Shutdown and Collapse of the Russian Economy

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Shutdown and Collapse of the Russian Economy

#1

Post by Foggy »

This morning we saw that the Kentucky teacher's union lost a lot of money in Sberbank. They didn't lose all their money, but Sberbank DID LOSE 95% OF ITS VALUE. And this is going to build. I'm seeing lots of stories about the economic crisis in Russia.

Yachts are being seized. Banks are being drained, and blocked from participating in global banking transactions. Everyone is draining their bank accounts, because credit/debit cards won't work. They can't make payments on contracts. Soon they'll have no ability to import food. The damage to the Russian economy is a hole with no bottom.

On the Virtual Meetup, Danraft asked: If Russia has an economy smaller than Italy (and that was the good old days last week), how can they afford a fleet of nuclear submarines and a large army and air force? Can Putin replace even one of the bullets being fired in Ukraine today, much less the missiles and other equipment?

And the sanctions have not fully been implemented. When they are, they'll be in place for many, many years, if Putin does manage to conquer Ukraine. If that happens, I think we're going to see a historic total economic collapse of a country, like we've never seen before. But it won't be immediate. By a few months from today, it might be a nightmarish hellhole.

When you see stories about the collapse of the Russian economy, please put them here. ;)
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Re: Shutdown and Collapse of the Russian Economy

#2

Post by Jim »

What's really interesting, according to the twitter string, is that the top 3 institutional investors were all from KY. Wonder who in KY is a big Russian fan?
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Re: Shutdown and Collapse of the Russian Economy

#3

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Re: Shutdown and Collapse of the Russian Economy

#4

Post by raison de arizona »

xpost

Oops, picked a bad one there.
Market Sentiment @mkt_sentiment wrote: 🚨Breaking🚨

State of Kentucky's Teachers Retirement System was the second-largest shareholder for Sberbank of Russia (The largest bank in Russia).

Their position dropped 95% in value from $13MM to $778K

What's even more interesting is that the top-3 institutional holders in that Russian bank are all from #Kentucky.
In the scheme of things, this is minor, the fund is likely in the billions. But it's just interesting, because Moscow Mitch.
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Re: Shutdown and Collapse of the Russian Economy

#5

Post by Foggy »

Part of the worldwide economic system today is that money flows over borders like a mighty raging river, have I said that before? I've been reading Thom Friedman for many years.

And I can't think of a historical parallel to what the world is about to do to the Russian economy. And the Russian economy really is very precarious. They have kept up appearances, like the fleet of nuclear subs and the large military, but where does that money come from? The billionaires have drained the economy of anything that might look like investment in infrastructure or manufacturing. It's an enormous country, much larger than the US, with a tiny economy which is mostly agrarian. But now there's going to be NO MONEY AT ALL, or the functional equivalent.

They're going to stop paying foreign spies. :biggrin:

They're going to stop fueling the submarines. :biggrin:

There are going to be food riots, and starvation. :(

And there may be damage so severe that it takes literally decades for the country to recover.
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Re: Shutdown and Collapse of the Russian Economy

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Post by raison de arizona »

You make it sound like they are going to become the next North Korea.

Maybe they are.
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Re: Shutdown and Collapse of the Russian Economy

#7

Post by Suranis »

For what it's worth, my Ukrainian friend tells me that outside of the central parts of Moscow the people have basically nothing. They don't even have water a lot of time. It's abject poverty.
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Re: Shutdown and Collapse of the Russian Economy

#8

Post by Foggy »

Except the North Koreans have had many years to adjust. I don't know how they do it, I think they still have a problem with starvation and definitely lack of nutrition. But as I say, they've had time to work around the problems.

It's going to drop on the Russians like a stone. They're not going to have time to prepare. I'm making a YouTube, "Delicious Recipes You Can Make By Boiling Leather Shoes".

Very timely, yesno?
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Re: Shutdown and Collapse of the Russian Economy

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Post by Uninformed »

Countries, much like individuals, when suffering a dire lack of money resort to taking it from others. The more untrustworthy the person the more likely this will happen. The saying “a cornered rat…” comes to mind. :smoking:

(I am not suggesting that sanctions against Russia should be relaxed - but then again I’m from the UK where, as yet, the sanctions have no teeth). :mad:
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Re: Shutdown and Collapse of the Russian Economy

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Post by Foggy »

Russia’s Looming Economic Collapse
The war in Ukraine is being fought on two battlefields. The first battlefield is geographic. It is the land Russia is tearing up with tank treads and pounding with missiles.

The second battlefield is made up not of physical particles, but rather of relationships—contracts and promises between nations, banks, companies, and individuals. This is the economic arena.

While Russia holds the military advantage over Ukraine on Battlefield One, it is getting destroyed by a Western alliance on Battlefield Two. In the past few days, the United States and several major European countries have declared a series of financial penalties and sanctions against Russia that are without modern precedent for a major economy. These policies are triggering a financial catastrophe in Russia.

