Mish's Global Economic Trend Analysis |
- Moscow Hikes Interest Rates to 17% from 10.5% in Emergency Middle-of-Night Action
- Insolvent Scranton PA Pensions Rise 80%, Fire Fund to Run Out of Money in 2.5 Years; Bankruptcy Looms
- Russian Ruble, Turkish Lira, Ukrainian Hryvnia Hit Record Lows; Global Currency Crisis on Deck
| Moscow Hikes Interest Rates to 17% from 10.5% in Emergency Middle-of-Night Action Posted: 15 Dec 2014 03:15 PM PST I commented earlier today, that you do not defend a currency by foolishly wasting foreign reserves. The Russian central bank came to the same conclusion. In an emergency middle-of-the-night central bank action, Moscow Lifts Interest Rates to 17%. Russia has lifted its key interest rate to 17 per cent, hours after the rouble suffered its worst drop since 1998.US$ vs. Ruble  At the end of 2013 the Ruble closed at 33.20-per-US$. It touched a low of 66.84-per-US$, a decline of slightly over 50% before settling today at 65.60, just under a 50% decline for the year. Russia Serious About Halting Ruble Slide That massive 6.5 percentage point hike may or may not stop capital flight and currency depreciation, but it does show Russia is very serious about the effort. 6.5 percentage points is genuine bazooka action. Huge Recession Baked in Cake Even if the hike stops the currency slide, it will come at a cost. A massive Russian recession is baked in the cake. That recession will spill over into Eastern Europe including the eurozone. Mike "Mish" Shedlock http://globaleconomicanalysis.blogspot.com |
| Posted: 15 Dec 2014 12:08 PM PST The city of Scranton hiked property taxes 57% and garbage collection fees 69% to shore up a police and fire pension funds that will run out of money anyway, in 5 years and 2.5 years respectively. Amusingly (to outsiders) but certainly not to Scranton taxpayers, Scranton Pensions Increased as Much as 80 Percent as a result of inane mayoral promises. The 2011 court ruling that awarded huge raises and millions of dollars in back pay to Scranton firefighters and police officers was a windfall for retirees too, with some seeing a more than 80 percent hike in their pensions between 2008 and 2012, a Times-Tribune investigation found.No Choice?! Of course the city had a choice. Actually, the city had two reasonable actions and curiously, Shrive even mentioned one of them. Last week, the city asked the fire and police pension boards to forgo that increase. Both boards rejected the request.Tell, Don't Ask Given Class 2A law, you don't ask police and fire for cuts, you tell them. Then if they fight, you make the final step: Declare Bankruptcy on the Spot The police and fire departments would have to plead their case in federal bankruptcy court, most likely getting haircuts of 50% or more. Ultimately, bankruptcy is where all these cases are headed. Taxpayers certainly don't deserve preposterous tax hikes while inept politicians look for ways out, because there are no ways out. In the meantime, collective bargaining of public unions needs to go the way of the dinosaur. Public unions and the hack politicians who support unions have wrecked more city and state budgets than the next 10 things combined. Mike "Mish" Shedlock http://globaleconomicanalysis.blogspot.com |
| Russian Ruble, Turkish Lira, Ukrainian Hryvnia Hit Record Lows; Global Currency Crisis on Deck Posted: 15 Dec 2014 11:05 AM PST As oil continues to slide so does the Ruble. Emerging market currencies have gone on for the ride as have the currencies of Eastern European countries, especially Ukraine. The Russian Ruble, Turkish Lira, and Ukrainian Hryvnia are at or near record lows. Russian Ruble - RUB  Since the beginning of the year, the Ruble has gone from 32.99-per-US$ to 65.51-per-US$. That's a decline of 49.64%. Ukrainian Hryvnia - UAH  Since the beginning of the year the Hryvnia has gone from 8.21-per-US$ to 15.75-per-US$. That's a decline of 47.87%. Turkish Lira - TRY  Since the beginning of the year, the Lira has gone from 2.15-per-US$ to 2.37-per-US$. That's a relatively modest decline of 10.23%. However, the lira slide since the beginning of 2013 (not shown on chart) is 25.74%. Traders Pressure Russian Central Bank Bloomberg reports Ruble Tumbles Most Since 1998 as Traders Pressure Central Bank. The ruble tumbled the most since 1998, sliding past 60 for the first time, as traders tested Russia's willingness to defend the currency amid an oil slump that's pushing the economy toward recession.Failure to Halt Decline Bernd Berg commented the "[Russian] central bank failed to deliver a decisive actions to counteract the ruble decline. Russia is facing the risk of a currency and confidence crisis." That's a true but very misleading statement. The worst thing Russia could do would be to blow its currency reserves in a foolish attempt to stop the Ruble slide. Were Russia to blow its currency reserves, