Russia in Financial Crisis (Again), Ruble Collapses (Again), Central Bank Does Mother of All Rate Hikes (Again), US Stocks Shrug (Again)

A financial crisis in Russia just doesn’t have the same effect on the US as a financial crisis brewed up in the US has.

By Wolf Richter for WOLF STREET.

Earlier today, the ruble collapsed by nearly 30% to where it took 117 rubles to buy $1, up from about 83 rubles on Friday under the broad range of sanctions, many of them targeting the Russian financial system.

The Central Bank of Russia implemented numerous emergency measures to contain the chaos, the bank runs, the frenzied hunt for dollars, and to prop up the value of the ruble. These measures included some capital controls, a promise of unlimited ruble liquidity for the banks, and the mother of all rate hikes: 1,050 basis points, from 9.5% on Friday to 20% on Monday. Which succeeded in softening the collapse of the ruble on Monday, now trading at 103 rubles to the dollar.

As the 25-year chart below shows, ruble-collapses and financial crises are a regular occurrence in Russia: The 1998 Russian Financial Crisis, Russia’s part in the Global Financial Crisis, the 2014 Russian Financial Crisis, and now the 2022 Russian Financial Crisis. Over those 25 years, the ruble has collapsed by 97% against the USD (chart via Trading Economics):

The last two Russian Financial Crisis (2014 and 2022) were triggered by the sanctions imposed on Russia after its invasion of the Ukraine. But the sanctions implemented so far are much more severe and are targeting Russia’s financial system much more profoundly than the prior set of sanctions. And the consequences for the Russian financial system will likely be more severe as well.

And the Central Bank of Russia has reacted more as well. Back in 2014 and into 2015, it jacked up its policy rate from 5.5% to 15% in multiple rate hikes. This time around, the Central Bank had already jacked up its policy rate eight times, totaling 525 basis points, to 9.5%, to fight rampant inflation. And today, it jacked up its policy rate by another 1,050 basis points to 20%.

These ruble collapses are why long-term ruble-denominated debt is toxic, and there are few takers and the yields are very high, and this is why Russia cannot borrow much in rubles. And whoever is holding ruble debt right now just took a huge loss in terms of the purchasing power of those bonds. Bond trading in Russia is suspended for now.

Russia borrows in foreign currency, some of it directly as sovereign debt, and a lot of it through its giant state-owned enterprises that are big exporters of crude oil, natural gas, metals, other commodities, and military equipment.

In terms of foreign-currency debt issued by the government, the cost of insuring it against default soared to levels that indicate a 56% chance of default, according to Bloomberg.

During the 1998 Russian Financial Crisis, the government defaulted on its foreign currency debts.

The Russian banks in Russia, which are in serious trouble, will be propped up by the Central Bank. Private shareholders may get wiped out and be replaced by the state. Sberbank, Russia’s largest bank, is already majority-owned by the state (50% plus one voting share).  On Monday, authorities closed the stock market in Russia, and shares are not trading.

But the ECB, as bank regulator, announced on Monday that Sberbank’s wholly owned subsidiary in Austria – Sberbank Europe AG, its branches in Germany, and its subsidiaries in Croatia, Slovenia, Hungary, and Serbia – “are failing or are likely to fail owing to a deterioration of their liquidity situation” — caused by runs on the banks, when depositors tried to get their money out.

“The ECB took the decision after determining that, in the near future, the bank is likely to be unable to pay its debts or other liabilities as they fall due,” the ECB said.

“And there are no available measures with a realistic chance of restoring this position at group level and in each of its subsidiaries within the banking union,” the ECB said, indicating that it will not bail out the Russian bank in Europe.

Depositors in the European entities of Sberbank are protected by the national deposit insurance programs of up to €100,000 per depositor per bank. If depositors stuck to the limits, they will be made whole by their national deposit insurance programs.

So Sberbank Europe AG and its subsidiaries will likely get resolved by bank regulators. The bank is relatively small, with €14 billion in assets. But during the 2014 Russian Financial Crisis, the ECB deemed the bank “significant” due to the magnitude of its cross-border activities, and thereby put the bank under its direct supervision.

If the bank gets resolved, the stock holder, Sberbank of Russia, is first in line to get bailed in, by definition, as bank stockholders always are.

Russian financial crises had little impact on the US economy and US financial markets. In 1998, the US economy and stock market were booming, the dotcom bubble was in full swing and had more than a year left to run. In 2014, when the US economy was recovering from its own Financial Crisis, the Fed ended QE, while the economy and markets were plodding along.

But the Russian financial crises had significant impact on the economies of Russia’s smaller neighboring countries.

And they had severe consequences for the people in Russia, often exposing them to personal hardship. Russia imports large amounts of consumer goods, from cars and consumer electronics to food, and a ruble collapse guarantees a massive spike in consumer price inflation for people who earn their living in rubles.

But a major disruption of Russia’s exports of crude oil, natural gas, metals, and other commodities could raise prices of commodities further, which could further raise inflation pressures in other countries, not so much in the US, which produces most of its own energy, but in Europe, where much of Russia’s energy exports are headed.

US crude oil grade WTI is now trading at around $95 a barrel. It had briefly touched $100 a barrel last week. Back in 2008, it hit $150 a barrel. Brent crude is already trading above $101 a barrel.

Emerging-market stock and bond funds may turn out to be tricky, depending on how much exposure to Russian stocks and bonds they have. There are reports that a European EM fund was gated, and others may follow, with investors not able to pull their money out until there is some clarity on what Russian assets are trading for. Trading in Russian stocks and bonds being suspended in Russia, and on some other exchanges, it’s hard to get a read on pricing, and gating makes sense until there is more clarity.

US and European banks, and many global companies have some exposure to Russia and might take a hit. Among the first confessions:

BP may be the biggest one. It announced on Sunday that it would “exit” – presumably sell – its 19.75% stake in Rosneft, triggering a large-scale “non-cash” write-down that includes the loss on its equity stake, which was valued on BP’s books at $14 billion. The write-down, hilariously, also includes $11 billion in foreign exchange losses that have “accumulated since 2013” due to the collapse of the ruble, but just haven’t had a chance yet to show up on the income statement, hahahahaha. BP’s shares fell 5%, no biggie.

Citigroup disclosed today in a filing, reported by Bloomberg, that it had $9.8 billion in exposure to Russia as of the end of Q4. This exposure includes $5.4 billion in country exposure, $1 billion of cash and placements with the Central Bank and Russian banks, $1.8 billion in reverse repos with various counterparties, and $1.6 billion in exposure to Russian entities outside Russia. Citi’s shares fell 5%, no biggie.

Stocks in the US are coming off the biggest stock market bubble ever, fueled by $4.7 trillion in Fed money-printing in 23 months. Individual stocks started blowing up a year ago, stock by stock, until the overall indices finally started showing the damage: the Nasdaq starting in late November and the S&P 500 early this year, amid rampant inflation, the end of QE, coming rate hikes and QT.

Now the stock market has an additional thing or two to worry about, and is still in total bubble territory, with lots of air space underneath it. After a sharp two-day bounce on Thursday and Friday that had followed five days of steep losses, the S&P 500 index lost just a little ground on Monday, giving up some of the gains from Friday. No biggie. A financial crisis in Russia just doesn’t have the same effect on the US as a financial crisis brewed up in the US.

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  232 comments for “Russia in Financial Crisis (Again), Ruble Collapses (Again), Central Bank Does Mother of All Rate Hikes (Again), US Stocks Shrug (Again)

  1. Phoenix_Ikki says:

    US Stocks Shrug (Again)

    Feels like the forever sentiment since QE again after Taper tantrum and definitely the case especially after the trillions in 2020. I guess this is what forever toxic optimism looks like.

    • Leo1992 says:

      Here is how I plan to play this:
      1. DON’T SHORT STOCKS: There is still huge liquidity tied in Fed reverse repos and TGA and even if fed stops printing, shorting will just be like giving wallstreet your money.
      2. If Fed really stops printing and raises rate slowly, I’ll go long commodities till Wallstreet throws the taper tantrum. Inflation will run high and eat my cash! Crude at $100 is still cheaper than crude at !150 :).
      3. Once the taper tantrum sets in and fed reverses course, go long on stocks again. Inflation will run hyper and eat my cash!

      • historicus says:

        SCARED European money taking down Treasury auctions and throwing their dollars at the US stock market.

        And Lord knows how many dollars are floating around Europe (and the World)

    • Well put.
      One man’s toxin is another man’s wine.

      • Which is why I avoid wine!

        Amazing how indefensibly invading and killing can be ignored by the stock market.

        At least there are sanctions.

        Would have been nice if those same sanctions were applied to Turkey when they did the same to tiny defenceless Cyprus.

        But Turkey is our NATO boy ….

  2. Not Smart says:


    Stocks may not declining as much as expected because the market thinks the fed is going to be less aggressive in fighting inflation now.

    Very curious to hear your thoughts on this and whether or not you believe the fed will be more dovish (25 bps hike instead of 50 bps, delaying QT, etc.)

    • Rob says:

      My thought is (not that anyone cares) that most bubbles typically don’t pop all at once, and the euphoria of this ‘more than a decade’ long crack binge fueled by low rates and Fed purchase programs, is going to take a bit longer to ween people off. We aren’t even close to the latter stages of grief, as we’re still hanging out in the denial phase.

