Russian invasion this weekend? What it means for markets.

[Steeze]

https://www.google.com/amp/s/sports.yahoo.com/amphtml/credit-suisse-strategist-says-were-172900306.html

Anyone see this? Suggesting that China, presumably any non-nato country, will think twice about holding US treasuries going forward after how quickly the US was to seize assets in Russia. This will lead to increase trading in non-US dollars, devalue the dollar, increase inflation, etc.

“ Pozsar marks the end of the current monetary regime as the day the G7 nations seized Russia's foreign exchange reserves following the latter's invasion of Ukraine. What had previously been thought of as risk-free became risk-free no more as non-existent credit risk was instantly substituted for very real confiscation risk.”

Seems like anyone who might have ambitions to do something the West might view unfavorable would be wise to distance themselves from NATO assets beforehand. Now that the playbook is in the open it will be prudent to prepare.

[ChpBstrd]

https://www.google.com/amp/s/sports.yahoo.com/amphtml/credit-suisse-strategist-says-were-172900306.html

Anyone see this? Suggesting that China, presumably any non-nato country, will think twice about holding US treasuries going forward after how quickly the US was to seize assets in Russia. This will lead to increase trading in non-US dollars, devalue the dollar, increase inflation, etc.

“ Pozsar marks the end of the current monetary regime as the day the G7 nations seized Russia's foreign exchange reserves following the latter's invasion of Ukraine. What had previously been thought of as risk-free became risk-free no more as non-existent credit risk was instantly substituted for very real confiscation risk.”

Seems like anyone who might have ambitions to do something the West might view unfavorable would be wise to distance themselves from NATO assets beforehand. Now that the playbook is in the open it will be prudent to prepare.

I've considered these implications as well - but anyone owning a digital yuan with the CCP recording every transaction needs to be even more concerned about having their assets confiscated. People will be losing their life savings due to social media posts - just watch. The coerciveness of any alternative is worse than what the US offers.

The authors think gold and commodities will be the basis of the hypothetical new monetary system, but wouldn't it be simpler for people fearing confiscation to just use non-digitized currencies? A country like Mexico, Malaysia, or India could attract inflows just by being too inept to confiscate financial assets effectively, if people really feared such a thing. There's not any sign they do. The Russian invasion of Ukraine was a black swan, and the asset freezing affected a very small number of corrupt oligarchs. Tort lawsuits, divorces, and false accusations of drug running are probably greater risks faced by rich people than something like this.

Russia will rely on trade with China to get through the next couple of years, but the weakened rouble will force them to liquidate some of their massive reserves of gold even as high prices encourage another cycle of mining investment. The increased supply and rising interest rates make me wary of yellow metal, which is not at all an effective inflation hedge.

Lastly, why was this posted in Yahoo Sports?

[Scandium]

https://www.google.com/amp/s/sports.yahoo.com/amphtml/credit-suisse-strategist-says-were-172900306.html

Anyone see this? Suggesting that China, presumably any non-nato country, will think twice about holding US treasuries going forward after how quickly the US was to seize assets in Russia. This will lead to increase trading in non-US dollars, devalue the dollar, increase inflation, etc.

“ Pozsar marks the end of the current monetary regime as the day the G7 nations seized Russia's foreign exchange reserves following the latter's invasion of Ukraine. What had previously been thought of as risk-free became risk-free no more as non-existent credit risk was instantly substituted for very real confiscation risk.”

Seems like anyone who might have ambitions to do something the West might view unfavorable would be wise to distance themselves from NATO assets beforehand. Now that the playbook is in the open it will be prudent to prepare.

Noted. If/when I'm a billionaire oligarch intimately and personally connected with a regime that sends hundreds of thousands of troops, tanks and jets to conquer a sovereign nation I'll be sure to consider the risk to the stolen assets I hold abroad!

