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"De-Dollarization" Deepens: Russia Buys Most Gold In Six Months, Continues Selling US Treasuries

Tyler Durden's picture




 

The rumors of Russia selling its gold reserves, it is now clear, were greatly exaggerated as not only did Putin not sell, Russian gold reserves rose by their largest amount in six months in December to just over $46 billion (near the highest since April 2013). It appears all the "Russia is selling" chatter did was lower prices enabling them to gather non-fiat physical assets at a lower cost. On the other hand, there is another trend that continues for the Russians - that of reducing their exposure to US Treasury debt. For the 20th month in a row, Russia's holdings of US Treasury debt fell year-over-year - selling into the strength.  

Buying low...

Russia gold reserves jump the most in six months in December, near the highest since April 2013...

 

and selling high...

Russian holdings of US Treasuries are now at the 2nd lowest since 2008...

 

It would appear the greatest rotations that no one is talking about are the fiat to non-fiat and the paper to physical shifts occurring in China and Russia.

Charts: Bloomberg

Some have commented on the "unprecedented" capital flight from Russia, but as Dr. Constantin Gurdgiev explains - Western 'analysts' appear to have forgotten a few things...

Central Bank of Russia released full-year 2014 capital outflows figures, prompting cheerful chatter from the US officials and academics gleefully loading the demise of the Russian economy
 
The figures are ugly: official net outflows of capital stood at USD151.5 billion - roughly 2.5 times the rate of outflows in 2013 - USD61 billion. Q1 outflows were USD48.2 billion, Q2 outflows declined to USD22.4 billion, Q3 2014 outflows netted USD 7.7 billion and Q4 2014 outflows rose to USD72.9 billion. Thus, Q4 2014 outflows - on the face of it - were larger than full-year 2013 outflows.
 
There are, however, few caveats to these figures that Western analysts of the Russian economy tend to ignore. These are:
  • USD 19.8 billion of outflows in Q4 2014 were down to new liquidity supply measures by the CB of Russia which extended new currency credit lines to Russian banks. In other words, these are loans. One can assume the banks will default on these, or one can assume that they will repay these loans. In the former case, outflows will not be reversible, in the latter case they will be.
  • In Q1-Q3 2014 net outflows of capital that were accounted for by the banks repayment of foreign funding lines (remember the sanctions on banks came in Q2-Q3 2014) amounted to USD16.1 billion. You can call this outflow of funds or you can call it paying down debt. The former sounds ominous, the latter sounds less so - repaying debts improves balance sheets. But, hey, it would't be so apocalyptic, thus. We do not have aggregated data on this for Q4 2014 yet, but on monthly basis, same outflows for the banking sector amounted to at least USD11.8 billion. So that's USD 27.9 billion in forced banks deleveraging in 2014. Again, may be that is bad, or may be it is good. Or may be it is simply more nuanced than screaming headline numbers suggest.
  • Deleveraging - debt repayments - in non-banking sector was even bigger. In Q4 2014 alone planned debt redemptions amounted to USD 34.8 billion. Beyond that, we have no idea is there were forced (or unplanned) redemptions.
So in Q3-Q4 2014 alone, banks redemptions were scheduled to run at USD45.321 billion and corporate sector redemptions were scheduled at USD72.684 billion. In simple terms, then, USD 118 billion or 78 percent of the catastrophic capital flight out of Russia in 2014 was down to debt redemptions in banking and corporate sectors. Not 'investors fleeing' or depositors 'taking a run', but partially forced debt repayments. 
 
Let's put this into a slightly different perspective. Whatever your view of the European and US policies during the Global Financial Crisis and the subsequent Great Recession might be, one corner stone of all such policies was banks' deleveraging - aka 'pay down of debt'. Russia did not adopt such a policy on its own, but was forced to do so by the sanctions that shut off Russian banks and companies (including those not directly listed in the sanctions) from the Western credit markets. But if you think the above process is a catastrophe for the Russian economy induced by Kremlin, you really should be asking yourself a question or two about the US and European deleveraging policies at home.
 
