. Russia's not much more than a clearinghouse for oil sales.
Great value in Russia now. I've booked my flights and am looking to invest there in agricultural production. The CIA has engineered excellent exchange rates for us to get involved in boosting the Russian economy. Thanks USA for making Russia the new boom economy.
Don't do the ag investment there.
They will steal the equipmant and the crops.
Who will you complain to?
'
Stilletto. +100
Think if Russia open door down south for agricultural production, gaive them two years contract + 3 + 5years 50/50 after cost, Russia needed no import anymore.
Hate to say this, but sooner or later this new cold war that we started with Russia is going to go hot.
LOTS OF OIL - At least they have two sovereign wealth funds, http://www.swfinstitute.org/fund-rankings/
Bigger balls than Yellen's got!
putin fluffers laid off
You just don't understand how Interest works, do you kitty?
no clearly not. i traded rates for 10years btw
Well, that's why the market became such a joke I guess...
yes and zero to do with the axis of evil - greenspan, bernanke & yellen
You have traded rates for the past 10 years? Bet that looks good on the resume'--oof! bet you can't include any of those years working for .gov.
Yup & I'm sure the Russian CB got permission before hand, you know, being a team player in the CB world -
given, but unlike yellen, he doesn't wear a cotton ball between them, so you can hear him sneaking up behind you.
Can you imagine getting 17% on your bank deposits?? That's a hundred times more than I can get here in this stupid country.
Technically it's only 17x more. LOL.
Where do you get 1% on your bank deposits?
I get charged fees with 0% interest.
My bank will still do .6% on a two year CD.
Mighty white of them.
Mighty white indeed! Speaking of the DEVIL, have you heard about the big White Sale down at the mall? Barry has issued E.O. 666 which stipulates that whites will be sold to the highest bidder until the niggers be satisfied they been repatriateded. Of course, the crackasz won't take kindly to this and will open up with both barrels. The oligarchs love it when we do their job for them.
getting 2 percent on first 10,000-credit union...
new checking plan with 12 debit transactions/month and on-line banking(turn off paper).
yah, along with the bank clawback. double every fee there is, make me pay $14.50 for a same-day online payment. So, that .6% gets cleaned up pretty fast.
Is there a local branch around here? 17% for merely parking your fiat is pretty sweet. Here's to hoping this remains a currency, and not a shooting, war.
Could I get that in wodka, Comrad?
What is the best way to store potatoes? Vodka!
Vodka and gravy is one of my favorites !!!
Hulk smash them together? Maybe add porcini? Serve with nice chianti?
Nothing that violent, just make gravy ice cubes and the rest is standard procedure...
#Div/0 you mean.
Weren't there a few people back in the early 80's who locked in 15 or 20 year CD's at 15% or better...?
I locked in a 10 year CD back then. Problem was, my bank got bought and that made the CD null and void.
Shit, my bank charges me money for the privilege of parking my money with them.
My bank charges me just to park the car.
That's the problem with banker jokes, Bankers don't think they're funny, normal people don't think they're jokes.
Y'all need to switch fuckin banks.
yeah, and I had a fucking ARM @ 24% Mother Fuckers.
.and a $ 250K Operating loan for my seed business....and Reagan implements the famous PIK (Payment in Kind) for farmers and paid them to not plant a crop. My ass is still raw over the whole ordeal.
My mortgage went from 6% to 19.5% and my house value dropped 30%.
Not good times.I survived it,so will the Russians.
Most stubborn people I ever met, made South Africans look positively pliable in
comparison.If you've done biz in SA, you know what I mean.
Afrikaner are good people
Why yes, yes I can. In the mid 80s I had CD's making 13-14% per annum.Go Volcker.
I remember when I could get 12.5% and 15% CDs down at the local S&L... I remember how that turned out, too
Were those some of the S&Ls that Clinton & Co. cleaned out?
I could get 12.5% and 15% CDs down at the local S&L...
I remember private owners of real estate carrying their own paper too in competition with banks / FDIC insured institutions double digit rates. Funny thing about the market, banks aren't the only entities with the capacity to loan. It may have had the appearance of pain, but the medicine was correct and the recovery from the S&L debacle was swift.
This action is much to be preferred to Ben's Japanization of the US economy this time around due to WS's 2007 Fannie / Freddie melt-down.
