03.14 BREAKING NEWS: Russian Bank Run OUT of Western Institutions Underway

 

by John Galt
March 14, 2014 19:40 ET

The headline does not mince any words as indeed, the Russians are getting the hell out of the West in what can only be called a bank run which appears to have been underway for possibly the entire week. CNBC shockingly covered this as the opening story on Larry Kudlow’s program tonight as well as it being one of the headline stories at the DrudgeReport.

First the breaking news tonight from the Financial Times:

Russian companies withdraw billions from west, say Moscow bankers

(subscription required to read the entire story)

This excerpt from the breaking news story should set off alarm bells:

Russian companies are pulling billions out of western banks, fearful that any US sanctions over the Crimean crisis could lead to an asset freeze, according to bankers in Moscow.

Sberbank and VTB, Russia’s giant partly state-owned banks, as well as industrial companies, such as energy group Lukoil, are among those repatriating cash from western lenders with operations in the US. VTB has also cancelled a planned US investor summit next month, according to bankers.

The flight comes as last-ditch diplomatic talks between Russia’s foreign minister and the US secretary of state to resolve the tensions in Ukraine ended without an agreement.

Indeed, the story from the Federal Reserve via Bloomberg indicates that this was only a theory earlier based on the custodial holdings report:

The record drop in U.S. government securities held in custody at the Federal Reserve is fueling speculation that Russia may have shifted its holdings out of the U.S. as Western nations threaten sanctions.

Treasuries held by foreign central banks dropped by $104 billion to $2.86 trillion in the week ending March 12, according to Fed data released yesterday, as the turmoil in Ukraine intensified. As of December, Russia held $138.6 billion of Treasuries, making it the ninth largest country holder. Russia’s holdings are about 1 percent of the $12.3 trillion in marketable Treasuries outstanding, according to data compiled by Bloomberg.

This matches a warning I posted in a story last week, “Russia’s Financial Nuclear Option against America,” where I warned that indeed Russia could start a financial run on American assets in the event that political and military action caused a destabilization in Russia, they would return the favor to the United States and perhaps their European trading partners.

The final threat that has been running through the pits as a wild rumor is that for selected nations in Europe and allies of North America, for those goods such as petroleum products or rare earth metals that are to be purchased from Russia, payment would only be accepted in Rubles or gold as the dollar peg would be permanently removed in retaliation for US and EU sanctions. Such a move would cause a boomerang effect on all world markets and a mad scramble for physical gold which may or may not exist in the vaults of the Federal Reserve and its member banks. Add in the fact the Russians have support from the Chinese government in their current course of action and the West might bite off more than it can chew if they elect to start an economic conflict with Russia.

 

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