And after you do, give another thought to the remaining USD 33 billion of outflows. These include dollarisation of Russian households' accounts (conversion of rubles into dollars and other currencies), the forex effects of holding currencies other than US dollars, the valuations changes on gold reserves etc.
 
As some might say, look at Greece… Yes, things are ugly in Russia. Yes, deleveraging is forced, and painful. Yes, capital outflows are massive. But, a bit of silver lining there: most of the capital flight that Western analysts decry goes to improve Russian balance-sheets and reduce Russian external debt. That can't be too bad, right? Because if it was so bad, then... Greece, Cyprus, Spain, Italy, Ireland, Portugal, France, and so on... spring to mind with their 'deleveraging' drives...
 
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Mon, 01/19/2015 - 01:14 | 5678789 noben
noben's picture

Yes. Strength in numbers.
Be part of a local and regional group.

Mon, 01/19/2015 - 04:56 | 5678979 Victor999
Victor999's picture

Survivalists are now being targetted by the Fed as terrorists...you know that, don't you?.... ;-)

Sun, 01/18/2015 - 17:08 | 5677288 Quinvarius
Quinvarius's picture

Everything Obama does backfires in his face.

Mon, 01/19/2015 - 00:23 | 5678699 Kprime
Kprime's picture

that's what happens when you have ur head up ur ass

Sun, 01/18/2015 - 17:22 | 5677316 q99x2
q99x2's picture

Go Putin. Kick some NWO butt.

Sun, 01/18/2015 - 17:32 | 5677345 Ewtman
Ewtman's picture

On Thursday, shocking news came out of Switzerland, when the Swiss National Bank abandoned its exchange rate peg against the euro. According to a Bloomberg article, "Not one of 22 economists surveyed by Bloomberg News between Jan. 9 and Jan. 14 expected the SNB to get rid of its cap in 2015."

Well they obviously didn't interview Brian Whitmer of Elliott Wave International who predicted the Swiss would drop the peg in his December newsletter.

 

http://www.globaldeflationnews.com/whitmer-of-elliott-wave-international...

Mon, 01/19/2015 - 03:27 | 5678906 basho
basho's picture

interviewed 22 economists?

shows you the quality and diversity of economic thought these days.

22 bumpkins sitting on a wall and like humpety dumpety ....

 

Sun, 01/18/2015 - 17:38 | 5677364 headhunt
headhunt's picture

Get ready for the bitch-slap on gold.

Sun, 01/18/2015 - 20:55 | 5678008 August
August's picture

Sure hope we get one soon

beep... beep... beep....

Sun, 01/18/2015 - 17:47 | 5677389 Amish Hacker
Amish Hacker's picture

"the capital flight that Western analysts decry goes to improve Russian balance-sheets."

It's worth noting that Russia's debt to GDP is around 15%, a level the US can only dream about.  http://www.bloomberg.com/news/2012-03-20/russia-scales-back-debt-to-gdp-...

Leave it to the western media to paint Russia's current situation as a desperate predicament, when what Russia is really doing is selling one asset (Treasuries) after a parabolic rise and buying another asset (gold) that looks artificially undervalued. This is not desperate or irrational behavior. It may, however, be part of their preparations for war.

Mon, 01/19/2015 - 15:57 | 5680676 cornflakesdisease
cornflakesdisease's picture

Yes, but it's private businesses have about $680 billion to roll over in the next 6 months.  ($280 just in the next 5 weeks).

Sun, 01/18/2015 - 18:47 | 5677561 'argar the 'orrible
'argar the 'orrible's picture

Unintended conseqences ?,, oh dear washington, its going to bite you on the bum this time.

Sun, 01/18/2015 - 23:59 | 5678635 jameswvu99
jameswvu99's picture

The only way people would ever take the Ruble or Yuan seriously as a competing currency, is to have it backed by gold. 

I could see China setting 10000 Yuan backed by ounce of gold or Russia backing 100,000 Rubles for an ounce of gold. 

Mon, 01/19/2015 - 00:42 | 5678738 Rock On Roger
Rock On Roger's picture

They'll use grams or taels, certainly won't be ounces.

Stinkin ounces are as good as dead.

Mon, 01/19/2015 - 15:54 | 5680667 cornflakesdisease
cornflakesdisease's picture

China and Russia would never allow redemtion, so it is pointless and holds no water.

Mon, 01/19/2015 - 00:24 | 5678696 ekm1
ekm1's picture

Selling UST is NOT de-dollarization, since they'd receive USD as a consequence.

 

Selling USDs to prop up Ruble, is de-dollarization.

Putin knew that and took the risk.

 

It all depends now whether TRADING PARTNERS accept ruble to do trade, or not.

Bartering is not a great way to expand the economy, though barter may be Putin's plan.

 

Will the muzhiks rise up due to potential hunger?

Maybe yes, maybe no. The tzar was run over by muzhiks.

Risky move by Putin.

Mon, 01/19/2015 - 00:53 | 5678757 IndianaJohn
IndianaJohn's picture

A few paragraphs on The Royal Family's last day; http://www.eyewitnesstohistory.com/nicholas.htm

Mon, 01/19/2015 - 04:53 | 5678978 Victor999
Victor999's picture

As to the viability of bartering between countries, I would refer you to Germany's spectacular rise in the 30s which was built upon disassociating their economy from the central banking system internally (basing their deutchmark on worker production value rather than fiat monetary policies) andinternationally using barter as a means of trade rather than fiat money.  Their economic growth during this period was nothing short of amazing.  Bartering does work.

Mon, 01/19/2015 - 08:44 | 5679153 ekm1
ekm1's picture

Is that a joke?

 

Mon, 01/19/2015 - 00:49 | 5678727 TheRideNeverEnds
TheRideNeverEnds's picture

Hahaha do people actually believe this fucking nonsense matters in any way?

 

De-dollarization my ass, look at the dollar index, its up yet again.  

 

Russia has a GDP comparable to that of California.

 

Russia is fucking nothing, they could sell every US asset they have and use 100% of their GDP to short the US market and it would be nothing.  NOTHING!  If they did do that and there wasn't an associated press release you may not even notice it.   The only, ONLY reason Russia is relevant in any way is that they have a lot of land with natural resourced and they posses nukes.

 

Financially the Russians are pathetic.  

 

You will have as much effect on the US market by pissing into the wind as whatever the Russians try to do.  

 

The Russians GDP is literally on par with Apples average trading volume.... 

 

 

And to those that's think Gold will decouple from paper prices / run out of inventory etc go to one of the hundreds of gold selling sites, they will fill any order you can afford.   Also you know that gold futures deliver in physical gold right?  Locking in prices for physical goods is literally the reason futures products were created.

Mon, 01/19/2015 - 01:42 | 5678812 Armed Resistance
Armed Resistance's picture

The country of Russia spans 9 time zones and even though your wife tells you otherwise, size does matter- especially with all of those natural resources. You haven't a clue about what you speak, especially in relation to the dichotomy between physical and paper metal.

Mon, 01/19/2015 - 02:35 | 5678859 trader1
Mon, 01/19/2015 - 02:43 | 5678867 TheRideNeverEnds
TheRideNeverEnds's picture

Landmass is almost entirely irrelevant regarding financial matters, see: Brasil, Mexico, Argentina, Australia, Kazakhstan vs Switzerland.

 

Regarding metals, if there was more demand the price would be higher, there is very little demand for physical gold and I repeat, you can easily fill an order for any amount of physical metal of any type.  You will see gold trading @1000 far before it ever reaches 2000.  

 

 

 

Mon, 01/19/2015 - 06:55 | 5679045 winchester
winchester's picture

what you omit to say is gold market is...rigged.