      Once the SHTF, the Fed will need more weapons at its disposal, which to me means they’ll need someplace much higher than 0.25% to launch rate reductions from.

      Sadly this entire country is so strung out, and so used to a lack of price discovery, that it once again thinks “this time it’s different”. It isn’t, but that outlook will change soon enough.

    • Wolf Richter says:

      Not Smart,

      Another Fed governor said today that he might be for a 50 basis point hike on Mar 16, if inflation for Feb and other data come out hot, as is expected.

      • historicus says:

        Slow motion to fight inflation
        Quick action to save the stock market

        very telling

        • phleep says:

          1994 rate hike ostensibly to head off inflation, upset a lot of apple carts. If a crony theory is believed, it is not just stocks, but all sorts of other bets on low rates, baked into various instruments, still piled up in inventories, the cronies might be protecting. When enough bagholders are found to take these (financial innovation! Democratize finance! Recruit a new generation of bagholders!), rates can rise.

      • andy says:

        will you be disappointed if they don’t raise at all?
        You know, all the uncertainty out there..

      • Mark says:

        Wow – A towering .5% increase in rates. When we’re already at least 15% true inflation…. per the honest 1982 CPI that a man with guts (Volcker) was facing.


    • Old School says:

      One thing that worries me is politicians are making decisions about the banking system and I doubt if they have any understanding about the consequences on the complex financial system. Maybe they know the Fed can always save the world.

      • NARmageddon says:

        Not save the world, but rather save the rich by inflating asset prices and deflating labor prices (by keeping constant labor cost and wages paid, and asset prices rising abruptly).

        • historicus says:

          The population is suffering from an extreme inflation. The Fed is instructed to fight such conditions, but apparently the Fed rather defend Federal borrowing costs, venture capital debt creation costs, and elevated stock and real estate.
          The curtain has been pulled back on the Federal Reserve game….ignore the mandates, serve the cabal.

        • phleep says:

          Some animals ARE more equal than others. And why should the Fed continue (yes, continue) propping up some no-account fellow dancing on the beach, lurking around the sidewalk cafe and mismanaging his life, flipping cryptos, who then shows up when the chow line forms and merely complains? Why do you think people strive like mad and put up with all the difficulties? To become rich, meaning, better hedged and with a moat of assets. That keeps government at a distance, with a healthy mistrust of government favoring the ragged masses. The alternative can easily slide down THAT alternative slippery slope to Russia 1917. As usual, sound adults favor some annoying, boring moves that come out somewhere in the middle. Which is where we are.

    • “Not Smart”? WTF?? . . . smartest thing I’ve heard this week!

      The US plutocrats will now be able to blame Putin rather than Covid for the collapse of the corporate feudal system 250 years in the making.

      This is all the FED and the central banks needed to stop pretending they care about tightening. . . IMO, you nailed it.

  3. Xavier Caveat says:

    I’d guess if you were a Russian, you’d be used to your money being worth nothing on occasion, as they’ve had lots of practice.

    • Harrold says:

      I’m not so sure about that this time. The ruble is crashing against dollars. Of course, because dollars are being denied. But we all know this just pushes Russia and China closer together in their quest to abandon the dollar and free themselvse from that pressure point.

      I took a look at the Chinese renimbi/ruble FX cross and it’s hardly a disaster. Up from about 11-12 to 15-16. Do the Russian people and businesses really care about the price of things in dollars? I doubt it.

      Russia sells about $1 billion a day in oil, which the west will not and cannot do without. There is also natural gas, wheat and high tech weapons. They will now be traded for renimbi instead of dollars or euros. So, Russia will never see the kind of disaster we see in countries that print money with nothing of value to trade for hard currency.

      • Kenny Logouts says:

        It’s a strange situation.

        I can see USD becoming increasingly less popular for settlements.

        I assume EU countries settle with Russia for energy in Ruble or Euro?
        Or are they using USD?

        It could get interesting if Russia start asking for Rubles and will only exchange them at preferential rates… or asking for CNY.

        • Wolf Richter says:

          Kenny Logouts,

          The euro is already roughly on parity with the dollar as a trading currency. You can buy oil, or anything else, with euros just fine. Nothing new about that.

          But the ruble is similar to toilet paper, having collapsed by 97% against the hated USD in 25 years. No one wants to accept rubles for international trades.

        • Cashboy says:

          It would be even more interesting if Russia asked for payment of Oil, Gas, Fertiliser, Aluminum, Paladium, Platinum and Titanium in physical gold in advance.

        • The ruble losing value against the dollar, the dollar losing purchasing power. oi vey’

      • nick kelly says:

        ‘Russia sells about $1 billion a day in oil, which the west will not and cannot do without. ‘

        OPEC et al are constantly arguing over quotas: who gets to supply the market. If Russia disappeared the other producers would up their production. Sure there would be temporary supply issues if it happened suddenly but no long term unsurmountable problems. Price of course will be affected in short term.

        As WR pointed out other day just because the US is a net energy exporter does not mean it doesn’t import some Russian oil. The US is 3000 miles or so wide. Its oil wells are central. Water borne transport is very cheap, so it makes sense to bring foreign oil to coastal refineries.

        Your argument is better directed to nat gas where a serious problem exists if Russian goes off line.

        • Danno says:

          How easy do you think it is to UP oil production?

          And why would the countries that could want to do it and hurt themselves when inflation is running rabid in their own countries?

        • Cashboy says:

          What is interesting is that the USA actually buy oil from Russia.

        • Harrold says:

          Agreed, Dano. Oil production can’t just increase on a whim. It takes years. The saudis/opec have said no increase. They like the higher prices, as you’d expect. And they don’t seem to be folding to US pressure as the did a few years ago. I find that VERY interesting.

          It is a global commodities market. Even if you don’t buy Russian oil directly, the marginal demand causes a bidding war. A loss of Russia’s 10 million barrels per day on the global market would send prices sky rocketing. $20 gas would not be out of the question.

          Remember, $4-5 gas had a hand in crashing markets in 2009. This is why the US and EU are NOT sanctioning energy.

        • Wolf Richter says:

          “Oil production can’t just increase on a whim. It takes years.”

          US shale oil production can be ramped up in months. Look at the second chart!

        • nick kelly says:

          Right now the 19 + OPEC members are producing 690,000 barrels per day below their agreed caps. If they just ramped up to to their caps they replace 70% of Russian production. But they could remove the caps.

          Could US shale ramp up? Sure, but with 200 billion having disappeared into their horizontal holes, financing will be tougher.

          Could Saudi ramp up? Easy: they just press buttons. Their ‘lift price’ is about a dollar per barrel. That, and their ability to flood the market, is why they are the ‘swing producer’.

      • Harrold, great post! . . . if you’re following my train of thought, you might agree with me that the real siege is in Bretton Woods.

        By chance did you also take a look at the Chinese renimbi/dollar FX cross? . . . a tale of two cities (again).

        • Harrold says:

          Yes, the dollar strengthened vs renimbi when the pandemic started in 2020. I would interpret that as what traders call “flight to safety”. Not saying I agree, just is what it is.

    • Mud says:

      Watching cnbc this morning with Marco Rubio interview, as soon as he started criticizing China ,internet connection shut down ,STRANGE

  4. Michael Engel says:

    1) Peace talks rd #1 over, after 5 days war. The delegates are back home for consultations.
    2) Russia was evicted from the swift system. Payment moratorium.
    3) Russia will barter and sell gold.
    4) Kiev is sandwiched. The main Ukraine navy base in the Black Sea was taken.
    5) The state of the union of our 30 allied nations is recession.
    6) Putin nuked the Wimmer inflation.

    • drifterprof says:

      The Ruble (Haiku):
      Russian cat bounces upward
      Eyes rubled, dead mouth foamy
      It must have eaten flubber?

      • Xavier Caveat says:

        Penny for your thoughts
        Or ruble if you prefer
        In regards to wealth

        • drifterprof says:

          The word “wealth is used in many ways (like “love”).

          Basically, wealth is stuff that gives the owner power in a social / cultural context.

          For me, sufficient wealth is independence from others making me do things I don’t want to do, or live in places I don’t want to live.

    • andy says:

      how your predictions missed the war is beyoned me. Was it not in tea leaves and charts and stuff?

      • Anthony says:


        I’ve know war is coming for a long time, I just didn’t know where. (you never do with Black Swans) I also hoped it would be in 20 years or more when I’m 86 and way past it but there you go as you have to live in the time you were born in.

        The big problem now will be the countries that can no longer afford the increased cost of food and so will have riots and civil war. Again, I don’t know where but I do know it is coming…

        Now where did I put my crystal ball….???? Oh dear, it was under my history books….

        • Petunia says:

          We have been closer to 1932 than to 2022 for the last decade. Now it’s here.

  5. Augustus Frost says:

    Wolf’s article is correct but the US and other countries who mimic its policies are going to get a lot more serious blowback at some point.

    There is a “white paper” on the RAND Corporation site describing the military balance in Europe dated 2018.

    It’s one view but differs a lot from many of the sentiments I read elsewhere, including the idiotic comments by one hedge fund manager today.

    According to this analysis, the US and NATO have more to lose from any direct conflict which is the direction belligerent US foreign policy is leading toward.

    • Wolf Richter says:

      Agreed on Ackman’s comments He and other hedge fund managers should STFU. I have no idea why the media keeps spreading their BS — that part is the media’s fault.

