Another wildcard is that the US has lost effective control over different elements of the government. The CIA and the DOD operate independently. Congressional oversight no longer exists. The President is extremely weak and is unable and/or unwilling to impose a uniform policy.
Back in 2016, Syria had different factions supported by different parts of the US government, and the factions ended up fighting each other. Similar situations are already occurring with Ukraine. The Secretary of Defense has been in contact with his Russian counterpart about a possible cease fire while the State Department and the CIA are working to escalate the war. Ukraine is turning into a proxy turf war.
The economic war front is about to have a new engagement as the ban on allowing Russia to transfer funds to make itâs bond interest payment causes an imposed default. There will be claims of how this will devastate the Russian Economy. Russia will be declared in default, the trading price of their bonds will fall, but these bonds will still trade in the secondary market. Russia has the assets to service the debt, so this is an imposed default. As China has already shown its willingness to ignore trade sanctions, and has more than sufficient resources to purchase the Russian debt in the secondary market. I expect China to wait for the trading price of Russian debt to crater on the secondary market, then buy as much of it as they can for pennies on the dollar. Then Russia will call the debt, most likely swapping it for ruble, or renminbi denominated debt. And it will then service the debt outside the Western banking system. The only losers will be the Western lenders forced to dump the debt for pennies on the dollar.
iâve said from the beginning the sanctions werenât worth crap. they are weak, and weak sanctions are worse than no sanctions. i was assured by brandonâs acolites that they were the most stern of sanctions and russia would collapse under them. of course they had to believe that, the masters had spoken.
About the only thing this country has left going for it economically is the dollar being the world currency reserve. These sanctions put that at serious jeopardy.
We are talking about ball park $370 billion dollars of debt, only between 65-70 billion of it Russian Government debt. $0.30 on the dollar, or less would not be unheard of after a default. But knowing that the debtor actually has the ability to service the debit, but isnât being allowed to, creates opportunity. That means the debt could be purchased for about $111 Billion at 30 cents on the dollar. China would be happy to buy the debt at a steep discount, then settle the debt service and future redemption in discount priced energy resources.
Yes, the US government in grasping at straws to engineer a default.
Given the rising value of the ruble, I doubt many bondholders will complain about payment in rubles as an alternative. I suspect that the US will see more damage than Russia in the long term.
Just when you thought our leaders couldnât get any stupider, this comes along. Apparently they think banning Russian Gold will be a good idea. Gold is a commodity, not a currency. As such it is fungible. I am sure China, India and several other countries will be glad to receive trade settlement from Russia in gold bullion. Will these fools never learn?
Expect India to become a major source of gold for Europe. Of course, most of the Indian gold will have originated in Russia. They may mix Russian gold with gold from other sources if chemical analysis would indicate the true origin.
The same sort of thing is going on with Russian oil.
It looks like there is finally a timetable for ending the war. Zelensky says that the war must end by winter. Winter weather does not work well for Ukrainian troops. Until then Ukraine will continue to fight to get the best deal.
My observation is that early winter is about when Germany will exhaust its stored natural gas, and Biden will have exhausted the Strategic Petroleum Reserve.
What happens if Putin does not obey the schedule and instead uses the winter weather to his advantage?
Given the lack of a coherent government in Kiev or Washington, I doubt a negotiated settlement is possible. The most likely outcome will be a decisive Russian victory followed by surrender terms dictated by Russia. The top priority appears to delay a collapse until after the November elections in the US.
Even Boris Johnson is tacitly admitting that is a likely outcome:
Lack of food and fuel could make the winter the worst western Europe has seen in many decades.