 

 

 

 

Mon, 01/19/2015 - 08:04 | 5679106 ltsgt1
ltsgt1's picture

Yes, there is very little demand for physical gold in the west since most westerners are either living paycheck to paycheck or they are brainwashed/conditioned to accumulate paper wealth in a fractional casino.

Ones could make any size of withdrawal from their MF Global accounts until they cannot when the SHTF.

Do you remember we almost had a bankrun merely a few years ago right here in the US?

Mon, 01/19/2015 - 03:40 | 5678918 U-P-G-R-A-Y-E-D-D
U-P-G-R-A-Y-E-D-D's picture

I'm listening to you until you say "you know that gold futures deliver in physical gold right?" and then I know you're fucking clueless.   

Mon, 01/19/2015 - 04:16 | 5678947 TheRideNeverEnds
TheRideNeverEnds's picture

Am I the only one here that is an actual educated market participant?

I'm really starting to think most commenters here don't even trade.

Here let me help educate you.

http://www.cmegroup.com/trading/metals/precious/gold_contract_specificat...

And

http://www.cmegroup.com/trading/metals/files/final-settlement-procedure-...

And the full details

http://www.cmegroup.com/rulebook/NYMEX/1a/113.pdf

If you want to take delivery on a contract give it a go. I doubt many people could afford to clear even a one lot what with that being 100 ounces of physical gold but it settles to physical gold that is for damn sure. Just cause some brokerages refuse to deal with it and will liquidate you if you don't roll before the settle and most people that trade it prefer to hold the contracts vs dealing with taking and holding physical for a multitude of reasons anyway doesn't mean it doesn't settle to physical.

Mon, 01/19/2015 - 07:53 | 5679089 ltsgt1
ltsgt1's picture

Paper (COMEX) vs. Physical (Shanghai Gold Exchange)

COMEX is the next MF Global.

You should learn the word REHYPOTHECATION. HSBC learn it the hard way.

Mon, 01/19/2015 - 15:51 | 5680657 cornflakesdisease
cornflakesdisease's picture

Zerohedge has become Kitco #2, awash with gun toting, ammo saving, gold stacking fools who have no understanding of financial matters and geo politics.  In between putin-gasms and rants, they don't seem to understand anything about Dollar, Inc.

Mon, 01/19/2015 - 07:30 | 5679072 daedon
daedon's picture

Didn't your mother ever tell you not to talk to trolls ?

Mon, 01/19/2015 - 00:58 | 5678764 Shitgum Suicide
Shitgum Suicide's picture

Speaking of gold, this driver for ups was found stealing barbarous relics worth $200k. Need I say more.

http://sacramento.cbslocal.com/2015/01/17/ups-driver-arrested-in-theft-o...

Mon, 01/19/2015 - 01:20 | 5678793 69BIGDOG69
69BIGDOG69's picture

I'm not questioning the veracity of the data given in this story per se, and I have no particular distrust of the Russians, but I'm wondering how reliable such information is. 

It's common knowledge that the Chinese lie with their economic statistics and savvy analysts try to cross-check the numbers by comparing to other, hopefully honest, data.  For instance, and I regret that I don't have the source to reference, but I saw a story where an analyst noted that Chinese electrical production and economic production diverged significantly with economic production being shown to rise much more than electrical production.  This, of course, was suspicious since they would be expected to move largely together.

In a similar way and close at home, the US is said to hold a certain amount of gold in Fort Knox, but there has been no public audit of that gold in about sixty years.  What reason is there to believe the reported number? 

All US banks must be audited, right?  Wrong!  The central bank of the US has never, in its 101-year history, been audited.

We, as readers of ZH and elsewhere, try to have intelligent discussions of what's going on in the world.  It's not possible to do so unless we can have some confidence in the reported data.  What say ye, ZHers?