      • phleep says:

        Ackman talking his book is ludicrous. He is hatching weird schemes right and left. Patchy track record, if anyone bothers to look. So many (supposedly) want to be fans, it is head-scratching.

  6. David Hall says:

    Russians are not allowed to send their money out of the country. Much of the Russian sovereign wealth fund is frozen. Russian bank branches in Europe are less solvent as depositors rushed to withdraw their funds.

    Russia considers nationalizing foreign investments in Russia. This may affect corporations, institutions and individual investors.

    The Bosporus is closed to warships leaving the Black Sea.

    • Michael Engel says:

      Turkey is applying the Montreux convention, 1936, blocking All war ships from the Bosphorus and the Dardanelles straits. ALL war ships, until the conflict is over.

      • BuySome says:

        Wasn’t that…except for ships returning to their home base. There’s always some loophole.

      • KGC says:

        Montreux only specifies ships “of belligerent states”, those specifically involved in a “war”. They cannot close the straights to “ALL war ships”, and if they tried they would very likely lose their place in NATO, which, however Erdogan stretches’ it, he does not want to lose.

    • WES says:

      An excellent example of collateral damage, is gold miner Kinross which operates a gold mine in Russia.

      It’s publically traded stock fell 10% today. Not sure if the 10% loss equates to the market valuing Kinross’s Russian mine at zero or not. Only time will tell.

  7. Lynn says:

    I wonder how much capital flight from Russia and maybe Belarus is funneled through hidden offshore financial centers? I’d assume there’s that because the value of the ruble PLUS it’s worth a lot less than their exports.

    I read a couple articles saying that Evergrande and other Chinese RE development/investment companies were funded in part by offshore money and that there were no intentions of paying back debt to those offshore companies.

    What happens when an offshore bank (if it’s called called a bank? IDK?) fails?

    • Lynn says:

      Oh, and the UK is now talking about disclosing beneficial ownership of properties being used as parking spaces for offshore money, and confiscating “illegally gained” Russian property assets in the UK.

      It’s debatable whether they would actually follow though or not, or enforce or not, but it’s interesting. The US is already working through regulations with the treasury dept on disclosing beneficial ownerships.

      • Augustus Frost says:

        The UK previously froze Venezuela’s gold reserves at the Bank of England.

        Arbitrarily confiscating foreign assets goes against centuries of Common Law which is the foundation of Western private property rights and the reason the cost of capital has been lower in developed economies versus elsewhere.

        Why would anyone want to invest anything in the US or Uk when either government might arbitrarily decide to take it away?

        These sanctions are also a form of economic warfare but that’s another consideration entirely.

        I also agree with the above comment that Russia might choose to nationalize all American assets and other selective countries, such as owned by UK entities.

        • Lynn says:

          The way it is being proposed and written would effect dirty money from all countries;

          “Under the new legislation, a register of overseas entities will be set up, applying retrospectively to property bought up to 20 years ago in England and Wales, and from 2014 in Scotland.

          Entities that do not declare the beneficial owner will face restrictions on selling the property, and people who break the rules could face up to five years in jail.

          The legislation will also make it easier for the authorities to use unexplained wealth orders (UWOs) – powers that enable them to confiscate criminal assets without having to prove to a criminal law standard that the property was obtained as a result of a crime being committed.”

          The way it would be enforced would be another matter.

        • Lynn says:

          And yes, there is talk in Russia about doing that. Possibly one in response to the other.

        • Levi C. says:

          I wouldn’t call targeted economic punishments due to an unprovoked invasion and war “arbitrary “.

          Do you really think the rest of the world has to follow the rules and play completely fair while Russia commits war crimes? What world do you think were living in?

        • Augustus Frost says:


          The concept of “dirty money” is whatever the government wants to make it, mostly the US government.

          It isn’t any of the US government’s business how anyone in Russia acquired their wealth outside of US borders.

          It’s the extra-territorial application of US law elsewhere which is yet something else which I’m quite certain any number of countries are completely fed up with.

        • Lynn says:

          Augustus Frost, I don’t care if foreign money is dirty or not as long as it isn’t invested in US land, national food sources, tech or RE.

          It IS int the US interest if it is being invested here. It’s also deemed a security risk by the treasury and I’m sure the State dept.

          Didn’t like it when US citizens bought habitation up in Mexico etc either. But those countries now limit foreign purchases to protect their own citizens.

        • RH says:

          That is the argument that the Russian kleptocrats will use to try to recover the funds they stole, which were just frozen. LOL. I am just amazed: our US government apparently has miraculous powers over EU leaders. Like magicians, could they not also lead a herd of cats AND then teach them to pick up musical instruments, play them, and function as an orchestra? LOL

        • Cashboy says:

          Credibilty of Swiss Banks also went when they were fast to disclose to the US tax authorities the bank account details of Americans with Swiss accounts.
          A lot of that money has gone to Singapore.

    • Augustus Frost says:

      What happens to an offshore bank if it fails?

      I don’t know normally, but in this instance, I’ll make the wild guess than the Russian parent balk will cut it loose. Probably can’t save it and definitely don’t have much incentive unless it’s mostly customers from Russia and similar countries.

      • John H. says:


        Wasn’t the Cypress banking crisis c. 2016 an example of the failure of offshore banking?

        If memory serves, the “haircut” was pretty close to the skin for many Russian investors, and their ears were bloodied a bit.

        • phleep says:

          Offshore banking losses for Russians (like the frictions in using crypto) is just a cost of doing business for those semi-fenced from the USA financial core. They have been practicing some form of this since Soviet times. Recall, eurodollars originated with a Soviet deal with Europeans to manage offshore dollars. The ruble wasn’t hard money for much of that century.

          Interesting to me will be the UK if it follows through with this about-face and decides to actually drag all its offshore money movers into sunlight. Who will the Brits be nannies and RE salespeople for? Who will buy their estates and fund their soccer teams? Will they have to ditch steak-and-kidney pie and start eating each other?

          Likewise for NYC and Florida real estate and art deals.

    • Mud says:

      Legal corruption

    • RH says:

      Notice how the CCP caused China to buy HUGE amounts of the world’s crops and stock up on oil, etc., in 2021. Coincidence? One wonders if Putin told Xi in advance about his invasion plans. At any rate, China is now very happy with its huge stockpiles which were “coincidentally” acquired AT BARGAIN PRICES some months before the invasion began.

  8. Cobalt Programmer says:

    From an actual foreign policy expert…
    1. If you want to hurt the Russia, stop the gas flowing in to Europe. If you want to hurt EU, stop the gas flowing in to the Europe
    2. Russia and people in Russia are entirely different. All the moves are going to affect russian people not the government.
    3. SWIFT alternatives are built in India and other countires. Soon there will be a SNAIL
    4. Russian economy is smaller than Japan. So, overall there would be no effect on stocks or bonds or banks
    5. People who pour down the vodka on streets, actually drank the bottle and filled it with water and pour it down for instagram likes.
    6. I was just now thinking about getting a mail-order bride from Russia. The war offsetted my plan.
    7. Gasoline prices are still in the low $3.8 range in the swamp area. People will use this gas prices to justify green initiatives.

    • Peanut Gallery says:

      Wouldn’t your mail order bride be cheaper now than before due to USD/RUB?

      Be greedy when others are fearful, Cobalt.

    • WES says:

      Yes, the SWIFT sanctions are hurting individual Russsians more than the Russian government. The government had time to prepare for sanctions.

      For the Russian people, many bank with foreign banks inside of Russia. An impact example is Russians having to use cash to pay to travel on Moscow’s subway system, as their bank credit and debit cards no longer work due to SWIFT sanctions.

    • Wolf Richter says:

      “4. Russian economy is smaller than Japan.”

      yes, and it’s smaller than the economies of a bunch of other countries, and smaller even than South Korea’s economy. And it’s much smaller than California’s economy.

      • Moosy says:

        “Smaller but with nukes.”

        I am not wasting time with this fear mongering, won’t happen and if it would, nothing matters anymore so don’t bother.

        But what is very intriguing is the current panic and financial insanity around Russian assets, specifically the large energy companies.

        The Russian state owns large part of them but also a large chunk is private. There is fear mongering talk about complete nationalization but that seems like shooting in your own financial feet, it would destroy short term liquidity for the State. And those in power likely have investments which they unlikely want to see disappear. And just targeting foreign investors, it would not raise foreign currency only ensure nobody ever wants to invest again.

        Then obviously you have the fear that they cannot sell their energy products but with pipelines to Asia and especially China, a freeze of Russian gas into Germany is only going to freeze it’s citizens. Literally.

        So here I am wondering. What am I missing. Why do you now have a company like Gasprom showing a PE of 1.4 (no typo here, I took this for symbol OGZPY), whose main earnings are based on world gas prices likely only to go up, why is this such a bad and dangerous investment at this time.

        The best explanation I so far can come up,it is just another episode or irrational fear and market distortion that give it some time will correct itself back to normal. But obviously, I must be wrong.

        So what on earth am I overlooking or missing in this riddle?

        • ivanislav says:

          I’m buying if the broker allows it. MOEX is closed though and I got an email from the broker (see my comments below).

        • phleep says:

          Rule of law problems: confiscation risk. I had students from Russia who did their (business) class project on starting a business there. They concluded with the bribery factored in, it would fail. The bribery could be Mob or Government or some hybrid of both.