Getting a proper grip on the second battlefield requires breaking down the news of the past several days into three categories: the global boycott of Russia, the economic crisis within Russia, and the worldwide ripple effects that we’re already starting to see.
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Re: Shutdown and Collapse of the Russian Economy

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Post by raison de arizona »

Seems like something like this will have serious long term ramifications.

xpost
Volkonski wrote: Fri Mar 04, 2022 6:58 pm S&P Dow Jones will remove all Russia stocks from its indices

https://www.cbsnews.com/news/russian-st ... =154956936
S&P Dow Jones, which manages both the S&P 500 index and the Dow Jones Industrial Average, said Friday it is stripping Russian stocks from its primary equity indices, adding to the financial isolation of the nation after it invaded Ukraine.

The index giant said it will remove Russian stocks listed or domiciled in Russia, including those trading via American depositary receipts, within its standard equity indices before the open of trading on March 9.

S&P Dow Jones said it will also drop Russia from its "emerging market" designation given the "deterioration" in its markets, instead classifying it as "standalone" — which means Russia companies as a whole would have to go through a new assessment at some point to be considered for one of the index company's three country classifications, which are developed, emerging and frontier.

The decision could further drain foreign investment from Russian companies, since the S&P 500 and Dow Jones indices are relied on by many American mutual funds and ETFs to build their portfolios. When a company is removed from one of the indices, it means that those index-based funds will no longer buy shares in that business — typically triggering a decline in its stock price.
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Re: Shutdown and Collapse of the Russian Economy

#12

Post by Danraft »

Well, my extended statement was that Russia has an economy smaller than Texas (California’s is 1.8x as big as Russia’s) and has given itself the impossible task of being a paper tiger with facade (at least that’s how it looks now): submarine nuclear force; navy; Air Force; ground forces; space program; spy ops/disinformation force; etc.

They must really be in fear that they (insert who you feel “they” is as far as governing goes) will not exist soon. They almost certainly will not be the world power they were.

There was an RT news segment about the growing NATO alliance (which at essence is a member group asserting that no territory shall be take by force)— the talking head basically implied without Ukraine Russia could not exist. It felt like that was the rational—NATO will invade and take parts.

But, if they really are suffering (they are— it will get worse), and are having an existential crisis wherein they feel that they will be invaded… it is time to give them an exit strategy that gives them security in borders and economy.

Russia needs to join the EU, NATO, or both.

It would have to be a pathway with verifiable steps… but, IMHO, all nation states and peoples want security and some predictability in life. This would help all parties.

There would be a LOT of behind-the-scene alliances needed to make this happen (including trans-nationals). I don’t think Russia is even close to meeting the criteria for the EU or NATO, but the discussions about how to get from here to there and perhaps some allowances to be made for certain concessions…???

I have pondered this set of answers for a few days and I guess this is a trial balloon. I know it is a polarizing concept to even ponder, but I feel it may be a viable path?
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Re: Shutdown and Collapse of the Russian Economy

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Post by Foggy »

I wonder what the effect of all this on growing crops in Russia might be this coming summer.

I mean, if the ruble has lost 95% of its value, can the farmers buy seeds?

Can they buy fuel for the tractors?

Can anyone buy the crops, even if they manage to grow them?

Maybe the agrarian economy can survive without cash in the 21st century. I'm going to have to see that, though. :oldman:
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Re: Shutdown and Collapse of the Russian Economy

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Post by Phoenix520 »

The invasion has produced one fairy tale moment after another as the world came together. Maybe the ending can be as well.

Russia, devastated by economic sanctions, still reeling after Putin’s death from cancer and angered by the revelations of his corruption and criminality, is overwhelmed by an outpouring of support and aid from the world. Some of what was stolen by oligarchs is returned to the economy.

Not even I believe this will happen. Go ahead, Universe, surprise me.
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Re: Shutdown and Collapse of the Russian Economy

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Post by keith »

Phoenix520 wrote: Fri Mar 04, 2022 7:43 pm The invasion has produced one fairy tale moment after another as the world came together. Maybe the ending can be as well.

Russia, devastated by economic sanctions, still reeling after Putin’s death from cancer tripping on a rug and falling out a window during a heart attack and angered by the revelations of his corruption and criminality, is overwhelmed by an outpouring of support and aid from the world. Some of what was stolen by oligarchs is returned to the economy.

Not even I believe this will happen. Go ahead, Universe, surprise me.
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Re: Shutdown and Collapse of the Russian Economy

#16

Post by noblepa »

raison de arizona wrote: Fri Mar 04, 2022 12:29 pm You make it sound like they are going to become the next North Korea.

Maybe they are.
North Korea, at least, has China to keep them afloat.

Who will Russia have?

Its worth remembering at this juncture, that one of the reasons the USSR collapsed was that they were spending so much money on their military that they couldn't sustain their economy. Are we about to see a repeat of that?
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Re: Shutdown and Collapse of the Russian Economy

#17

Post by John Thomas8 »

China is allowing Russian corporations to bank there, a major hole in any sanction battle.
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Re: Shutdown and Collapse of the Russian Economy

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Post by bill_g »

And China is already propping up our economy by buying our Treasury Bonds. China may see this as an opportunity to kill two birds with one stone, and emerge as the last one standing.
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Re: Shutdown and Collapse of the Russian Economy

#19

Post by humblescribe »

Foggy wrote: Fri Mar 04, 2022 7:28 pm I wonder what the effect of all this on growing crops in Russia might be this coming summer.