Mon, 01/19/2015 - 01:20 | 5678794 Road Hazard
Road Hazard's picture

I wonder what would happen tomorrow if China and Russia stated that, effective immediately, they would no longer accept the USD for anything and will only accept physical gold (or their native currencies) as payment for goods shipped? I'm guessing the price of gold would shoot not to the moon..... I'm thinking it would shoot to somewhere along the edge of our solar system. That would be a funny day as the entire US economy implodes within a matter of milliseconds and we are turned into a third world shit hole instantly. I wonder how the FSA would react?

Mon, 01/19/2015 - 01:42 | 5678811 lasvegaspersona
lasvegaspersona's picture

Does the dollar value of Russia's gold really matter to anyone?...certainly no the Puter...

But the world will always think in dollars...........won't it?

Mon, 01/19/2015 - 06:59 | 5679047 winchester
winchester's picture

nah, it takes times but, look europ, in +/- a decade now  no more thinking in local money, all in euro, human can adapt....especially if they have no other choice .... :)

Mon, 01/19/2015 - 10:11 | 5679321 ThisIsBob
ThisIsBob's picture

The world should start thinking in grams.   i-thingies should have a milligram app.

Everything I really like is already traded by the gram, anyway, including gold.

 

Mon, 01/19/2015 - 11:37 | 5679572 dexter_morgan
dexter_morgan's picture

No. The world doesn't still think in British Sterlings, the prior global reserve currency, and it won't think in dollars once a new reserve currency(ies) are established.

Mon, 01/19/2015 - 02:11 | 5678845 JoJoJo
JoJoJo's picture

Dont feel to sorry for the Ruskies. Their national debt is only about 40% of their GDP and they know how to lve without a punch bowl. We dont.

Mon, 01/19/2015 - 02:40 | 5678862 Bear
Bear's picture

We are the Punch Bowl

Mon, 01/19/2015 - 15:48 | 5680645 cornflakesdisease
cornflakesdisease's picture

Yeah, they just have to find away to come up with $280 billion in the next 5 weeks so their private industries can service their debt, and another $460 billion a few few months later for the rest of it.  Too bad no one in Russia has that kind of money, including Putin.

Mon, 01/19/2015 - 04:06 | 5678945 Panic Mode
Panic Mode's picture

So who is sucking up all the Trashury, US, Japan or Belgium?

Mon, 01/19/2015 - 04:18 | 5678953 bentaxle
bentaxle's picture

Japs must be feeling a little p.ssed off what with their buy Nikkei, Short gold strategy, also helping to keep the price of gold down for Putin...

Mon, 01/19/2015 - 05:51 | 5678994 Counterpunch
Counterpunch's picture

De-dollarization is inevitable.  It is nearing the end of its life cycle. Massive debt, uncontrolled unskilled immigration, continued offshoring, a financial sector that provides sham economic data by trading around future promises to pay - the future has been beaten, raped, and robbed just to keep the system chugging along, and to keep allowing the transfer of wealth from productive labor to capital.

 

What's cute is the neocon/militarist approach is accelerating its demise in trying to create a unipolar world run by the Anglo-American-Zionist axis.

 

HRW condemns use of unconventional arms by Ukraine
Mon, 01/19/2015 - 07:12 | 5679057 winchester
winchester's picture

counter punch, explain to me how the fuck in hell changing money will solve the uncontrolled unskilled population immigrating.

 

just one observation, if changing money would prevent any forgeign mass to invade a country, we would have never waited that much to use this method.

 

changing money only leads to one thing for mass, inflation.

Mon, 01/19/2015 - 14:51 | 5680422 BooMushroom
BooMushroom's picture

Changing money won't fix the problem, the problem will cause people to change what money they use, because the problem(s) will cause the original money to become increasingly worthless.

Mon, 01/19/2015 - 11:27 | 5679536 dexter_morgan
dexter_morgan's picture

LOL - gee I seem to recall the experts on here saying the Ruskie's were selling gold - had to be in order to stay afloat.......

What really scares me being a US citizen, is how easy it is for Putin to outfox and outmaneuver our stellar leadership. Do we really NOT know much about Russia and their economy, or do we just have a bunch of fucking idiots running things, or is it intentional stupidity?