      • max says:

        Correct — Russia is Bangladesh with missiles

        Russia gdp per capita for 2020 was $10,127
        Germany gdp per capita for 2019 was $46,468,

        But according to neocons Russians are coming — As Bugs Bunny used to say: ‘What a maroon’

    • Swamp Creature says:

      Cobalt Programmer

      Check out the Glen Echo Exxon. $4.19/gallon already, before the lasted jump in crude.

      • Cobalt Programmer says:

        usually the first pump near an exit will be higher. More you go into the suburbs, the gas prices are cheaper. So, I would say still below $4.
        but if it is really higher, i am not surprised…

    • Jpollard says:

      The implications of eliminating natural gas to the EU will result in almost immediate closing down of industry in Germany as rationing is instituted . It will also cause widespread hardship in Ukraine .
      It will also cause natural gas rationing and soaring prices in New England due to its lack of pipelines and dependency on LNG .
      For these reasons natural gas will not be cutoff

    • nick kelly says:

      4. ‘Russian economy is smaller than Japan.’


      Japan has the third largest economy in the world and the yen is a ‘safe haven’ currency. Russia’s economy is the size of Canada’s but supporting 145 million people not 40. Then add in Russian inequality which Credit Suisse says is in a category of ONE.

    • rocketFrog 5000000c says:

      Italy has a greater GDP than Russia.

      • 728huey says:

        Texas has a greater GDP than Russia.

        • Wolf Richter says:

          Ha, thanks. Yes, you finally made me look it up. I was thinking that Texas might, but I was too lazy to look it up.

          While I was looking up stuff: NY has higher GDP than Russia. FL is just a tad below.

          Interesting that there are three states in the US that each have a higher GDP than Russia.

    • Time to think outside the box, maybe?
      1) Switch to Python.
      2) Get bride from Venezuela by way of Mexico.

    • Serge says:

      Russian gas just got cheaper, I fueled today for $1.79 per gallon. (54.05 rubles per litre.)

      P.S. Stay away from Russian mail order brides, they will leave you dry.

  9. Peanut Gallery says:

    Is anyone buying Russian sovereign debt or buying rubles right now?

    • Zark Muckerberg says:

      Russian children may soon play jenga with bricks of ruble, and their grandmothers burn for heat 💸

  10. MiTurn says:

    Wolf, your post headlines are always the best (again)!

    You rock snarkiness. Oh, and the articles are quite informative and well written too.

  11. OutWest says:

    Threatening to incinerate your traiding partners isn’t good for business! He became a pariah overnight on the world stage with that one. Even Xi is taking a step back over that one.

  12. pat says:

    I love Wolf and love the posts – BUT I must say I have been following for a few years and agree with much of the – “the stock market is insane- real estate is even more insane- crypto is worse than insane posts and rants – BUT I am retired and have been quite conservative while my son has been very aggressive and leveraged. He has accumulated $$$$$$ a mountain of profits in all three categories – so now he is very well off and retired at 41. And much less levered and conservative. And yet markets keep rocketing up – my point is fortunes have been made ( and probably a few lost to be fair) but the good times rolled and they are still rolling !

    • Wolf Richter says:


      Maybe you misread the headline. Markets are not higher. The S&P 500 dipped today and is down 9.2% from its high on Jan 3. The Nasdaq is down 15% from its high in Nov.

      Someone like your son with a “very aggressive and leveraged” portfolio of high-fliers is down far more. Ask your son how far his portfolio has come down.

      • Xavier Caveat says:

        Gamblers always win @ the casino or racetrack when you aren’t there watching them lose.

        • DawnsEarlyLight says:

          Lol, good one!

        • phleep says:

          Survivorship bias. All of nature is as much a vast graveyard as a garden of quite temporary survivors. Evolution and natural processes disperse the majority losers to the four winds. Human and other species have a bias to jump out there, try, and hope for the best.

        • Sams says:

          The casino always win. They have rigged the game in their favour.

      • pat says:

        wolf – you are correct – but you should take the advice you give some of your readers – READ what I posted ! He has only about 25% of his holdings in what I refer to a LALA money- he has de-leveraged 100% and is actually listening to his dad ! and has informed if I fall on hard times he will be there for me ! all the best to you and yours ! and thank you for your good work it illuminates and entertains !

    • historicus says:

      ” while my son has been very aggressive and leveraged. ”

      Our curse has been to expect the Fed to stand to their duties.
      Those “born yesterday” perhaps saw the Fed as they truly are…..a fake entity with a goal to drive assets higher.
      Your son might be in for a surprise…..I’ve had mine.
      And I suspect the IF the FED stands to their duties, the likes of your son will be whining about how unfair their actions are.

      • ivanislav says:

        Well, constantly changing the rules whenever it suits them is the very definition of unfair :) He’ll have a good argument!

      • phleep says:

        In a finite game, like a football game or romance movie (or USA delusions of “victory” in the Civil War or WW1 or 2), the goal posts, starting and ending bells are clear. In an infinite game, actual life, it keeps throwing new chapters at you with twists, if you are fortunate to survive the last one. Victory is enticing but a delusion.

        • 91B20 1stCav (AUS) says:

          phleep-some of the most sagacious words i’ve ever read. (the eternal conundrum of human hope escaping Pandora’s jar vs. the conditions of human societal fatigue&failure…).

          may we all find a better day.

    • andy says:


      How will your son be explaining the gap on his resume in a year or two?

      • VintageVNvet says:

        resume(s) are SO 20th century andy!!

      • OutsideTheBox says:

        Really ?

        You don’t know to fix a resume gap ?

        Ok… involves a friend and a Subchapter S corporation.

        Easy peasy

        • VintageVNvet says:

          I was actually responding to a recent report suggesting it’s time to do away with the whole his or her ”story” AKA resume thingy(s), and go over to skill testing candidates for actual real skills and relevant knowledge. This policy has been suggested as making hiring less ageist, racist, gender neutral, etc.
          Course it will surely fail to catch on because such a policy would mean many of the ”legacy” candidates would not be hired or recruited or enrolled, and we certainly can’t have that happen, eh???

      • Peanut Gallery says:

        Andy, working is for suckers…

        Or so everyone now believes

  13. JeffD says:

    “…the end of QE, coming rate hikes and QT.”

    The US has talked about this a lot since 2008, with very very brief action that was completely reversed. Why should we believe they will do anything now? To this day, still $30 billion/month in QE and ZLB interest rates? Using “the definition of sanity”, all signs point to ZLB after a very very brief try at 1% Fed Funds rate.

    • Kenny Logouts says:

      The Fed got its reason to raise rates because “inflation”(self inflected)

      It’ll then have reason to lower them again because “Putin”(self inflicted via foreign policy)

      But not before a correction. A correction isn’t an issue if you’re on the right side of it, or avoided buying in 2020-2022.

      Just like inflation isn’t a bad thing if you’re on the right side of it.

      No problems here except for the plebs. As always.

      Why do people expect anything else except human nature playing out again and again?

    • historicus says:

      “the end of QE, coming rate hikes and QT”

      they can put that on a sign and hang it behind the bar with the “Free Beer Tomorrow” sign.

  14. Swamp Creature says:

    Pakistan and Algeria just lined up on Putin’s side in the conflict. He’s got more friends than you think.

    • Wolf Richter says:

      With friends like these…?

    • Alku says:

      this was the last drop, the trigger. But all started from the attempt to stop the war against breakaway republics.

    • MarkinSF says:

      Yep. China, India, most of the Middle East (including Israel?). This could be a devastating blow to Russia but could also go a long way to establishing an East/West divergence from the “one world” dollar system of the hegemon.

      • Jon W says:

        @MarkinSF – I don’t think the one-world dollar system is anywhere near as coercive as you make it out to be. If you wanted to turn all your wealth into Remimbi, the USG isn’t going to try to stop you.
        It’s just that, for some strange reasons, wealthy people all around the world are not particularly ecstatic about holding their wealth in Rubles, Remimbi, or Lira.

        They seem to want to hold US currency and assets. Even the elites in China and Russia seem obsessed with not holding their wealth in their home countries. Strange isn’t it. Perhaps if you ask yourself why those who should be the biggest proponents of such alternative world currencies, don’t want to hold them, you might understand why the US is still the global reserve currency.

        The western system has a lot of problems but at least we are allowed to complain about it.

        • Winston says:

          Yep, the USD, the least dirty shirt in the laundry hamper. At least there is some semblance of financial law here (please excuse the ratings agencies /s) combined with a massive military and a HEAVILY consuming idiocracy.

        • Sams says:

          All those sanctions on rich Russians may move forward the end of holding foreigners obsession to hold US currency and assets.

          Strip rich foreigners for their money because the USA do not like their home country and not that many want to hold US currency and assets in the future.

          The biggest treath to the US dollar position as global reserve currency is the politics of the USA.

        • Lynn says:

          “Strip rich foreigners for their money because the USA do not like their home country and not that many want to hold US currency and assets in the future.”

          That would be awesome if half of that happened. They can hold their dollars offshore. Leave our housing and food production alone. Same with London, Canada, Australia etc. No reason hords of people should be homeless so some Russian or Chinese billionaires can park their money in our housing and REITs.