I mean, if the ruble has lost 95% of its value, can the farmers buy seeds?

Can they buy fuel for the tractors?

Can anyone buy the crops, even if they manage to grow them?

Maybe the agrarian economy can survive without cash in the 21st century. I'm going to have to see that, though. :oldman:
Foggy,

here is a somewhat recent report on Russian agriculture from the 'Merican Gubmint, courtesy USDA:

https://apps.fas.usda.gov/newgainapi/ap ... 9-2018.pdf

This only lists major food items, like grain, poultry, eggs, dairy, meat, sugar beets, vegetable oil.

(Did you know that Cargill and Pepsi are mentioned as major players in Russia's large-scale agricultural endeavors? It is right there in the report. Maybe it is time to drink Dr Pepper, boycott Taco Bell, KFC, and Pizza Hut, and shun the monolithic Cargill's products in our every day lives. Cargill is immense.) But I digress.

According to the interwebs, Pepsi is a major industrial potato and raw milk processor in Russia. Cargill trades in grain, oilseeds, poultry and animal feed. They also have massive plants for chemical conversion of plant materials into derivatives like starches, syrups, and stabilizers.

Anyhoo, the farmers, regardless of size, probably don't have to buy seeds. They can collect seeds from harvest and reserve them for next year's crop. Grains like wheat, barley, rye, oats, and millet grow true to variety each and every time. Corn, no, but I really don't think that corn is a biggie in Russia. Potatoes can be grown for seed (not real seeds, but potatoes are grown from the eyes you see that are on the tuber. Just cut them up and stick into the ground.) Poultry, eggs, swine, beef, and dairy all have AI programs to inseminate the breeding females to sustain the population for harvest.

The report goes on to say that the majority (53%) of agriculture in Russia is large-scale, commercial endeavors. This is followed by individually-owned farms generally less that a section in size. Bringing up the rear is the mom-and-pop truck farm for personal use and occasional forays into the local marketplace.

Whether export embargoes will put a sizable dent into their ag is beyond my knowledge. But I do believe that there will be enough to feed the population--even if it is bare-bones and lacking variety. While a lot of the processing that Cargill does might cease temporarily if there is no money or market for those products, potatoes, dairy, grain, and animals can all be consumed with minimal additional work.

It should be noted that in the agricultural world, commodities that are grown on massive scales are the ones that get the most publicity and the most money. If the crop is traded on commodity exchanges, then that commodity is going to be analyzed and researched. Everything else we eat or wear (food and fiber) is considered a specialty crop. Tree fruit, vegetables, melons and squash, herbs, spices, and the like, while important, typically do not receive the same amount of attention. These foods are generally more perishable, and require more money for proper storage and shipment. I don't know how extensively these food crops are grown in Russia. My guess is that not much outside the very southern latitudes and locally if microclimates are suitable. At one time Russia was a pretty significant importer from the ole US of A of table grapes, raisins, prunes(!), walnuts, and almonds.
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Re: Shutdown and Collapse of the Russian Economy

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Post by Foggy »

Cool, thanks, humblescribe. :thumbsup:

So they'll just have to survive, somehow, without prunes. :twisted:
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Re: Shutdown and Collapse of the Russian Economy

#21

Post by John Thomas8 »

There's nothing stopping the Russians from taking over the processing plants within their borders and operating them as normal. With finance provided via China, this is probably not an issue for at least the short term.
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Re: Shutdown and Collapse of the Russian Economy

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Post by raison de arizona »

Wow, that's bad folks.
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Re: Shutdown and Collapse of the Russian Economy

#23

Post by Notaperson »

They are scared to death of reopening their stock market.

Russia’s Stock Market to Remain Closed Friday
There will be no stock trading on the Moscow Exchange on Friday, as the closure of Russia's stock market reaches the two-week mark.

In a notice posted on its website late Thursday evening, the Russian Central Bank said there would be no stock trading on the exchange the next day. The Moscow Exchange's currency market will be open.

Stock trading on the Moscow Exchange has been shut since Feb. 25—the day after Russian forces invaded Ukraine—although the exchange's currency market has reopened.
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Re: Shutdown and Collapse of the Russian Economy

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Post by John Thomas8 »

https://www.theatlantic.com/newsletters ... il/627004/

Add it all up, and it looks like China could become the counterpart of last resort for Russia. This would make Russia something like a giant North Korea. Since 2010, that rogue nation has relied on China for roughly 90 percent of its total trade. One plausible scenario, then, is that Putin’s failed attempt to expand the Russian empire grows the Chinese empire, as Russia clings to China to avoid economic ruin.
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Re: Shutdown and Collapse of the Russian Economy

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Post by bill_g »

China will get access to a lot of natural resources in this new relationship with Russia.
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