ITS HARDBALL TIME. One of my ultra-hardball sources - by the way, a New Yorker - sent me this. Ill have the opportunity to confirm if the Russian government is REALLY thinking about it tomorrow. The main problem is not tax revenues in Russia as they are about the same as the ruble and oil have declined in tandem. This ruble depreciation is a great and necessary incentive to change the Russian economy to make everything themselves. Their main problem is external debt that is about 600 billion. I understand the Russian government is being advised to default on all of it as it is too expensive to sell rubles for dollars to pay interest and whatever principle is due. The Russians may declare a moratorium. This is being very seriously considered. They might negotiate on it first as it might cause an economic conflagration in the west as markets went into hysteria and Long Term Management Capital with over 1.3 trillion in derivatives almost caused the entire western financial system to collapse in the 1998 Russian financial crisis that started on 8-17-1998. Russia has many potential counter-sanctions as cutting off all natural gas and oil deliveries to the EU which would collapse the world economy as well as defaulting on all its external debts both public and private to creditors outside the Russian Federation that would shake the EU to its foundations. Russia is almost entirely self-sufficient in its needs based on vast mineral and agricultural potential. They can issue a law that forbids any company to pay interest or principle on debt that is not denominated in rubles. As a matter of further perspective, Russia in 1998 was in relative chaos and only saw their GDP fall 4.5%. The decline in GDP for 2014 will be negligible. Maybe a point or two at most.
Posted on: Thu, 11 Dec 2014 16:08:30 +0000
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