        • MarkinSF says:

          You’re reading way more into this than I suggested. Did I say or even imply that the dollar system was coercive? What is known is that there is a desire by a range of countries (BRICS for instance implies the players) to move away from the dollar system and free themselves from it.
          And this event may bring that reality closer to fruition. The fact that the United States has the POWER to freeze any country out of international trade (Cuba, Venezuela and whoever else that doesn’t play by the rules) by controlling the SWIFT system is proof positive that the rules are established and policed by the US.
          Obviously the dollar rules the world economy. And there are a lot of sovereigns that wished they didn’t have to play along.

      • nick kelly says:

        ‘Yep. China, India, most of the Middle East (including Israel?).’

        What are you talking about? China the supposed new best friend ABSTAINED on the UN vote condemning the invasion. If you think an abstention is neutral…research needed.

        Israel? It might be opposing the US, its only ally and support in umpteen UN debates and the only reason it still exists? Not over their own illegal settlements, but in support of Russia?

        Is this sarc?

      • nick kelly says:

        ‘India’s decision to abstain from voting on a U.N. Security Council resolution demanding that Russia cease its invasion of Ukraine does not mean support for Moscow, experts said, but reflects New Delhi’s reliance on its Cold War ally for energy, weapons and support in conflicts with neighbors. ‘

        Global News

        Think of it like this: a close biz partner, or close friend or maybe spouse, does something nasty.
        You are asked what you think and you say ‘no comment.’
        It is common knowledge that a UN abstention is nothing like a ‘no’ and usually means general agreement with the motion but a strategic reluctance to say so. An abstention from a motion to condemn from an ally sends a powerful message to the target, including the message that the ally does not like being in this position. China is in a more difficult position, as it tries to play its new ‘Russia card’ against the West. See China’s follow up remarks about respecting borders. The last can of worms China wants to open is borders being altered by ethnicity, as in Donbas, or Tibet.

  15. Prof. Emeritus says:

    That is a very well written article trying to focus only on the economic side of the story. Currently there is an overload of information from propaganda machines (on both sides), which makes it very difficult to objectively assess the situation.
    On the crude oil side: the grade that the Russians used to export to Europe is called ‘Urals’ – it’s not as liquid as Brent, but still quoted by many brokerages and market makers. Currently it trades at a gigantic discount of -10-15 $/bbl, meaning you essentially get a 10% discount if you are willing to buy Russian barrels. Normally it’s within the range of ±2$/bbl. The dual pricing speaks for itself.

  16. Brewski says:

    Citibank has a 5-6 billion exposure.

    Would guess that they and other biggies will be at the Fed for help.

    More bailouts on the way.


    • Wolf Richter says:

      Nah. “Exposure” doesn’t mean loss. And a few billions are petty cash for banks the size of Citi whose assets are in the multiple trillions.

  17. Wolf Richter says:

    OK, here we go, to keep you posted on the goings-on at our tourist-trap gas station: The price of regular just flipped to $5.13, from $4.99, which I documented on Feb 5. And I noticed that people are still buying gas there, no problem.

    • Phoenix_Ikki says:

      It’s depressing to see that buyer’s strike is about as rare Worker’s strike in this country. Lemmings have been conditioned by buy, buy buy no matter what the cost is. Judging by how ski resorts are still sold out in SoCal every weekend with lift tickets at over $120 a day like this past weekend, guess good times is gonna go on for just a bit longer.

      • Jpollard says:

        $170 in Colorado
        $100 in New Jersey

        • Xavier Caveat says:

          I am holding a Disneyland ticket book in my hand from 1975-76, where admission and tix was $6.25. There’s a couple of D’s and a B & A therein for those of you scoring at home.

          How much does it cost to get into the hap-hap-happiest place on earth now?

      • Harrold says:

        Why shouldn’t they? It’s all bought with credit cards. That gas purchase is like 3 bucks a month. Yes, it’s for life, but they don’t care or even notice…

        Until all the cards get maxxed out. Then they defaut and start all over again. Life in America for the lower middle class.

        • VintageVNvet says:

          Once again, Gilbert & Sullivan to the rescue H:
          ”Bow, Bow you tradesmen and you masses, Bow, Bow you lower middle classes!!! ”
          How prescient, one would think,,, but, nah, it’s the same now, actually probably better for WE the PEONs than ever has been, eh???
          MAX out those cards, then rinse them out in BK and start right in again a day or so later!!

      • historicus says:

        Credit card forgiveness to be added to the Democrat platform /s

        • phleep says:

          Brilliant, stealth welfare transfer. Inflation tax is stealth tax, why not? War is peace.

        • Peanut Gallery says:

          That’s what 2020 stimmies were?

          Haven’t you been RTGDFA that Wolf publishes on consumer debt?

      • Sams says:

        Lend money and buy. There will be nothing to plunder from the grave. ;)

    • Moosy says:

      Still buying gas but still using as much?

      Those prices in San Francisco, %-wise, with the current almost $2 tax and carbon and whatever fees, when it goes from $4 to $5, it is just 25% and people have high income so that $1/gallon extra, mehh.

      The real impact is at other places in the country where gas was $2 and now is $3. For them it is a 50% increase and $1 extra or $20 extra for a full tank bites much more especially in those places income tend to be lower.

      Kind of weird silver-lining of high taxes; it reduces the impact of rising prices.

    • DawnsEarlyLight says:

      Really Wolf! $5.14 sir!

    • Nasty Edwin says:

      I see more sedans out on the road lately. Are folks temporarily mothballing the big SUV’s?

      • Old school says:

        Honda has updated technology on motorcycles to meet the new Euro standards. You can get a 125cc commuter bike that is rated 187 miles / imp. gallon in UK, I think that is around 175 mpg US. Not available in US, but they have several that several models in the 125 mpg range in US.

        • VintageVNvet says:

          scooters, etc., are very dangerous OS, the ONLY means of transportation more dangerous than private air planes,,
          rode one for several years in my 20s, including (legally ) riding the white lines commuting in SoCal,,, but not since then as could already see somewhat declining reflexes coming into play…
          a death almost every week in the greater tpa bay area from errors of cars hitting scooters,,, and pedestrians too to be sure
          first time you have to put the bike down to avoid a car you will have all the information you need

        • phleep says:

          On a scooter, you are as safe as the most impaired driver on the road determines for you. Not noticing scooters is so much easier than not noticing cars, for such people, too.

        • Anthony A. says:

          I lost a good friend three years ago on one of those. Dangerous these days of fast speed limits and big trucks.

    • Kenny Logins says:

      To be clear.

      If they spend here it still counts to GDP?
      But the money will go to who?

      And where won’t it be spent?

      Oil/petroleum stock holders winning, Amazon and Chinese producers losing?

      • Wolf Richter says:

        Kenny Logins,

        Yes it counts as GDP, no matter where they buy their gas. “real” GDP is adjusted for inflation so price increases like this should not increase real GDP.

        Any imports are deducted at cost from GDP, exports are added.

  18. roddy6667 says:

    My friend in CT filled his 275-fallon heating oil tank yesterday. At $3.46/gal, it cost $1001.
    My first apartment was in 1968. Heating oil cost cost 18 cents a gallon and gasoline was 28 cents. Rent for a 2-BR apt was $70. No credit cards, no debt. Life was good.

    • Moosy says:

      So only a 20x increase in 54 year when compared to USD

      Income has gone up more. Rent has gone up more. Food , healthcare everything under the sun has gone up more.

      Stop using the USD as a measure stick. Is shrinks to half it’s size about every 11-12 year.

      Energy prices are lower than 54 years ago.

      • Ryan says:

        The minimum wage in 1968 was $1.60/hr. The median household income was $7,700. Income has not gone up more than 20x for the vast majority of people since 1968. Unfortunately, “real” income has gone down quite a bit.

      • Ryan says:

        The inflation adjusted price of oil in 1968 was less than $26 a barrel. So energy prices aren’t lower unless you use 1980 as your base year.

  19. Finster says:

    “Now the stock market has an additional thing or two to worry about, and is still in total bubble territory, with lots of air space underneath it.”

    You bet. And the purchasing power stored in US stocks is going to fall. Either because stock prices fall, or because they fail to keep up with consumer prices. The Fed can’t stop it either, only choose which way it happens.

  20. ivanislav says:

    Bitcoin is really taking off. +14% in the last 24 hours.

    I remember during the 2020 financial crisis, when the Fed started printing again, I opened a crypto account to have an escape hatch just in case. Well, I can imagine a lot of people in Russia and Ukraine are thinking that right now. Maybe bullish in the near-term.

  21. ivanislav says:

    Just got this email from Interactive Brokers about the Moscow exchange:

    * All MOEX products will be available only for closing (position reducing) transactions.
    * Non-residents of Russia are blocked from selling securities on MOEX per Central Bank of Russia regulation.
    * IBKR will stop supporting GTC/GTD orders for MOEX products and will cancel existing GTC/GTD’s.

    Just another way the system keeps you from making money :( Gazprom and other companies will be selling for pennies on the dollar.

  22. ivanislav says:

    One final thing that may save new traders some money/pain/anxiety:

    A recent limit-buy order of mine was cancelled by my broker as a trade-halt resumed and I was pretty upset about it – would have gotten in at a great price. According to Interactive Brokers’ customer service, they will automatically cancel any *new* trades placed during a trade-halt, while trades placed *before* will still be executed when trading resumes. On top of that, if you *modify* a trade placed before the halt, that counts as a new trade and will also be cancelled.

