Tuesday, October 16, 2018

How ironic is it that Russia has become the world's most stable economy after dumping their dollar reserves and swapping them out with gold

If we were to ask you what you thought of a country that has little debt, record low unemployment, 3.1% expected economic growth, and an economy that produces the two most important commodities in the world, which nation would you guess fits this description?

Additionally, what if we mentioned that this country has also been under intense economic sanctions for the past five years?

If you guessed Russia then you are absolutely correct.  And perhaps what is most ironic is that they are achieving this at a time when most of the world's other economies are teetering on the cusp of recession, enduring a growing debt crisis, or dealing with tightening liquidity.

Russia is financially stable despite sanctions, President Vladimir Putin said at a meeting with Central Bank officials on Tuesday. Higher reserves and falling dependence on oil are the key factors, according to the president. 
“The financial market remains stable. That is thanks to the joint actions of the government and the Central Bank. Our foreign exchange reserves have increased by 5.7 percent since the beginning of this year and are already at $459 billion,” Putin said. 
Russian foreign reserves consist of foreign exchange, special drawing rights (SDR) holdings, the reserve position in the IMF, and monetary gold. They reached their highest level before the global crisis of 2008 at $598 billion. 
The economy shows growth, too, Putin noted. “In general, the picture in the Russian economy is generally positive. Industrial growth for eight months amounted to 3.1 percent, including manufacturing production that grew by 3.8 percent,” the president said. 
Putin also noted the consistently low inflation and unemployment. “In August, unemployment fell to 4.6 percent, which is a record low, and inflation in September was 3.4 percent.” – Russia Today
Russia, even more than China, has led the way in global de-dollarization and cutting off as many strings in which the United States could use to put more economic pressure on the Eurasian power.  And by diversifying their primary industries now with agricultural exports, they have also been able to protect themselves from the gambit used by Washington back in the late 1980's to bring about the fall of the Soviet Union.

27 years after that fall, it is perhaps apropos that Russia is the one leading the way in helping to bring down the U.S. by attempting to cut off its power not through oil, but in their control over the global reserve currency.  And a big part of this has been in their decision to dump their dollar reserves in exchange for gold, and set themselves up to be a huge winner during the next global currency reset.

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