The Fed is about to elevate rates by .25%, this week for the first time since 2018. The hike will be just the first of a series as the Fed struggles to bring skyrocketing inflation under control. In so doing, the economy will be headed for a historic crash.
At the same time as the hike is initiated, Russia is expected to complete a pair of interest payments on dollar bonds. At present it is unclear is western investors will receive their cash in dollars, rubles, or if a nearly unprecedented default situation is about to take place. A similar debt default took place in 1998, which triggered the massively unpopular and confidence shattering series of “too big to fail” policies. These pieces of legislation turned the heat against the American people, a heat that we are still feeling.
Russia is expected to make a pair of interest payments totaling $117 million. A thirty-day grace period could mean that Russia could delay the payment as long as the 15th of April, which would be followed by another larger and equally more uncertain $2 billion principle payment with more uncertain Russian debts due by the end of the year.
These are just some of a long list of multi-billion dollar debts, and Russia’s creditors have no reason to be sure it will pay.
According to the Financial Times, Russia said it had scheduled the debts to be paid at the start of this week, but that sanctions might interrupt its ability to complete the payments. Russian Finance Minister, Anton Siluanov said the US sanctions are going to force an “artificial default.”
But there are both internal and external reasons Russia may fail to make the payments. Morgan Stanley commented on the impending defaults, saying, “We believe it is likely there will be a missed payment as of March 16. There are ways it could be avoided. The GL9A could be extended, or Russia could make the debt payments in USD as it is required to do. As usual, a default would not mean the bonds would be excluded from EMBI indices. Barring new rules being put in place, index exclusions may only take place due to a lack of secondary trading.”
At present, markets have already factored in the defaults. Russian bonds are trading at a fraction of their value, which shows that low confidence is a problem. Credit rating agencies have downgraded Russia’s credit from “investment-grade” to “junk,” as Fitch Ratings reports they believe the default is well on its way.
Now, international finance experts are asking the question of whether or not it still counts as a default if Russia pays in rubles. Siluanov said that it would be more than fair for Russia to make the payments in its own national currency in light of the crippling sanctions which should, according to him, stop the payments from happening altogether.
In most cases, a default of this magnitude would be followed by a negotiation period between bondholders and the indebted government about plans to restructure the debt. This is usually accomplished by trading defaulted bonds out for new, less troubled ones. The new bonds would be worth less with lower interest rates or would be scheduled for payment over a longer period of time. The third option would be a combination of lower interest rates and longer repayment periods. A fourth option would be that the ECB could buy the debt and pretend the default never took place. But Russia would need to invade another country for that to work.
Russia’s last default is still a stain on the country’s reputation as a financial power. Moscow made the shocking decision to devalue the ruble and default came just after an Asian financial crisis that had global consequences, triggering the collapse of the US Long Term Capital Management Hedge Fund.
Experts believe a repeat of the ’98 disaster is not inevitable. Major finance firms like JPMorgan are now cutting out exposure to Russian risk in an attempt to buffer themselves against the fallout.
Still another option is for the Biden administration to relax some of their sanctions against Russia covertly while focusing on domestic issues, which is happening anyway. Should this be the route the government opts for, there is little doubt that the corporate media won’t help cover the administration’s tracks as Americans once again take the hit for the inability of global level players to pay their bills.
Our country is on the brink of economic disaster directly due to the policies of the Biden administration, the Democrat Party, weak Republicans. You don’t need an advanced degree to see that the number one factor on the globe is the restrictions put on American gas and oil. This never should have happened and should have been reversed months ago in recognition of building world tension. Now Bidens response is that it would take too long to gear up American production in order to be of any value. Bullshit!! The moment it is announced to the world that America is opening the floodgates on American gas and oil production and pipelines the world will take a collective sigh of relief. Energy prices will stabilize and begin to back down. The second and immediate need that is reaching crisis levels are the Raw materials that fuel the farming industry. The cost of fertilizer and other needed products for farming are going through the roof and fueling inflation. With Ukraine and Russia producing over 30% of the world’s wheat food prices and availability may soon reach depression Era levels. America must become self sufficient in agriculture minerals and chemicals or securing dependable sources until we can be independent if possible. We also need to stop the FED from increasing interest rates wichvwill only add fuel to the fire of inflation. And, of course, needless “pork barrel” spending must be wiped out of all spending bills. The country will do just fine if by putting off spending on many items in the budget for a year or two in order to lower taxes and redirect some of the saving into the immediate needs of energy and agriculture.
Best solution send Biden and Harris to Siberia where they would feel at home ,send Fauci to gitmo ,put Trump in charge of the energy dept.until supplies are replenished, Then have Desantis as commander and chief .Restore confidense in America ,send the squad to Venesuela ona permanent vacation.
Typical of many severely impaired idiots, Biden seems to take pride flaunting his shortcomings in policy and use of verbage to obscure the reality that he has created.
Without Joe we were already the most indebted nation in the history of the planet. For this dubious privelege our thanks go equally to multiple generations of weak kneed Republicans who won’t stand up for the common taxpaying voter, and Democrats who think flinging billions of $ at problems solves them while both are filling their pockets.
This will become painfully obvious when we are switched to an all digital economy. The greedy self serving government has not yet figured out that once we go digital we will know exactly how much they take in and more amusingly, how it was all spent and where – and also who initiated it. The government thinks they are exposing all taxable Revenue Sources going Digital. The reality is they will be opening both the necessary costs of running the country as well as their illicit expenditures, to ever closer scrutiny. It’s a double-edged sword…