4 ms·

Russia is spiraling toward a $150B default nightmare

8 points by awb 5y ago

nikolay 5y ago
Nightmare for whom? The creditors?
- verisimi 5y ago
  Good question! But I'm not sure bankers want it to work like that - see financial crisis, Greece, "too big to fail".
- awb 5y ago
  > a potential default that could cost investors billions and shut the country out of most funding markets. Nightmare for two groups: 1) current creditors 2) Russia, because of the difficulty in finding future creditors with reasonable terms after a default
- WheelsAtLarge 5y ago
  The collapse of the Russian economy will be felt by all the world's economy. We just don't know how hard it will be yet. Hopefully the world's bankers will be able to figure out how to soften the blow. But the Russians will really feel it. The economy will fall into a deep recession with all the social turmoil that goes with it. People tend to gravitate towards leaders that tell them that they will save them. Those usually turn out to be some kind of hard liner that leans toward dictatorship. In 1998 there was an Russian economic crisis which brought Putin to power. This time a similar leader will come to power if Putin does not survive the chaos. The irony is that if it collapses the western countries will need to help Russia recover. Otherwise the country will fall into an authoritarian regime which will be a huge problem that will need to be dealt with in the future. The collapse of the economy is a big deal both financially and politically for everybody.
moltke 5y ago
Banks: try to shutdown Russian economy Also banks: "Why can't we get our money back out of Russia?" Sometimes I can't tell if all of this is just a dumb joke.
- awb 5y ago
  This is a really big misunderstanding of the situation. Governments sanctioned Russia. The banks that withdrew voluntarily were fully aware of the financial consequences.
  - simonblack 5y ago
    Don't you just love it when people enjoy shooting themselves in the foot? Think it's smart to block 300 billion of Russian cash reserves? Welcome to your own (possibly fatal) cash-flow problems when a mere half of that cash can't come your way.
    - awb 5y ago
      Who is “your” in this scenario?
      - simonblack 5y ago
        Western banks and creditors. People can't complain about not being paid if they won't allow their debtors to pay. That leads to cash-flow problems for all concerned. There used to be an old business saying which is still relevant: "Never let your Ego get in the way of your cash-flow."
        awb 5y ago
        Governments imposed the sanctions, not the banks. And no bank that withdrew from Russia voluntarily is complaining to my knowledge. It sounds like you’re accusing someone of being hypocritical, but I don’t know who specifically. Do you have any quotes of any western banks / creditors acting hypocritically?
        simonblack 5y ago
        Governments imposed the sanctions, not the banks. If the Government isn't listening to banks when we're talking about hundreds of billions of dollars in sanctions, there's something completely broken in a top-heavy FIRE economy. And especially when we're choosing to use economic instead of military warfare. Bloomberg reports: Signs of looming financial damage are becoming apparent at many of the world's biggest money managers, including BlackRock Inc. and Pacific Investment Management Co. But it’s not likely to be limited to these giant funds. Because much of Russia’s debt was rated investment grade just weeks ago, the securities were pervasive across global fixed-income portfolios and benchmarks, meaning the impact could ripple across pension funds, endowments and foundations. “This will be a monumental default,” said Jonathan Prin, a portfolio manager at Greylock Capital Associates. “In dollar terms, it will be the most impactful emerging-market default since Argentina’s. In terms of broader market impact, it’s probably the most broadly felt emerging-market default since Russia itself in 1998"... https://www.livewiremarkets.com/wires/risk-of-huge-us-150-billion-russian-debt-default-with-consequences-for-investments-in-china https://www.livewiremarkets.com/wires/risk-of-huge-us-150-bi...

8 points by awb 5y ago

nikolay 5y ago

Nightmare for whom? The creditors?

verisimi 5y ago
Good question! But I'm not sure bankers want it to work like that - see financial crisis, Greece, "too big to fail".
awb 5y ago
> a potential default that could cost investors billions and shut the country out of most funding markets. Nightmare for two groups: 1) current creditors 2) Russia, because of the difficulty in finding future creditors with reasonable terms after a default
WheelsAtLarge 5y ago
The collapse of the Russian economy will be felt by all the world's economy. We just don't know how hard it will be yet. Hopefully the world's bankers will be able to figure out how to soften the blow. But the Russians will really feel it. The economy will fall into a deep recession with all the social turmoil that goes with it. People tend to gravitate towards leaders that tell them that they will save them. Those usually turn out to be some kind of hard liner that leans toward dictatorship. In 1998 there was an Russian economic crisis which brought Putin to power. This time a similar leader will come to power if Putin does not survive the chaos. The irony is that if it collapses the western countries will need to help Russia recover. Otherwise the country will fall into an authoritarian regime which will be a huge problem that will need to be dealt with in the future. The collapse of the economy is a big deal both financially and politically for everybody.

moltke 5y ago

Banks: try to shutdown Russian economy Also banks: "Why can't we get our money back out of Russia?" Sometimes I can't tell if all of this is just a dumb joke.

awb 5y ago
This is a really big misunderstanding of the situation. Governments sanctioned Russia. The banks that withdrew voluntarily were fully aware of the financial consequences.
- simonblack 5y ago
  Don't you just love it when people enjoy shooting themselves in the foot? Think it's smart to block 300 billion of Russian cash reserves? Welcome to your own (possibly fatal) cash-flow problems when a mere half of that cash can't come your way.
  - awb 5y ago
    Who is “your” in this scenario?
    - simonblack 5y ago
      Western banks and creditors. People can't complain about not being paid if they won't allow their debtors to pay. That leads to cash-flow problems for all concerned. There used to be an old business saying which is still relevant: "Never let your Ego get in the way of your cash-flow."
      - awb 5y ago
        Governments imposed the sanctions, not the banks. And no bank that withdrew from Russia voluntarily is complaining to my knowledge. It sounds like you’re accusing someone of being hypocritical, but I don’t know who specifically. Do you have any quotes of any western banks / creditors acting hypocritically?
        simonblack 5y ago
        Governments imposed the sanctions, not the banks. If the Government isn't listening to banks when we're talking about hundreds of billions of dollars in sanctions, there's something completely broken in a top-heavy FIRE economy. And especially when we're choosing to use economic instead of military warfare. Bloomberg reports: Signs of looming financial damage are becoming apparent at many of the world's biggest money managers, including BlackRock Inc. and Pacific Investment Management Co. But it’s not likely to be limited to these giant funds. Because much of Russia’s debt was rated investment grade just weeks ago, the securities were pervasive across global fixed-income portfolios and benchmarks, meaning the impact could ripple across pension funds, endowments and foundations. “This will be a monumental default,” said Jonathan Prin, a portfolio manager at Greylock Capital Associates. “In dollar terms, it will be the most impactful emerging-market default since Argentina’s. In terms of broader market impact, it’s probably the most broadly felt emerging-market default since Russia itself in 1998"... https://www.livewiremarkets.com/wires/risk-of-huge-us-150-billion-russian-debt-default-with-consequences-for-investments-in-china https://www.livewiremarkets.com/wires/risk-of-huge-us-150-bi...