Two extreme's of the same Russian economics in the sanctions phase.
#Russian Prostitutes Hike Rates Over Slumping Ruble
http://tmt-go.ru/512596 #news
Russia Faced With 'Massive' Liquidity Problem, Says Sberbank Chief: http://www.themoscowtimes.com/busine...ef/512573.html
Originally Posted by OUTLAW 09
Oil prices continue to slide. @ 3:47 GMT: <WTI $65.48 /bbl> <Brent $68.47/bbl>
On Thursday the Russian central bank cut the foreign exchange repo rate, the interest rate it charges on the currency it gives to banks. The rate fell from 1.5% above the London Interbank Offered Rate (Libor) — the benchmark interest rate at which banks lend to one another — to 0.5% above Libor. A lower interest rate should make it less expensive for banks to borrow from the central bank and therefore more appealing.
The rate cut illustrates that the central bank is growing concerned about the ability of Russian banks to meet their debt repayments. If they fail to pay, it could trigger a wave of defaults that would further hit the fragile Russian economy, which is already expected to fall into a recession in 2015.
Yet if the problem is a shortage of collateral, these measures are unlikely to be enough. Back in February, JPMorgan analysts warned of just such a scenario: about 60% of available collateral was already pledged of an upper limit of about 75%. That top level is the point at which JPM says the stress in the banking system, in the form of increased risk of default, may start rising rapidly.
We appear to be near that point.
Judging by Thursday's news, banks appear to have been forced instead to seek help from the state.
This would explain Putin's move to divert money usually earmarked for infrastructure investment (for example, in Russia's ageing road and rail network) into a bank bailout.
Reuters reports that VTB and Gazprombank have already applied for 250 billion roubles ($4.7 billion) and up to 100 billion roubles in additional support. This would put a further dent in Russia's reserves after the country saw total international reserves drop some $90 billion so far in 2014, mostly in failed attempts to buoy the rouble.
It might also open the door for non-bank companies to lobby for additional support. The oil company Rosneft requested 2 trillion roubles last month but was turned down.
Russian finance: a very serious worry of a few smaller banks losing total confidence when a lot of non-preforming loans hit in early 2015.
Putin's speech strenghtens some the fears for the Russian economy. He wants to appear strong and to avoid any sign of weakness and thus strides firmly down the ever darker economic road.
Of course the oil price might jump before inflicting too deep wounds but it really looks as if the new Russia is in surprisingly similar economic situation as the Soviet Union was in one sense: It is highly dependent for it's economic well-being on prices of the commodities it exports, especially oil. Sad indeed for such a country. It is very hard to see upsides for the Russian economy. Maybe I will make a seperate post trying to play devil's advocate, because so much seems to confirm my earlier opinions.
@outlaw: There are quite a few de-facto state companies deep in (foreign-currency) debt which makes their balance sheets vulnerable. State support seems needed and has already been given. Maybe some people will understand the though lessons especially the Irish, Cypriots and Spanish had to learn: even countries with nominally low debt can find quickly a lot of it when sierra hits the fan ...
Last edited by Firn; 12-05-2014 at 08:42 PM.
... "We need officers capable of following systematically the path of logical argument to its conclusion, with disciplined intellect, strong in character and nerve to execute what the intellect dictates"
General Ludwig Beck (1880-1944);
Speech at the Kriegsakademie, 1935
Now the Russian economy is in total free fall and headed to total collapse.
http://www.bloomberg.com/news/2014-1...80788e032dc57d
Russian media is having a hard time depicting the falling rubel and oil price.
#Rossiya24 is ditching Brent Oil price for $ -> ₽. Constantly rising number cements the optimism of viewers.
pic.twitter.com/eOJTD832Ab
Wechselkurs #Rubel / Euro und lpreis erstmals auf gleicher Hhe.
pic.twitter.com/B9T6LuwBlZ
Diese Website zeigt live den #Rubel-Absturz im Vergleich zum lpreis:
http://zenrus.ru/ #lastTweet
pic.twitter.com/9pAobI8El1
Russian state TV anchor tamps down concerns over depreciating ruble by standing in front of the rate in the studio
pic.twitter.com/Etz3Yw53dh
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