    It’s good to know the rules before you enter those high-stress/high-impact situations.

    • Peanut Gallery says:

      Holy cow, this is nuts. Were you able to execute your SBER trades?

      • ivanislav says:

        Yes on SBER, no on the GAZP trade I discussed above. I’m down 50% right now overnight on SBER (London ADR) but totally fine with it – trading was first restricted to sell-only and now you can’t even trade it, so the price is artificial/arbitrary. The only thing that matters is what happens next with sanctions.

        That’s not to say I won’t lose the entire position, it’s totally the risk I signed up for.

        • Peanut Gallery says:



          SBER down to 0.21 from 1.0x USD yesterday.

          Down from 20.xx something over the past few years???

          Aren’t you getting a little nervous? I mean that thing could go to zero…

        • ivanislav says:

          Peanut, I don’t care about the price, it’s a totally binary situation. Either it gets resolved, or bankrupt/delisted/nationalized/force-sale. The interim volatility is irrelevant to me.

        • Peanut Gallery says:

          ivanislav, you have balls of steel. As hard as Zelensky’s.

        • Peanut Gallery says:


          SBER ADR on London Exchange now down to….. 0.03

  23. Volvo P-1800 says:

    I saw a clip of a Ukrainian “babushka” (granny) doing her bit for the resistance. She walked up to some Russian soldiers, gave them sunflower seeds and told them to put them in their pockets. “That way, at least sunflowers will grow where you fall.” (The sunflower is the national plant of Ukraine.)

  24. Alex says:

    So is every rational head of state in the world looking at what’s happening to Russia and saying, “….you know maybe we shouldn’t be so tied into the world’s financial system, especially dollars????”.

    Afghanistan had a whole lot of cash in the US system and after the Taliban overthrew the US puppet regime the US seized the cash to give to Americans.

    What head of state with just a little beef with America is sitting there saying “Our cash is protected. We own it, it just sits in a US bank. We can transfer it any time.”

    Even allies might be looking at this like…can anybody ever get together to do this to us???

    In 20 years I don’t know how supreme the dollar will reign.

    • KGC says:

      One thing I see happening is China looking at the economic sanctions hitting Russia right now and trying to calculate how they could survive if hit with the same should they move on Taiwan. Very few countries are using their currency in trade.

  25. Michael Engel says:

    1) The State of the Bubbles.
    2) TA Gibberish for entertainment only, skip : Every bubble need a backbone.
    The backbone low is above previous peaks. The BB are found on the bubble left. // Every Anti bubbles also need a backbone. The backbone high should be under previous bottoms. They are found on the bubble right.
    3) To construct a deep recession we will need few Anti BB. Example : 1929 – 1932.
    4) Option #1 : SPX monthly : Feb 2022 left behind a large buying tail. It will send prices to a new all time high.
    5) Option #2 : SPX monthly flipped in Feb 2022. The monthly and the weekly are not in bearish territory. Not yet : a bear market rally until mid year.
    6) Option #3 : Feb 24 low isn’t good enough. The downtrend will soon resume. With enough speed & thrust it will open the air space below,
    between Feb 24 low and the next low. A new Anti bubble backbone BB #1 will be born.
    7) Ant BB#1 might start a trading rang. Option #1 : accumulation. A new all time high after Anti BB #1. Option #2 : just a regional bear market rally. A local bs.
    8) Option #3 : distribution. With enough speed and downdraft, the next Anti BB#2 will be formed. SPX will dive like an eagle to hunt a rabbit in the valley down below…

  26. Michael Gorback says:

    Putin seems to have lost his grip. He’s more emotional and out of control. I don’t think his military leaders are in the loop. I think Putin is acting on his own. He wants to cobble back together the old Russian Empire (not the USSR, which was smaller). IMHO it’s his dream.

    He’s been in power for 22 years and I’d say he didn’t start to act up until about 2007 when NATO offered Ukraine and Georgia membership. There had been an agreement not to expand NATO.

    I don’t think he feels the need to occupy other countries as long as he can make them puppets and preserve his dream for Russia.

    Georgia caved as did Azerbaijan. Ukraine held out. That’s why he’s after Ukraine. He doesn’t need to own it, just control it.

    Ironically, he seems to have driven Sweden and Finland into the arms of NATO. He even pissed off the Swiss. Do you know how hard that is?

    I think the grandmaster of global chess has slipped his harness.

  27. ivanislav says:

    Wolf, sorry to take overuse the message board, but this Russia stuff really interests me. Would you comment on the following idea?

    US and EU/NATO have frozen Russia’s central bank’s foreign reserves. In the past I think this has been done with a few nations, but very seldomly. I read that the amounts are mind-boggling, 2/3 of Russia’s ~630 billion in reserves – frozen for an indeterminate period of time, or effectively stolen if this follows the history of Iran and a few others.

    So, do you think this will erode trust in the use of reserves kept at foreign central banks, something I imagine is a pillar of today’s global financial system?

    We don’t know how this turns out, but at the present moment, I have to question the lack of foresight on Russia’s part to maintain reserves that can be zero’ed out by NATO members!

    • Old School says:

      I think Russia planned about as good as they could. They got rid of as many dollars as possible and replaced with other currencies and gold. They knew when they invaded price of their main products oil, gas and minerals that the west must have would go up.

      Most likely any western investments in Russian companies will be lost to the West.

      Who knows what will happen, but it’s looking like Russia will gobble up Eastern half of Ukraine and Western half could become part of Europe. Russian supply lines will be sitting ducks if they push too close to NATO countries.

      • John H. says:

        I have a 1918 $1000 Russian Government Bond on my “Wall of Shame” next to a 1mm Turkish Lira and, of course, a 100 Tril. Dollar Zimbabwean note.

        The former I paid $15 for in about 1995 because I liked the color and how it was matted in the frame. I’m sure I wildly overpaid for it if not for the pleasure it brings to the eye…

      • Bobber says:

        I put some pocket change in some Russian ETFs yesterday, for fun. Already down 10%, as expected.

    • Wolf Richter says:


      If a country wages war against its neighboring country and invades it and tries to occupy it and take it, then all bets are off. “You shoulda thought about it beforehand,” is what comes to mind. That’s what we’re learning today about the reserves.

      You said: “I have to question the lack of foresight on Russia’s part to maintain reserves that can be zero’ed out by NATO members!”

      The unwanted answer to this is: Russia should have never invaded the Ukraine, not in 2014 and not in 2022. End of story. It should have had enough “foresight” to not do that.

      • ivanislav says:

        Wolf, your response makes me think you’re interpreting my question as a judgement on whether what Russia or the US/NATO response did was right. That’s not it at all. I was asking specifically about whether “you think this will erode trust in the use of reserves kept at foreign central banks?” Not trying to start an argument lol.

        • Wolf Richter says:

          To be clearer: No. It will increase the trust in reserves by countries that don’t invade their neighboring countries. That’s what I said, in essence.

      • ivanislav says:

        PS – that very question was raised by Mike Green of Simplify Asset Management as well, a guy as gung-ho pro-US as you can get, who has served on the presidential panel for something or other (tech development?).

    • billytrip says:

      I think if you are planning on invading a sovereign nation with legions of tanks like it was the 1930s you should not have reserves in any other country because the world is tired of this sh*t.

      If you act more or less sane and legal no one is interested in freezing you out.

  28. Michael Engel says:

    The western world info war agents penetrated the defense ministry deep bunker and stole Russian top secret maps. That’s how they know it all.
    How phony they are.
    Hug justices ate plut-onion

  29. YuShan says:

    I think most market players underestimate the long term significance of what is happening. It is not about the (relatively small) size of the Russian economy or about how much stocks are affected today. It is about the demise of globalization and western dominance. That was already happening, but this war will massively accelerate it.

    Every country will now be reviewing how dependent they are on others and how vulnerable THEIR financial system is, either to direct sanctions or to fallout from sanctions against others. Especially China and India will be paying close attention to how this pans out and prepare.

    Also note that China and India (with a combined population of 2.8 billion people) abstained from condemning Russia in the UN, which implicitly communicates that they do have at least some sympathy for Russia’s position in this conflict.

    The demise of dollar hegemony will accelerate because of this, but this hegemony is the main reason why America still gets away with its massive double deficit (budget and trade). Seeing that people already freak out over relatively minor rate hikes, I’m not sure if people are prepared for this.

    Of course not much will change overnight, but the rest of this decade is going to be “interesting”, and probably not in a good way.

    • Publius says:

      I think China’s and India are happy to see Russia weakening itself while straining, if not weakening, the West, but neither is going to fully publicly side with Russia, as their economies are far more dependent/intertwined with the West/Japan than with Russia.

      • phleep says:

        Shades of great power politics of the late 1930s. (Gulp.) In a nuclearized world. Goes onto my radar for future RE prices here in San Diego, a Navy town. Price of nuclear-warmed glass?

      • Sams says:

        China may not waste a good crisis if they can use it to weaken the US hegemony in the worlds financial markets.

    • ivanislav says:

      Twitter quote from Michael Green hedge fund manager:

      “Redrawing maps rarely works in favor of the status quo and the use of finance “nuclear option” is another extraordinary step in the de-globalization of our US hegemonic era. The willingness of “small c” central banks (eg CBRussia) to hold significant reserves abroad has been damaged. This impacts credit provision (eg money market) and places yet more frictions into the system around trade while further eroding trust in the USD as a “base layer” for global trade.”

