Dryfly

About $100

US can’t save them … not w/ the tsunami of sovereign debt US has to refi this year ~$9T on top of the $2T yearly current account deficit predicted for this year. Total float of about $11T … We can’t save ourselves

100% right …

If it is happening it’s on the black market and ‘we’ won’t see it until it’s massive

It’s why on X spaces I ask ppl who have contacts in Russia (and near abroad like Tbilisi) what’s happening in the black market both for goods and street ‘forex’

They say black market is increasing but not crazy

The laborers are certain to get paid that way (unlike Russians) and payments will be made from proceeds of the oil sales - in India - to their families directly so won’t be at risk of being stolen by Russia

I would be shocked if this wasn’t the arrangement

BTW my expectation is a similar ‘closed loop’ is starting w/ India. Except the loop is different… Russia supplies oil, India offers rupees (Russians don’t want that) … so a rupee denominated fund set up in India to ‘pay’ Indian laborers sent to work in Russia…

He gets yuan by selling China all of that. He’d prefer $ € probably but yuan will do if he’s buying goods from China

Selling gold is only used as a last option fallback if ‘funds’ are short

That’s my read on things

You buy something relatively ‘rare’ in official channels at say 10 rubles then turn around and sell it in black market at 50 rubles … or for hard currency you then use to buy western goods (unavailable in country) on black market

We are likely returning to that and soon…

But it’s why the black market was so prolific and ‘profitable’ … the opportunity for ‘ruble arbitrage’ was enormous and a big reason why official outlets saw products disappear and yet remain wildly available on black market…

It also explains why they are okay w/ ruble appreciation (even if rate is ‘artificial’) … if you can’t really export manufactured goods (due to sanctions) do you care if ruble strong? Not really

In USSR ruble exchange rate was pegged by state - but trade was ‘managed’ anyway so why not?

So selling hard currency is a viable alternative so long as you have it and you can control the ‘black market’. My guess is a big part of these sales is only selling to ‘investors’ you can somewhat control (oligarchs or other state-aligned institutions) so it doesn’t end up in ‘black market’

Typically a functioning economy will sell bonds to do the same (sterilization of excess money supply) but no one trusts ‘bonds’ … or incentivizing savings via high interest rates but Russians don’t trust ‘banks’ either

This actually makes some sense but there are nuances IMO

Selling hard money ‘to the domestic public’ as a way to drain off rubles (in circulation - ie inflation) makes a lot of sense IF there are assurances it doesn’t end up in the black market - that’s a direct threat to the state….

Any idea why they don’t just set a pegged exchange rate like they did in USSR 🤷‍♂️

They need a tutorial by Trump Org … he’d tell them to pull all the revenue they can forward and push the expenses out into next year

The number I’d like to know is the percentage of buyers that aren’t banks or institutions owned or controlled by Russian govt

The official rate might not weaken … in Soviet times they just set a ‘peg’ to $£ and DM and you ‘deal’ w/ it. Of course the black market thrived both for smuggled goods and currency but state industry and offshore trading partners had to price based on ‘the peg’

I think they want a return to that

It’s like Soviet times - they just set the exchange rate and you take it or leave it. It’s why the black market thrived both goods and currency exchange

Good to see you back - must have been bad

And of course it ignores the effects of the black market which is likely THE ONLY sector of economy likely to benefit/grow

It’s why I keep asking ppl in ‘the region’ wtf is going on in black market wrt street exchange rates AND prices for goods. Both in Russia and their near abroad, lot matters IMO

Will a stronger exchange rate make a difference? Yes and no. It will make a difference in that it will allow Russians to buy imports cheaper in rubles but it will put even greater squeeze on domestic producers trying to compete w/ those imports. Strong currencies kill domestic producers

3/N

Inflation is always too much money chasing too few products to buy w/ that money. So for a Russian cons you have both … more money in circulation AND fewer goods to buy EXCEPT for import

So that’s why it appear imports are the cause (but its a symptom not the cause)

2/N

I think he’s right but doesn’t fully flush out the problem. Imports are where price inflation is realized (seen) but the cause is (1) too much money supply injected into economy from spending on war and (2) shrinkage of domestic production of consumer goods…

1/N

She said the Chinese translation for the English words ‘bribe’ and ‘sales commission’ is basically the same thing. Conceptually to them no different

Russia is as bad or worse

One other trivia - I worked w/ a young sales person from China. She was the ‘international sales manager’ for a privately held mfgr. She said they try to do as much int’l business as they can because domestic Chinese business is so corrupt…

Low salaries are fixable from government perspective… just allow police to extract payment from ‘criminals’ … ie population

Ppl will pay to be allowed to work for state for free not unlike how in US poor pay at 5 Star restaurants often don’t discourage waiters applying … the tips can be crazy

Ya but that’s an easy fix for Putin cartel / it’s cool just give us a cut

Something weird is going on on

In 1998 a lot of their debt was denominated in a currency other than rubles OR the buyers of debt were international… defaulting much more problematic

Today most of their debt denominated in rubles and held by Russian institutions so easier to ‘print and pay off’ instead of defaulting

Can you explain what happened? I get the ‘penalty’ part but what were they trying to pull off? TIA

It doesn’t trade openly on world forex markets - only in Moscow. Neither China nor India eve want it. Russia recently floated yuan denominated bonds because so few foreign buyers would buy them in rubles

Official ruble exchange rate is fictional