Vlad must think the US won't attack during his upcoming delirium tremens, and he's probably right as the US continues to remain a junkie, oblivious to reality.
Then again, there's always this solution: http://www.google.com/url?sa=t&rct=j&q=&esrc=s&source=web&cd=3&ved=0CDcQ...
imho.
Lots of bankers and other crooks were thrown in prison during the S&L crisis. Good times.
If only high rates are your criteria,
Call a bank in Zimbabwe before accepting the pittance in rubles.
Go Putin Go!
Next step, the syndicate shorts the CDS into oblivion and then the lights go out.
Everywhere.
There's water all over my screen. Holy shit!
dosvedanya economy
No problem. According to you, they had no economy to start with...
the implosion has been brought forward to next week...
Putty-tat, now remind me again about Ukraine's "economy", their currency and their "Vanishing Gold" trick.
Can you cough up a good hairball, or just good at ass-licking, putty-tat?
the vanishing gold trick was the russian puppet you muppet
Not quite: As it turns out, the Vanishing Gold trick (30+ tons) happened on the watch of Yats and the Nazi junta. And it went to the US.
Sorry, Morris, "9 Lives" for you today.
.
Funniest thing I have read this day.
Fox business says this is not a big deal.
So, ya know, it must not be a big deal.
I suppose Fox would say the same thing if Mr. Yellen jacked up rates by 6.5%...
First they would have to look up who Yellen is. And then have someone explain what an interest rate is.
But their girls are cuter than CNBC...and I don't know where the remote is.
Every time I put on FOX news I think I am watching Saturday Night Live.
what time time does that blonde airhead who replaced Napolitano come on, maybe I will rub one out then change the channel immediately
Does that ever work?
Sure, for a couple of weeks.
Gives you time to pray for a miracle;) Actually, Sweden went to 22% briefly to deal with a currency crisis years ago and came out of it OK. Russia is a lot..., messier.
It kills car loans, real estate deals, refi, you name it. Short term fix at best.
Because of these shitheads in CB, car sales have dropped in Russia greatly (22% in november) and production dropped, even though there is a recylcing program going on. People are now hunkering down and living in their old Soviet era apartments or sold those off to live in their Dachas outside of the city. So chances of anyone buying a new apartment or a modern dacha (older ones are nice) are nill. Older style dacha's I guess are going to be the thing again.
Kaiserfart..
Before you speak get it half right anyway...
Sweden was pegged to a basket of currencies, and to stave off a depreciation the Riksbank infact hiked the repo rate to 500%. It lasted three days until the Riksbank gave up and the SEK devalued by something like 40% then to stabilize around 25% down. Funny was that the swedish larger corporations that sat on cash could park their o/n funds at the Riksbank for 3 business days at 500% (was a couple that managed to do the lot they had) getting a nice little interest revenue boost that year...
Even funnier is that the trade minister (näringsminister) at the time Per Westerberg 1992 (Nov), sold SEK for 40million the day before the Riksbank decided to float the SEK. This has not yet been been revealed.
So it worked out fine for Sweden, by doing what all the Med-countries would like to do.. Depreciate to become competitive.. Although a bullshit game it wont work for the Russkies as their competitive advantage is the oil (with a little buffer in their goldholdings)..
Sorry I rattled your cage.
I"ll be sure to nominate your drunken ass for Miss Congeniality.
Hey, isn't Sveriges Riksbank the one that invented the fraudulent Nobel Economics Trophy back in the 1960s?
Humm I sure as hell can't figure out what your "o/n" funds are. However I did find these - a pretty interesting sequence of events:
http://www.nytimes.com/1992/09/19/business/turmoil-in-europe-winds-of-ch...
[ To that end, he has pledged to do whatever is necessary to preserve Sweden's commitment to an exchange rate fixed on Europe. So far it has been an expensive stand: on Wednesday, when the krona was the target of speculators and began to slide precipitously, the Swedish central bank raised its marginal lending rate to a staggering 500 percent. As a non-Socialist leader, Mr. Bildt is working against great political and economic odds. A crippling recession has taken a terrible toll, at the same time that Mr. Bildt has pressed for sharp cuts in Government spending and programs that for decades made Sweden a model of the benevolent welfare state. ]
and then:
http://www.nytimes.com/1992/09/17/news/17iht-perc.html
Last week, Prime Minister Carl Bildt said he was willing "to go through fire and water to defend the fixed exchange rate."