I know there are DOZENS of us here in exactly the same situation! So prepare! Buy gold!! *rolleyes

[Steeze]

https://www.google.com/amp/s/sports.yahoo.com/amphtml/credit-suisse-strategist-says-were-172900306.html

Anyone see this? Suggesting that China, presumably any non-nato country, will think twice about holding US treasuries going forward after how quickly the US was to seize assets in Russia. This will lead to increase trading in non-US dollars, devalue the dollar, increase inflation, etc.

“ Pozsar marks the end of the current monetary regime as the day the G7 nations seized Russia's foreign exchange reserves following the latter's invasion of Ukraine. What had previously been thought of as risk-free became risk-free no more as non-existent credit risk was instantly substituted for very real confiscation risk.”

Seems like anyone who might have ambitions to do something the West might view unfavorable would be wise to distance themselves from NATO assets beforehand. Now that the playbook is in the open it will be prudent to prepare.

Noted. If/when I'm a billionaire oligarch intimately and personally connected with a regime that sends hundreds of thousands of troops, tanks and jets to conquer a sovereign nation I'll be sure to consider the risk to the stolen assets I hold abroad!

I know there are DOZENS of us here in exactly the same situation! So prepare! Buy gold!! *rolleyes

The risk isn't on an individual level, like you said, none of us are in that position. Rather, it is about the dollar and US assets losing appeal for foreign investors. Governments losing interest in holding US debt and transacting in dollars for commodities (demand for dollars decreases). For wealthy individuals in countries like China, they may now think twice before parking money in US real estate, knowing that the Taiwan situation may unfold at some point in their lifetime.

So on a personal level the consideration is that the dollar may lose value faster going forward as foreign buyers of our debt are increasingly replaced by the Fed monetizing the debt as a matter of necessity. If you live in a major city in a NATO country, you may find that property prices are affected by the drop in demand from non-NATO foreign investment.

[Scandium]

https://www.google.com/amp/s/sports.yahoo.com/amphtml/credit-suisse-strategist-says-were-172900306.html

Anyone see this? Suggesting that China, presumably any non-nato country, will think twice about holding US treasuries going forward after how quickly the US was to seize assets in Russia. This will lead to increase trading in non-US dollars, devalue the dollar, increase inflation, etc.

“ Pozsar marks the end of the current monetary regime as the day the G7 nations seized Russia's foreign exchange reserves following the latter's invasion of Ukraine. What had previously been thought of as risk-free became risk-free no more as non-existent credit risk was instantly substituted for very real confiscation risk.”

Seems like anyone who might have ambitions to do something the West might view unfavorable would be wise to distance themselves from NATO assets beforehand. Now that the playbook is in the open it will be prudent to prepare.

Noted. If/when I'm a billionaire oligarch intimately and personally connected with a regime that sends hundreds of thousands of troops, tanks and jets to conquer a sovereign nation I'll be sure to consider the risk to the stolen assets I hold abroad!

I know there are DOZENS of us here in exactly the same situation! So prepare! Buy gold!! *rolleyes

The risk isn't on an individual level, like you said, none of us are in that position. Rather, it is about the dollar and US assets losing appeal for foreign investors. Governments losing interest in holding US debt and transacting in dollars for commodities (demand for dollars decreases). For wealthy individuals in countries like China, they may now think twice before parking money in US real estate, knowing that the Taiwan situation may unfold at some point in their lifetime.

So on a personal level the consideration is that the dollar may lose value faster going forward as foreign buyers of our debt are increasingly replaced by the Fed monetizing the debt as a matter of necessity. If you live in a major city in a NATO country, you may find that property prices are affected by the drop in demand from non-NATO foreign investment.

In the grand scheme of things effecting the market this seems like extremely small, near insignificant, concern. Again; the concern isn't for "foreign investors", it's for kleptocrat investors tied to regimes making war on the west. Ok, if all 27 of them stop buying 100— million dollar apartments in London and New York that could affect property values. Oh no my house price... Or tesla shares or whatever. I fail to see even a 1% effect on prices of almost anything.