    • Old school says:

      Noriel Rubini has an essay out this morning trying to forecast what it all means to the US economy. If I read correctly he thinks it’s going to be stagflation similar to 1973 and 1979. He’s guessing Fed will be do too little and then have to do a Volker to kill off inflation.

      • YuShan says:

        Very hard to predict, but totally possible.

        I haven’t read his article, but I agree that if ultimately the Fed has to choose between “the markets” and the currency, they will indeed do a Volcker to save the currency if they have to.

        However, I don’t think they will have to go to 20%. If they raise rates to say, 5-7%, this will probably create enough asset deflation to help dampen CPI inflation, because the bubble is so massive.

        Before the GFC, the Fed used the Taylor Rule as their framework. If they used that today, the Fed Funds would be around 7.5%.

        • John H says:

          Grant’s Interest Rate Observer says in recent article that Taylor Rule:

          r = p + 0.5y + 0.5(p – 2) + 2

          calculates to a 9.55% Taylor Rule rate (pub. date 2/18/22)

          9.55% !!

          That’s how far behind Fed is at present, and a flight or two of incremental steps to climb…

      • Peanut Gallery says:

        Old School, how are you accessing Rubini’s material? Looks like most of his stuff is for paid subscribers only.

    • Candyman says:

      Please note…Bank of Singapore has halted all Russian oil and gas exchanges.

    • Peanut Gallery says:


      Of course in the short term we are seeing flight to UST / USD due to volatility in Russia.

      But how does this war impact demand for dollars over the long run? Are you basically saying that global trade (“globalization”) will decline and thus each individual country will diversify the type of currency they carry and hold for trade purposes?

  30. NJB says:

    Bond market action is suggesting that central banks will be much less aggressive raising rates than was the case before the Russia invasion. If this is correct, the risk of inflation taking hold and changing people’s mindsets is much greater. Employees will ask for cost of living adjustments and we’ll get a wage-price spiral. Recent events have been inflationary (rising oil prices and other commodity prices) and if anything, central banks should be getting more hawkish.

    • historicus says:

      The Fed is supposed to fight inflation, not effects of geo political events.

    • Tom S. says:

      Commodity price action suggesting otherwise. Once rates rise I expect yield curve inversion.

  31. Jim Cramer Fan says:

    Gold was supposed to rally in this kind of scenario, and yet, it’s up a measly 1%. Meanwhile, Bitcoin is up 15% since yesterday. It seems that Bitcoin is replacing gold as the de facto safe haven. We are witnessing history, folks.

    • Augustus Frost says:

      Wait until major country governments turn against it and see how much of a safe haven it is then.

    • Tinky says:


      That’s your conclusion based on a timeframe of ~one week?

      • jdquillan says:

        Look at pretty much any timeframe since 2010 and Bitcoin outperforms gold. I got interested in Bitcoin a couple years ago when it became clear gold was not behaving as it should given various risks. Turns out lots of young people view Bitcoin as virtual gold, and every day more of us oldsters are coming around to that view.

  32. Michael Engel says:

    Within a year : TLV, Harkov and Kiev.

  33. Winston says:

    Ukraine is a major producer of neon gas critical for lasers used in chipmaking and supplies more than 90% of U.S. semiconductor-grade neon, according to estimates from research firm Techcet. About 35% of palladium, a rare metal also used for semiconductors, is sourced from Russia. A full-scale conflict disrupting exports of these elements might hit players like Intel , which gets about 50% of its neon from Eastern Europe according to JPMorgan. The pain won’t fall evenly. ASML, which supplies machines to semiconductor makers, sources less than 20% of the gases it uses from the crisis-hit countries.

    • Harry Houndstooth says:

      Thank you !

      • Harry Houndstooth says:

        Recent Russell 2000 highs:

        2103 February 9, 2022
        2086 February 15, 2022
        2066 March 1, 2022 (so far)

        Lower highs.
        Back up the truck on SRTY and SQQQ.

    • Old School says:

      I think virtually all titanium comes from Russia. They are also #4 copper producer.

      The big world gold miner that I follow gets 20% of revenue from copper, so they are currently getting high margins on both copper and gold. Through luck or smarts they have no mines in Russia. But miners are volatile because they are so levered to product price which is out of their control.

    • Wolf Richter says:


      Why do you tune out what the actual semiconductor industry says about that neon situation in the Ukraine?

      CEO of the Semiconductor Industry Association John Neuffer:

      “The semiconductor industry has a diverse set of suppliers of key materials and gases, so we do not believe there are immediate supply disruption risks related to Russia and Ukraine.”

    • Anthony says:

      Don’t forget the fact, that it turns out that Russia produces from 10% to around 33% of all the world’s fertilizer, depending on which fertilizer.

      It ,of course, has plenty for its own farmers.

      • Anthony says:

        Oh, and most fertilisers are made from Natural Gas…..which explains why they have exploded in price…..

    • David Hall says:

      Neon may be produced from the fractional distillation of air that is supercooled and pressurized to form liquid gases.

  34. Duane says:

    Seems the same financial forces at work sanctioning Russia are the same forces responsible for retooling the US economy to more resemble the oligarchic economy of Russia.

  35. joe2 says:

    Wish we had some fixed benchmark to mark all these drops to instead of marking variables to variables. And subjective variables at that. Not much point to this except for watching your own wallet.

    i guess you need to be an instantaneous arbitrager. Forces you to be a trader not an investor.

  36. Michael Engel says:

    Aubrey McClendon : the world move when people who like risk
    take action.

  37. GSH says:

    Well, defense stocks are doing well. No big surprise there. LMT up from 380s to 450 in a week.

  38. Peanut Gallery says:

    Some say Russia attacked Ukraine due to “NATO aggression” against Russia.

    I don’t understand this conflict very well. Would someone please kindly explain?

    • ivanislav says:

      This is not the place to get the Russian perspective. If you want to understand their world view, a decent place to start is Putin’s speeches/press-conferences with subtitles from recent months where he outlines the history and lead-up to war.

      • Wolf Richter says:

        I have zero tolerance for Putin’s propaganda and lies. If he wants to spread his propaganda and lies on my site, he can have his people contact me and make a deal on a banner ad, payable in USD in advance. But the comments are not Putin’s propaganda section.

    • Harvey Mushman says:

      The Ukraine would like closer ties with western Europe, the European Union, and they would ultimately like to join NATO. Putin is threatened by this. That’s my view from 30,000 feet.

      • Wolf Richter says:

        It doesn’t matter why Putin wants to take the Ukraine into his empire. There is no justification or rationalization for what he did. What matters is that he attacked and invaded.

        Just because you know why someone committed genocide doesn’t excuse the genocide. The “why” is irrelevant.

    • In the 2000s then VP Dick Cheney began placing Cruise Missiles in the new NATO countries. These missiles aren’t regulated by the weapons agreement on tactical weapons. They can carry nuclear warheads and they fly under radar, and they can knock out Moscow C&C before they can answer. They effectively altered the strategic balance. Obama promised to negotiate these missiles but he never did. Putin thought he could deal with Trump who couldn’t go against neoconservatives without ripping apart the party. Russia became another third world nation with nuclear weapons, and US policy is clear on that. This is one reason Pakistan supports Putin, Pakistan has a nuclear arsenal. The US would like to disarm all nuclear armed rogue nations.

      • SpencerG says:

        That is not correct at all. The Bush Administration decided to put Surface-To-Air interceptor missiles in Poland and the Czech Republic as part of the Missile Defense system being built to contain Iran. The Russians objected not because they were “cruise missiles” but because they could intercept Russian missiles as well as Iranian ones.

        The Obama Administration cancelled that project in 2009… notably on the 70th anniversary of the Soviet invasion of Poland which got some media play at the time as being diplomatically tin-eared. To smooth things over VP Joe Biden went to Poland later that year to announce a smaller system would be deployed instead… but it never was. In fact, the famous hot mic gaffe in 2012 by Obama was when he said he would have “more flexibility” to negotiate things like missile defense with Putin after the election.

        In 2013 (after the election) the advanced phases of the smaller program were cancelled or delayed. Supposedly it is to be completed by 2022.

        But none of this has anything to do with NATO deploying cruise missiles in new NATO countries. Such missiles have been covered under the INF Treaty ever since 1987… which the Russians decided to break sometime around 2013. NATO backed out of the treaty in 2019 after all NATO countries agreed that Russia had been violating it for years.

    • Lynn says:

      I’ve sort of been told this isn’t the place to discuss this, but it’s about missiles. If you first clear your browser and then google all that you will find articles, probably starting on the second or third pages of your search. To be clear I don’t think what is happening is justified..

    • Wolf Richter says:

      Peanut Gallery,

      Putin attacked the Ukraine to take the Ukraine, which he considers part of his empire. Nothing complicated about it.

      • Peanut Gallery says:


        I still think that is too simplistic of a narrative…

        But fine let’s accept that what you said is true. Why now? Why at this very juncture in time?

        It doesn’t make sense…

        • Wolf Richter says:

          As I said elsewhere here: his “why” or his “why now” is really irrelevant. There is no excuse, no rationalization. What matters is that he did. And how he did, and what it leads to. The whole thing is terrible.

