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Sorry, I still don’t understand what you’re getting at. I think the government was fully aware of the tradeoffs of the sanctions and potential Russian default.

• simonblack 5y ago
  We're probably talking past each other. I don't think the Government was fully aware of the consequence of their actions. The point of the Government's sanctions is to cause problems and distress for Russia economy. But sanctions are a two-edged sword and end up with you causing problems and distress for your own economy too. Many US investment companies expect regular interest payments from Russia. Actually, most them are dependent on those payments of interest to maintain their cash flows. If their cash flows get affected, they are at risk of collapsing themselves. Some of those investment companies are supposedly "too big to fail" and will require being bailed out by the taxpayer if they are near collapse. That causes fear, uncertainty and doubt in the financial circles, and that is definitely not wanted in an industry that requires plenty of investor confidence. Now, if the Government blocks the use of Russia's cash reserves such that payments can not be made to and from those accounts, Russia is prevented also from paying those interest payments to the US investment companies that are relying on those interest payments to maintain their own cash flows. I can't believe that the Government would have put sanctions on Russia's cash reserves without previously talking to those financial companies whose livelihood depends on free access to international transfers. If the Government did talk to the banks/investment companies and went ahead with the sanctions anyway, they are guilty of putting their own economy at risk. That's sheer stupidity: You can't prevent Russia from paying interest by blocking their cash reserves and then complain that your economy is at risk. If the Government did not talk to the banks/investment companies (those are the same thing really after the repeal of the Glass-Steagall Act), they are again guilty of putting their own economy at greatly risk. Something is incredibly broken if the Government just barges ahead and makes stupid decisions without looking at the financial disasters that follow for the financial industry in the US's top-heavy FIRE economy as a direct consequence of their economic warfare on Russia. I would not be at all surprised if the blocking of Russia's cash reserves leads directly to end of the USD as the World's Reserve Currency, and quite soon. Hopefully, I was a bit clearer for you this time. At the cost of being rather long-winded about it. :)
  • awb 5y ago
    > I don't think the Government was fully aware of the consequence of their actions. I remember the news pre-sanctions about the US & Europe deliberating. They were also discussing the burden each country would have to bear, so I got the impression they were fully aware of the double edge sword and communicated that to the public. I also don’t hear anyone complaining note that was large enough to be consulted by the government. > If the Government did talk to the banks/investment companies and went ahead with the sanctions anyway, they are guilty of putting their own economy at risk. Sure, but the risk to US, European & allied economies is a drop in the bucket compared to the impact on Russia. I think that was the trade off they calculated was worth it. I don’t think anyone was under any illusions that these sanctions would be without repercussions. > I would not be at all surprised if the blocking of Russia's cash reserves leads directly to end of the USD as the World's Reserve Currency, and quite soon. Possibly. But I think I heard that the US + EU + UK countries account for ~33% of the global economy. If you count other US allies like Mexico, Canada, Japan, Korea, Australia, Turkey, etc. then the number goes higher, I think to near 50%. It’s a huge economic bloc that has proven it’s ability to act in unison.