And finally:
http://www.nytimes.com/1992/11/20/business/currency-markets-sweden-aband...
CURRENCY MARKETS; Sweden Abandons Its Effort To Prop Up the Krona's Value By RICHARD W. STEVENSON,Published: November 20, 1992
-- After a long and expensive battle against the markets to maintain the strength of its currency, Sweden gave up the fight today and allowed the krona to fall in value. --
Soooo the process for Sweden took a couple of months before a thoroughly dampened and singed Mr. Bildt caved.
[Special postscript - for connection with modern times]
Oh yeah and wierd how history rhymes (also from the nytimes):
DECISION FOR EUROPE; Sweden Strongly Accuses Russian Subs of IntrusionPublished: September 23, 1992 Prime Minister Carl Bildt today accused Russian submarines of violating Swedish waters, the most direct accusation Sweden has made in 10 years.
"Our suspicions are clearly directed toward Russia," Mr. Bildt said a day after the Swedish Navy fired depth charges at a suspected foreign submarine off Oxelosund, 60 miles south of Stockholm.
Ok, so how does one go about buying Rubles.
You buy toilet paper and print putin's face on it. I think it should go as currency in russia.
Now that right there is why I like that guy. Ain't no one going to change my mind. Action. Results.
Whatever it takes - the right way!
Checkmate? Or are we still playing checkers?
you get better results moving the market if you do it with a farmer attitude instead of the gamer attitude, the gamer geopolitics attitude limits you to stay inside the four corners of a board
Putin for chairsatan!
deflation to rip Russian economy
Central Banks can fail..
According to some historic accounts, vodka was used to make gunpowder in Sweden in the 15th century.
Fuck me. I'm heading to Russia, exchanging my dollars and bringing home a Russian bride for Christmas. Vlad...you da man!
I think you can afford two at this price.
But can he afford to divorce two?
ONly to divorce one....the one I have now - the American.
Don't get married in CA. You pay her until YOU die, not her. I'm not kidding. Married more than 10 years in CA? You pay a trust in her name even after she's gone. The sentence is LIFE.
Introduce them to some market competition...
So to speak...
Double your pleasure
Quadruple your misery...
Who the hell parks their money in Russia?
We're talking russian chicks here DV, not interest rates...
If you're in the neighborhood,
I would go Ukrainian. All day, all night, Maryanne....
My tendencies lean towards European/Asian hybrids...
Got me an American wife now which beats the fuck out of the last two Canadian ones I had.
USA USA!
What does she use to beat them with? Paddle or strap?
not even the Russians, evidently
Bulgarians and Transylvanians.
TYLER DURDEN, How can one open an online bank account with a Russian bank?
It's our way to dissent with TPTB in the West.
Maybe TD or one of the ZH writers can do an article on this?
Inquire with some Nigerians if you want to do it safely.
So if as an American you took some of these overpriced dollars we have, bought rubles and opened a bank accountin Russia, and then the dollar collapses as we know it will, one might be able to seriously make some dough.
I grabbed some RSX this afternoon. Easier than getting into Russia with a pile of dollars.
17%
.05 %
Yeah this strategy never fails.
oh yeah...uk 1992?
Yeah, that's my point.
It rarely works.
Although I guess you could make a case that the UK actually benefited from Soros and the gang in 92, otherwise they might be screwed with the Euro now.
It worked for Volker... and Reagan ! Somehow, people forget that...
Pretty sure we never went from 10.5 to 17% in one jump as a third tier currency.
If this isn't desperate, I don't know what is.
I know all the Putin apologists can find nothing wrong with him and think he's so great.
Last I check he had a client state of 50m people 12 months ago. Flash forward to now and 45m of those people want NATO memenership and the EU. Somehow Putin goes from all of Ukraine to the poorest 10% and sends up the victory flag. God, the west is pathetic for not being able to claim the victory that Putin's pathetic ass gave them on a silver platter.
There are 120 million Mexicans want the right to live and work in the USA for much the same reason 45 million Ukrainians want into the EU.
If you refer to Ukraine it was 45m, not 50.
Your other claim is complete BS you a Kiev Post contributor?
