WALL STREET’S PYRRHIC VICTORY

UPDATE DEC 16, 2014

“CATASTROPHIC” DROP OF RUBLE RINGS ALARM BELLS ACROSS RUSSIA

Wall Street’s Pyrrhic Victory: Ruble’s Freefall Actually Helps Russia’s Most Important Industry

Nine days ago, the Truth in Media published an essay on oil and ruble war Wall Street is carrying out against Russia (see OIL WAR 2014: PRELUDE TO SHOOTING WAR?, Dec 7). Since that time, the oil prices have dropped further, while the ruble seems to be in a free fall.

Timothy Ash at London-based Standard Bank described the ruble’s fall as “the most incredible currency collapse I think I have ever seen in the 17 years in the market, and 26 years covering Russia” (Huffington Post, Dec 16).

The ruble came under intense selling pressure Tuesday, falling at one point by a catastrophic 20 percent to a new historic low, despite a massive pre-dawn interest rate hike from Russia’s Central Bank, the Huffington Post reported today. Russian officials were clearly rattled even though state television urged citizens not to panic.

“The situation is critical,” Deputy Central Bank chairman Sergei Shvetsov was quoted by Russian news agencies as saying. “We could not have imagined what is happening in our worst dreams.”

The Central Bank’s surprise decision to raise the interest rate to 17 percent from 10.5 percent in the middle of the night Tuesday appeared to be a desperate attempt to prop up the troubled currency. The ruble has fallen sharply in recent weeks and is down more than 60 percent since January, due to sinking oil prices as well as the impact of Western sanctions imposed over Russia’s involvement in Ukraine’s crisis.

The ruble traded at 72 per dollar late Tuesday afternoon — a modest improvement from earlier, when it hit 78.5 to the dollar.

Wall Street’s Pyrrhic Victory: Ruble’s Freefall Actually Helps Russia’s Most Important Industry

So it looks like Wall Street is winning in its war on Russia? Well, looks can be deceiving.

Because this has so far been a “Phyrrhic victory” for boys and girls in pin-striped suits. Wall Streeters are cutting off their own noses to spite themselves. And to please their Washington detachment. Alas, the ruble’s drop is “fool’s gold” for the New World Order crowd.

The reason is that the ruble’s freefall is actually helping Russia most important industry – oil and gas (see Ruble Freefall Helps to Shield Russia’s Most Important Industry, Bloomberg, Dec 16). Because the oil prices in US dollars have been also dropping by about as much as the ruble.

Today, after dropping below $60, the Brent price then fell to $58.50 a barrel, before recovering slightly to $59.01 (see BBC News report, Dec 16). They are now down almost 50% since June.

Not so in rubles, as you can see from the above chart.

So while Russia’s plunging currency is becoming a growing concern for policy makers in Moscow, the benefits for the Treasury are swelling as it receives more and more rubles for each dollar of oil export revenue.

The CHART OF THE DAY shows that Brent crude sold for an average 3,759 rubles a barrel this year, the most on record, even after the mean dollar price of $101.74 dropped to the lowest since 2010.

Russia’s fiscal accounts are benefiting from this year’s more than 40 percent decline in the ruble as it kept pace with a similar slide in oil, which is priced in dollars. The government’s budget surplus is 1.27 trillion rubles ($23 billion) through November, compared with 600 billion rubles in the same period last year and 789 billion rubles in 2012, according to Finance Ministry data. It was 1.34 trillion in 2011.

Oops… maybe the Wall Street financial wizards should retake their Harvard or Wharton MBA classes.

As for the Washington “experts,” by now they are probably used to having the market plaster egg on their faces.

RUSSIA ON THE MENU

UPDATE, Dec 18, 2014

PUTIN CONFIRMS OUR THEORY OF US-SAUDI COLLUSION IN HIS ANNUAL PRESS CONFERENCE

In his 3-hour annual press conference in Moscow today, Russian president Vladimir Putin said that Saudi Arabia and the US might have conspired to lower oil prices to harm Russia (and Iran – see Guardian, Dec 18).

And here’s what the Truth in Media said about that 11 days ago (an excerpt from the Truth in Media Dec 7-story “OIL WAR 2014: PRELUDE TO SHOOTING WAR?” (above http://wp.me/p3QU1S-F0):

“Why do we think Wall Street engineered this attack on the ruble in collusion with Washington?

Because if the drop in the oil prices were the only reason behind it, the Saudi dinar would have tumbled down proportionately as well. Yet if you look at the above chart, you will see that the dinar has been rising at the same time as the ruble was being gutted. Which suggests that the Saudis are also playing on the W-W team.”

UPDATE, Dec 22, 2014

CHINA COMES TO RUSSIA’S AID, RUBLE REBOUNDS

In a challenge to Wall Street, China flexed its financial muscle as it came to the aid of a fellow-BRICS member by boosting the value of the Russian ruble, the Bloomberg Newswire has just reported (also see WALL STREET’S PYRRHIC VICTORY, Dec 16).

The ruble jumped 6% to 55.23 per dollar as of 10:48 a.m. in New York after Hong Kong-based Phoenix TV cited China’s Commerce Minister Gao Hucheng as saying that expanding the currency swap between the two nations would help Russia. The ruble has gained 11% over the past two days, paring a selloff that’s made it the world’s worst performing currency over the past six months.

Chinese officials signaled that they are willing to expand a $24 billion currency swap program to help Russia weather the worst economic crisis since the 1998 default. China has also provided $2.3 billion in funds to Argentina since October as part of another currency swap, and last month it lent $4 billion to Venezuela, whose reserves cover just two years of debt payments.

By lending to countries shut out by US/Wall Street of overseas capital markets, Chinese President Xi Jinping is bolstering the country’s influence in the global economy, and challenging the Wall Street/Washington domination.

READ MORE… http://www.bloomberg.com/news/2014-12-22/yuan-ruble-swap-shows-china-challenging-imf-as-emergency-lender.html

PUTIN’S APPROVAL RATINGS SOAR, WHILE OBAMA’S SAG

Meanwhile, Putin’s popularity in Russia is soaring despite the drop in the ruble and oil prices, while Obama’s approval ratings are hitting rock bottom (see the charts).

With friends like Wall Street, who needs enemies…