interesting thread on russia's economy, rubles, etc.

[orleans]

Link to tweet

THREAD: Here's why sanctioning the Central Bank of Russia could prove devastating - the true "nuclear" option in the West's financial arsenal. Russia currently holds about $640 billion in reserves. About 32% held in euros, 22% in gold, 16% in dollars, and 13% in Yuan. 1/

Most of that gold is held domestically and beyond the reach of sanctions. But about $300 billion in reserves are held abroad. Freezing those will prevent the Bank of Russia from using them for things like currency interventions or transfers to the Russian Treasury to spend. 2/

We're already seeing the ruble fall to its lowest levels ever as holders of rubles rush to exchange them for other currencies they think are safer stores of wealth. This is typical in crises - people trust dollars more than rubles to hold value. 3/ https://xe.com/currencycharts/?from=USD&to=RUB&view=10Y

We saw this dynamic during Russia's August 1998 financial crisis, again in 2014, and we're seeing it now. 4/

Currencies are bought and sold on international foreign exchange markets. Like any traded good, their price (or exchange rate) is a function of supply and demand. Demand for the ruble is plummeting: people are selling them in exchange for dollars/euros. 5/

This means that the market is being flooded with rubles that nobody really wants, so supply is increasing. Falling demand and rising supply means the "price" of the ruble is dropping, or weakening. 6/

A crashing ruble is bad for consumers: they get fewer imported goods for their rubles AND fewer domestic goods (reduced purchasing power). Put another way, it takes more rubles to buy the same stuff as before. That's called inflation, and it can get quite severe. 7/

High inflation is generally bad for economic growth, and hyperinflation is historically associated with severe recession/depression. That's bad for ordinary folks and, say, governments who are waging costly wars with their neighbors. 8/

This is why central banks often intervene in currency markets to stabilize their currency: spend your reserves (dollars, euros, gold, etc) and buy up rubles to reduce the supply and prop up the exchange rate. 9/

But what happens when you burn through your reserves? You can't support your exchange rate by buying up excess rubles, and the currency crashes. That's what we saw in Russia in 1998, and that's what precipitated a major economic meltdown. 10/

(10 more tweets in this thread that ends with this: In conclusion, Слава Україні! Героям слава! 🇺🇦 20/END

translation: Glory to Ukraine! Glory to heroes! )

[roamer65]

1. Do it.

Crash the fucking rouble.

[Cha]

2. Rts TY.. so interesting!

Link to tweet

[UTUSN]

3. Hoping for the 2nd crashing of the USSR, Putin's crashed USSR