It will likely come down to 'might is right' either way unfortunately.

Mon, 01/19/2015 - 15:45 | 5680633 cornflakesdisease
cornflakesdisease's picture

Is that the inept puppet leadership in the west on strings OR the real leadership behind the scenes that now has every central bank under their control save, Russia, Cuba, Iran, Syria, North Korea, and Venezuelan as their 120 year plan nears completion?  Yea, those guys are so stupid. 

Mon, 01/19/2015 - 11:31 | 5679547 PrayingMantis
PrayingMantis's picture

 

 

... meanwhile, >>> "Putin prepares bitter and hysterical missile surprise to 'American partners'" ... >>> http://english.pravda.ru/russia/politics/16-01-2015/129540-putin_missile_surprise-0/ 

 

... the article states further ..."There is no success in negotiations at this point. Moreover, appropriate systems are being built in Europe and Alaska, which is very close to our borders," he said. Putin also said that the West was developing the so-called theory of global preemptive strike.

"There are other things that really concern us," said Putin and mysteriously hinted on unpleasant "surprises" for "our Western partners." "The main thing is to avoid hysterics afterwards," he concluded bitterly.

Few people paid due attention to the strange remarks about hysterics. The majority of assorted political analysts, commentators and writers, who can usually explain anything in the world, took Putin's remarks as a mere figure of speech that was used to demonstrate Putin's determination in defending Russia's national interests. Only a few experts interpreted his words about the "surprise" and "hysterics" seriously. While those "few" were wondering what surprises Vladimir was preparing for Uncle Sam, the situation began to clarify itself."

 

... de-dollarization might not even matter when these "surprise" and "hysterics" materialize ...

Mon, 01/19/2015 - 12:18 | 5679710 dscott8186
dscott8186's picture

I'm not so sure your De-dollarization is more hype than anything else.  IF Russia and China sought to dump all their US Treasury bonds, the Fed would respond by buying up all those bonds with electronic ones and zeros (a massive $1 trillion plus injection) on the secondary markets.  You have under estimated the responses.  

US bonds are nothing more than dollar bills with interest, so dumping them means you have to buy something with them to get rid of them. With over a trillion dollars in hand from selling those US bonds, Russia and China have to buy something with that US currency to repatriate the value.  There isn't $1 trillion in gold to buy.  

So what are they going to do with all those dollars????  

Mon, 01/19/2015 - 15:41 | 5680609 cornflakesdisease
cornflakesdisease's picture

Thanks for restoring my faith that there are some wise folks still on ZH and not just gold stacking, ammo buying, sister marrying, emotionally crippled types.  As all currencies race for the bottom, the dollar is the cleanest dirty shirt and it will collapse, just as soon as we run out of zeros.

Mon, 01/19/2015 - 13:16 | 5679992 livefreediefree
livefreediefree's picture

Damn it! Since this article was published, there are 10 newer articles, none of which concentrates on Russia.

Fuck this shit. We need more articles on Russia. After all, the Russkys on ZH need some escape, some outlet from the total shit that is Russia. ZH articles about Russia provide that relief.

Therefore, if you all concur, I plan to petition ZH to guarantee that they publish an article about Russia at least every 5th article. Once ZH complies, we'll then petition that ZH publish Russia-centric articles every 4th article, then every 3rd, then every 2nd, and then, TA-DA, every article.

Yes, ZH is zero for 7 septillion in its predictions on economic doom. It's completely failed in its main purpose. Therefore, why not convert ZH into a Putin-controlled propaganda machine, something like, say, a new Pravda?

OK, I'll start. Hey, fucking Tyler, you son of a bitch. We need more published articles on Russia, you stupid goat. More Russia. More Russia. More Russia. And, Tyler, your mother is so large her dress size is Ringling Brothers, Barnum, and Bailey.

Mon, 01/19/2015 - 17:34 | 5681141 Youri Carma
Youri Carma's picture

I heard that only capitalists sell when it's high and the dollar is very high.

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