      • Tom S. says:

        You sure he wants the Ukrainian land or does he want a friendly puppet government masquarading around in Ukraine? Sure, he may take what land he can get along the way, but how long he intends to keep troops in Ukraine is still up in the air. Yes, he said he believes that the Ukranian territory is part of historical Russia, but he also said they are inches away from making nukes and joining NATO. It’s the rhetoric of a dictator losing his grip on his nation and their place in the world. A friendly government is always the preferred option over having to fund police state, see the two recent US wars for reference as to the loss of life and costs that occur in that situation.

        These types of unprovoked wars also do permanent damage to credibility on the home front. The resulting sanctions are going to do lasting damage to the Russian people, but it will take time. Russia has a history of government overthrows, this event may well be a tipping point.

        • Wolf Richter says:

          Tom S.

          There is no difference between “does he want a friendly puppet government masquerading around in Ukraine” and “does he want a friendly puppet government masquerading around in Ukraine”

          He wasn’t going to personally move to Ukraine and run the place himself. He’d have someone else do that for him — namely some kind of puppet. We agree on this.

  39. georgist says:

    Feels like there is real complacency in the Western media about this conflict.
    There are a number of hurdles to clear here, once the back-slapping of armchair “freedom fighters” in the west have finished agreeing they all love freedom.
    If we have to dig in and outlast inflationary pressures, can the fractured West do this? Different costs will be borne by different nation states.
    Trudeau is forswearing off Russian oil – Canada doesn’t import any.
    He’s saying to the Germans “your turn”, they will be massively impacted.

    We are in this position because the West did not take hard decisions. It was easier to outsource production due to pollution / energy. It was easier to extend credit to deal with the job losses. It was easier to add immigrants to pressure housing up and run a pyramid scheme to pay for boomer pensions.

    Do we really have the resolve now, all of a sudden?

    • Peanut Gallery says:

      Not sure I understand your point of view. It seems like you are conflating many different things.

      Would you please clarify?

    • Anthony A. says:

      You know, when you look at the countries in this world we live in, not very many of them are doing OK for themselves.

  40. georgist says:

    There’s a lot of propaganda on both sides.

    MI6 have been releasing information about Putin being “enraged” by progress and some other personality stuff.

    I have to wonder, how can MI6 have details on Putin getting annoying in a room with probably 10 people, but they aren’t able to confirm if he’s been getting treatment for a serious illness that could have been going on for years?

    I would take all this type of press drip-drip wtih a pinch of salt, from UK/USA and Russia.

  41. Cashboy says:

    One has to look at the positive side of things.
    There will be a lot more single blonde, blue eyed Ukrainian women on the market.

    • Anthony A. says:

      I wish I wasn’t so old now! And with my Lithuanian last name I could have probably scored one really nice young lady! LOL

  42. The implosion of Russia will be far worse than mere sanctions. Putin is desperate. His demise opens the path to one world progressive liberal government, which is a very positive global economic development, but the path there is very bumpy.

  43. Winston says:

    World’s Biggest Container Shippers Suspend Cargo Deliveries To And From Russia

    “As the stability and safety of our operations is already being directly and indirectly impacted by sanctions, new Maersk bookings to and from Russia will be temporarily suspended, with exception of foodstuffs, medical and humanitarian supplies,” shipping giant Maersk said in a statement on Tuesday.

    Meanwhile, the Swiss-headquartered Mediterranean Shipping Company (MSC) – the world’s biggest container shipping company by capacity – said in a customer advisory that it will also stop all cargo bookings to and from Russia starting today, “covering all access areas including Baltics, Black Sea and Far East Russia,” the company said in a statement. Starting March 1, MSC had introduced “a temporary stoppage on all cargo bookings to/from Russia”.

    “MSC will continue to accept and screen bookings for delivery of essential goods such as food, medical equipment and humanitarian goods,” it said.

    The moves follow similar decisions already taken by Singapore-headquartered Ocean Network Express and Germany’s Hapag Lloyd – effectively cutting Russia off from the world’s leading container shipping companies, adding to freight challenges ahead

  44. roddy6667 says:

    When I was young and poor, I was always in a financial crisis. No big deal. I think Russians see things the same way.

  45. Goomee says:

    I pinched this from Reuters-$10 toothpaste.

    By Jessica DiNapoli

    (Reuters) – Get ready for the $10 tube of toothpaste.

    Colgate-Palmolive Co CEO Noel Wallace said last week at an industry conference that the household goods maker sees its new Optic White Pro Series toothpaste as the type of premium product “vital” to its ability to raise prices, which will help drive profit growth this year.

    His remarks come when many consumer products companies are hiking prices as much as they can to offset their own rising costs, a trend that could continue due to the conflict between Russia and Ukraine, whose economic risks include driving up gasoline prices.

    So far retailers and consumers seem largely unfazed by higher prices. But some lawmakers and consumer advocates argue that companies are excessively raising prices in order to fuel profits and return money to shareholders.

    “We’re seeing significant price hikes on virtually every item consumers purchase,” said U.S. Representative David Cicilline, who is working on proposed antitrust legislation aimed at bringing down prices. “They’re imposing real hardships. People are taking things out of their grocery carts because it’s too expensive.”

    In the past, major retailers such as Walmart Inc pushed back on price hikes. But now, retailers like Walmart and Target Corp

    Target said on Tuesday in an earnings call that bumping up pricing is the last lever it pulls when faced with increased costs.

    The U.S. Federal Trade Commission over the last three months has probed sky-high prices and supply chain disruptions, requiring companies including Procter & Gamble, Kraft Heinz Co, Kroger Co and Walmart to turn over internal documents on profit margins, pricing and promotions.

    Comments on the inquiry are due March 14 and so far show small grocers angry with having to pay more and receive less of crucial products. Consumers wrote in about being unable to find oatmeal, cereal and cat food.

    In an interview with Reuters, Cicilline cited Colgate as an example of a company touting price hikes, making basic items too costly, and paying out more to investors.

    Colgate expects its margins to widen this year, due in part to higher prices. It also bought back almost 50% more shares last year, a boon for investors.

    Raising prices is a “key capability” for Colgate that will help drive profit growth, Wallace said last week.

    A Colgate spokesperson said in a statement that the company has a wide portfolio of products at different price points, and touted its new $10 toothpaste as the first with 5% hydrogen peroxide, with “demonstrated efficacy to whiten teeth.”

    Consumer goods companies last year started hiking prices in response to rising raw material costs and labor shortages due to the pandemic.

    “There is incredible appetite for our products,” said Katie Denis, a spokeswoman for the Consumer Brands Association, a trade group for consumer packaged goods companies including Colgate. “We make essentials. And there is no option of not delivering.”

    Prices also rose on competing private label items, analysts said.

    The White House is targeting corporate profits as it grapples with inflation. Bharat Ramamurti, deputy director of the White House’s National Economic Council, said there are examples of companies outside of the meatpacking industry — which has particularly been in the White House’s crosshairs — increasing prices beyond their own climbing costs.

    Lindsay Owens, executive director of the progressive non-profit Groundwork Collaborative, named diapers as a category with little competition, paving the way for aggressive price hikes.

    Kimberly-Clark Corp’s margins took a hit in 2021 due to rising costs. The maker of Huggies diapers is betting that consumers will buy pricier options made with plant-based material, helping its profits recover, executives said at last week’s conference.

    P&G executives said last week that they expect margins to continue to improve as higher prices hit stores. The company also plans to buy back more stock than originally planned.

    Graphic – U.S. CPG gross margins:

    “Many companies are taking advantage of high consumer demand to continue to raise prices when they don’t need to,” said Jack Gillis, executive director of the Consumer Federation of America, a non-profit consumer interest group. “As long as consumers are willing to pay those prices, there’s no incentive to lower them.”

    (Reporting by Jessica DiNapoli in New York; Editing by Leslie Adler and Andrea Ricci)

  46. SpencerG says:

    I think the value of WolfStreet is not in developing short-term trading strategies. Wolf has no more way of knowing what the market will do day-to-day than anyone else. In the first two days after the Russian invasion of Ukraine the market jumped higher… then held steady for a day… and today it plunges. Crazy!!! Timing such moves is a fool’s errand.

    The real value he provides (to me at least) is the deep dives he does into the subjects that interest him and which provide a basis for mid- to longer term investment.

    I say all of this as a word of caution. Too many commenters look at recent market movements and say “Wolf you were wrong”… when he simply isn’t looking at these issues over that short of a timeframe. Wolfstreet has the best commenters of any blog I have ever read… but I urge everyone to keep what I said in mind.

  47. SnotFroth says:

    I wonder how many rubles have become bitcoins in the last few days.

  48. Buiteboer says:

    Dear Wolf,

    This analysis is probably one of the few that show the real impact the conflict is having on the internal Russian economy. One only hears how ‘shit’ will be cut off, sanctioned, and blown up – but not what is actually transpiring in the multiverse of the Russian market.

    Also astonishing how the world has plummeted from the delirium of borderless globalisation, and free-flowing capital, to 19th century mercantilism, hard borders, hard power, and hard crashes in financialised markets!

    In South Africa market watchers have wide eyes seeing the tumult and global fall-out of all the northern hemisphere wardrums… fertilisers, fuels, foods, and financial markets are being whacked out of shape.

    Thanks, often use your analysis with great effect!

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