Also; what's the alternative? Chineese investors parking their money in China? Because there it's safe from being ceased by the government! Oh wait..

I file this under extremely hypothetical doomsday scenarios published weekly by people advocating buying gold..

[MustacheAndaHalf]

The two largest economies in the world are the US and China.  Between them is the largest trading relationship in the world.  How can China sell goods to the US without accepting US dollars?

Setting aside the US impact, consider if China stopped all trade with the US.  How could China's workers stay employed in that environment?  Unemployment would skyrocket in China - and discontent.  I can't speak for China's leaders, but based on what they target with censorship, I think stopping discontent is their top priority.  I think avoiding discontent is more important to them than money in USD that might get frozen.

As to Russia's central bank, can it conduct it's mission without USD and Euros?  I suspect those are the most traded currencies.  In normal times they might defend their currency from small drops - selling USD and buying rubles, to influence currency markets.  But if they lose all influence over the largest currency markets (USD, Euro?), that limits their options and might spoil their ability to act.

[ChpBstrd]

Setting aside the US impact, consider if China stopped all trade with the US.  How could China's workers stay employed in that environment?  Unemployment would skyrocket in China - and discontent.  I can't speak for China's leaders, but based on what they target with censorship, I think stopping discontent is their top priority.  I think avoiding discontent is more important to them than money in USD that might get frozen.

I agree that control is more important to the CCP than money. I.e. with control, you can get as much money as you want regardless of economic circumstances, but without control your money will just be taken away by somebody who has control. Ask Jack Ma about that.

Chinese history has always been a story of clashes between the business nobility and the emperor, with each side periodically overthrowing the other. If the modern emperor of China feels the need to weaken his potential rivals in the business nobility he could engineer an economic crisis and most propaganda-fed Chinese people would believe his line about it being the U.S's fault, not the emperor's. Xi is watching events in Russia with great interest, thinking "you mean I can wipe out the wealthy business owners in my country and use propaganda to get away with the domestic economic impacts? All I have to do is invade a small rival country?"

[MustacheAndaHalf]

Setting aside the US impact, consider if China stopped all trade with the US.  How could China's workers stay employed in that environment?  Unemployment would skyrocket in China - and discontent.  I can't speak for China's leaders, but based on what they target with censorship, I think stopping discontent is their top priority.  I think avoiding discontent is more important to them than money in USD that might get frozen.

I agree that control is more important to the CCP than money. I.e. with control, you can get as much money as you want regardless of economic circumstances, but without control your money will just be taken away by somebody who has control. Ask Jack Ma about that.

Chinese history has always been a story of clashes between the business nobility and the emperor, with each side periodically overthrowing the other. If the modern emperor of China feels the need to weaken his potential rivals in the business nobility he could engineer an economic crisis and most propaganda-fed Chinese people would believe his line about it being the U.S's fault, not the emperor's. Xi is watching events in Russia with great interest, thinking "you mean I can wipe out the wealthy business owners in my country and use propaganda to get away with the domestic economic impacts? All I have to do is invade a small rival country?"

You said "always", which exaggerates the certainty of that statement.  Wasn't Mao Zedong a founding member of the CCP, which was based on workers & peasants revolting against both nobility and business classes?  In other words, the most significant clash in the past 100 years did not involve the business nobility vs the emperor.
https://en.wikipedia.org/wiki/Proclamation_of_the_People%27s_Republic_of_China

Also, why would China imitate Russia?  Putin might get fractionally more assets from departing foreigners, but that is nothing compared to the collapse of the currency.  The stock market there has been closed for weeks - it no longer functions.  The collapse of various assets is hurting Putin's net worth far more than any incremental taking of assets.. and those actions will long be remembered by investors, who will avoid Russia.

Compare that to China, with so much money it started the Belt & Road initiative.  China loans money to countries with uncertain chances of paying it back, and builds up roads & ports.  I don't see the desperation you imply - if anything, China ranks much higher than Russia on world corruption perceptions index.