04/21/11 Stockholm, Sweden – This week — just as Standard & Poor’s lowered the US debt rating outlook to negative — Russian Prime Minister Vladimir Putin has swept in to point out that when it comes to monetary policy, the shoe’s on the other foot now. Russia has had a much challenged record for managing the ruble, with seven redemominations in the twentieth century — most notably during the 1998 Russian financial crisis – so perhaps Putin has a good sense for smelling one coming ahead in the US’ future.
According to WSJ Real Time Economics:
“’Look at their [the US] trade balance, their debt, and budget. They turn on the printing press and flood the entire dollar zone — in other words, the whole world — with government bonds. There is no way we will act this way anytime soon. We don’t have the luxury of such hooliganism,’ he said.
“Even as Putin blamed the U.S. for printing money — something for which Russia was criticized during periods of hyperinflation in the 1990s — other Russian officials said there is no alternative to the U.S. dollar and declined to discuss cutting the country’s dollar holdings.
“Russia has the world’s third-largest international reserves after China and Japan, with the biggest part in U.S. government debt. However, Russia appears to have cut its direct Treasury holdings significantly in recent months, according to data from the U.S. Treasury.”
The article also goes on to point out how Russia is also likely benefiting from US expansionary monetary policy, mainly because it is serving to increase commodity and energy prices. After China and Japan, Russian has the largest foreign reserves with a significant portion in US debt. That means if they have an issue with the dollar, they have a potential say in its future direction. You can read more details on US monetary policy as “hooliganism” at the Wall Street Journal.
Best,
Rocky Vega,
The Daily Reckoning
Rocky Vega
Rocky Vega is publisher of Agora Financial International, where he advances the growth of Agora Financial publishing enterprises outside of the US. Previously, he was publisher of The Daily Reckoning, and founding publisher of both UrbanTurf and RFID Update -- which he ran from Brazil, Chile, and Puerto Rico -- as well as associate publisher of FierceFinance. Rocky has an honors MS from the Stockholm School of Economics and an honors BA from Harvard University, where he served on the board of directors for Let’s Go Publications, Harvard Student Agencies, and The Harvard Advocate.
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