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The Nikkei newspaper has released a very troubling if not totally surprising story, that Russia will ask foreign lenders to reschedule loans worth $ 400 billion, potentially the equivalent of a debt default depending on how it is structured. Just a reminder, the last time Russia defaulted on its bonds it set off a cataclysmic chain of events that terminated with Long Term Capital Management’s implosion and the first major Wall Street mediated rescue of the financial system. This report has already caused the Euro in early Japanese trading to drop significantly against both the Dollar and Yen.

“European banks may face more financial difficulties, given the Nikkei’s report that Russian banks may negotiate a debt rescheduling,” said Yuji Saito, head of the foreign-exchange group in Tokyo at Societe Generale SA, France’s third-largest bank by market value. “It is natural that the euro is sold” to $ 1.27 and 117 yen today, he said.

According to Bloomberg:

The Russian Association of Regional Banks has submitted a plan for rescheduling loans to the Russian government, the Nikkei newspaper said, citing an interview with Anatoly Aksakov, the head of the association. The group is already in talks with HSBC Holdings Plc and Deutsche Bank AG, the Nikkei reported.

A $ 400 billion dislocation in credit markets is not what the global economy needs. However, we have no doubt that the equity market will have already factored this news and rise to new depression highs tomorrow.

6 Thoughts on Guess the Russians being a threat isn’t looking so viable anymore?
  1. Reply
    Why are people such jerks?
    June 23, 2011 at 1:12 pm

    I dont believe Russia has ever stopped being one of our greatest threats. Whether its through the credit and banking markets, or any of their of major threats.

  2. Reply
    Sergeant Carter
    June 23, 2011 at 1:57 pm

    Quite the opposite, it sets up a potential wag the dog scenario where Putin or another government hack gins up a controversy for him to come to the rescue and divert attention away from his failed communist regime.

  3. Reply
    June 23, 2011 at 2:41 pm

    Geez, I must be a dinosaur…I can still remember when HSBC was just plain old Household Finance…a shylock outfit. I guess usury pays. LOL

    Anyway, the whole thing is going to hell in a hand-basket.

    I doubt the MM-3s and Tridents have been reprogrammed, if you catch my drift.

    I guess all the profligate spending of the people of the World is coming back to haunt us all. Our human sense of entitlement has grown too great for our economics. I mean, shouldn’t everybody have a Lexus, a Blackberry, an $ 800 cell phone, a Wii and a PS3, and a $ 3K gaming computer (with Intel i7 and Tri-SLI 295s) hooked to their Plasma 72″ TV? LOL

    The Piper wants paid…and he will have his due.

  4. Reply
    June 23, 2011 at 2:47 pm

    This is small consolation for fomer Soviet Republics.

  5. Reply
    chesty puller lives
    June 23, 2011 at 2:57 pm

    Guess the Russians being a threat isn’t looking so viable anymore?

    NOW I am happy…
    A bunch of starving, broke and (politically) myopic Russians with an excess of NUKES to sell on the black market.
    Yeah, I am really ecstatic!

    Hey Y, I have the Blackberry: it beats a laptop, cell phone, clocks, video/ still camera and radio in my work truck.
    Can I get the delivery date on the rest of that stuff?

    Y. I thought you were a doc, as well. Like the Granddad mobile. My old ’81 F-100 can’t keep pace with yours but cops look amazed when I roll by because it is NOT falling apart (like most newer trucks around) and can keep pace with BMWs and Porsches in traffic.
    Std trans, I6, mod 4-bbl, no ps, pb, ac or radio… but Bullwinkle keeps pressing on!

  6. Reply
    June 23, 2011 at 3:35 pm

    Russia has $ 1.4trillion worth of gold reserves. Worst case scenario is if Putin lets the Russian banks fail. What then? Or if they dump their US or Uk government bonds on us.

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