Majority Ukraine wish Maiden never happened
the western pollacks are main useful idiots believe EU lies
.
You know, made me laugh. Kiev Post is great comedy, and their exaggerated serious style while telling absurd tales of fantasy adds to the laughter.
Status of Kiev Post contributor is very prestigious for satirical comedy writers.
Boys, the Ukrainian people have voted to be a part of Europe, why
dont you get that ? The majority of Ukrainians dont want putin
and his false promises.
Signed
Kiev Post contributor, Anti-putin troll, Farry whatever
ps. putin is fucked he's going down with the economy, his bankers and oligarchs
will see him off.
Vlad, is that you?
volker wasn't defending the currency. in the uk they raised rates by 200bps in the morning and 300bps in the afternoon. then the policy makers came to their senses and realised fixed exchange rates and defence of a currency is suicidal at best.
-- Yeah, that's my point. --
I guess you left off the "/sarc" tag on your ealier post :-)
Seems a LOT of stuff went down in 1992.
http://www.theguardian.com/business/1992/sep/17/emu.theeuro
What I am trying to understand is the cascade of events - USSR breakup, 1991 recession, 1992 currency crises, 1997 asian financial crises, 1998 Russia default
Seems like the rhyming on this song is getting started. I wonder how the chorus goes??
“We Molotov-ed some folks.”
The Bernake/Yellen equivalent to this bold move would be ……. replacing the word “considerable” with “significant” in the first FOMC statement of calendar year 2017.
Norman Lamont is working for Putin now??
I remember Lamont...rate increases didn't work for him.
And didn't he get a black eye?
Watson
Russian military history would indicate that this is goin to be only ONE of a number of moves that are going on in thie counter-attack. Be prepared for a few more explosive announcements and moves by Mr. Putin.
You got that right.
If I was a gambling man, I would go with:
Regards,
Cooter
I see this as an internal issue to Russia and do not see it as an attack on the dollar. If people have been correct in their assesments of the falling ruble then there is not need for this. Posters have claimed that the weak ruble was actually to Russia's benefit and that it did not hurt the Russian ecomony. That Russia was isolated from the weakness due to exports. Seems they were wrong.
Putin should have diversified the Russian economy 10 yrs ago. Instead he and the Russian elite took easy profits and did not reinvest in the country. Now Russia is vulnerable.
Instead of big moves external to Russia by Putin (should have occured by Russia in Serbia, Iraq2 and so on) I would look out for big moves by the west in Syria. I would not be surprised to see more terrorist events within Russia in a few months.
Get out a map and a piece of string and a ruler. Start spacing out Russia and where the population lives. Then go look at Russian age demographics.
Please report back your findings.
Regards,
Cooter
The only "explosive" moves by Putin will be the massive farts flying out of his rear when he shits his pants! Dead man walking...
A gold/silver/platinum/palladium-backed Ruble would be better.
Can you imagine how a silver based currency would rock the technology economies in the world? The friggin iPhone would shoot up a bunch. If you wanted to hurt the high tech world, a silver currency would suck up a ton of silver in a small market.
An iPhone has 0.35 grams of silver in it. Even at $1000 per troy ounce, that's just $11 bucks worth of silver.
Well said!
That's more than rest of phone is worth...
especially long term
Multiply that .35 grams by 40 million. Then it seems like a lot more.
Oldplayer,
It is not possible for a country with an imploding economy to peg the currency to anything. The peg commodity will be gone in weeks.
The general idea of the commodity reserve is that declining reserves give governments the signal of poor international economic performance. That is the signal to change policy. Putin will not accept that information. If ruble was pegged to gold, russia would no longer have any gold.
BTFRD!!
R for Ruble.
Gee, think the Fed Res will bail out oil in order to raise its price? If it does, Vlad wins! The corner is getting smaller for the USA.
And to think it's the 6th anniversary of ZIRP!
poor Russians who bought a house with ARM mortgages... ouch!
Most Russians live in flats/apartments, not houses, and they often pay cash.
I seriously doubt there is such a thing as a Russian ARM mortgage...
Two problems:
1. The 650bps spread is earned over a year, but the FX movements could produce that in a month;
2. Long before one year is over, 17% rates have crippled the economy.
Much better to just leave the FX rate alone.
Maybe Putin regards FX rate as matter of national pride?
Watson