How The West Broke Russia's Economy part 2

Franc denominated reserves that fall under their jurisdictions. And while this all sounds very complicated. In practice, it means that when theHow The West Broke Russia's Economy Russian central bank calls their broker to sell French Government Bonds or some other instrument, the broker will just say no. Or if they want to access the accounts that they have at . And with this move the West has basically broken Russia’s central bank, and yes, by that they also invalidated the analysis that I made in my previous video. The consequence, is that now the sanctions on banks weigh much more heavily. The Ruble is plunging hard. Russian inflation is expected to surge. And the Kremlin will find it harder to finance its invasion forces. But, there are two important points here that might complicate matters. The first is that some yet turn out to be smoke and mirrors. And The second point is that Russia might be able to defend its currency even without its war chest. Smoke & Mirrors Let’s talk about smoke & mirrors first. Sure, all of these sanctions sound extreme and market participants now already reacting to them, as if they are in place. But, it is important to remember that they are not yet all in place. Yes, some banks have lost access SWIFT. But, importantly, they are still allowed to use the system for energy transactions.  perhaps Russian banks can get around this by just indicating many more transactions are ..... energy transactions? And even if this is not possible,  And about these central bank reserves. It is not yet clear how much of them will actually be frozen. This means that the Russian central bank might still have some time to move most of them to other jurisdictions. And, on top of that, Russia is fighting back against sanctions in other ways. For example, many fear that Russia will counter Europe’s by cutting them off from their precious gas. Then again, it is also not in Russia’s interest to do this because it will leave them with even less money to prop up its currency. In other words, the more it cuts off Europe, the more quickly its war chest will deplete. So, for now, Russia’s central bank is trying to attract foreign money by raising its interest rate from 9.5% to a whopping 20%. On top of that it has initiated capital controls to prevent citizens from sending money out of the country. Finally, it has pledged to provide liquidity to all banks in need. So, with the West having broken Russia central banking strategy. The ball is back in Russia’s court. If Russia does cut energy to Europe, the fallout will be bad. Furthermore, Russia is looking at freezing Western assets. And finally, as Credit Suisse economist Zoltan Poszar has noted, Russia’s energy surplusses, were funding the West for a large part. So, stopping that flow might lead to tremendous stress in Western financial markets as well. And what about the long-term impact of these sanctions on the use of the Dollar or the Russian economy? But, first, onto the sponsor of this video, Squarespace. Squarespace provides a powerful online platform from which you can create your very own website. For creators, Squarespace really helps you to connect with your audience and generate revenue because it allows to you create gated members only content. What is more, it allows you to manage your members, send them e-mails and leverage audience insights, all in one easy to use platform. So, if that sounds good go to Squarespace.com for a free trial, and when you’re ready to launch, go to squarespace.com/moneymacro to save 10% off your first purchase of a website or domain. And, finally, want to know more about Russia’s economy: check out this video, or about international finance check out this video. Finally, consider supporting my research via Patreon.com/moneymacro or Kofi links in the description.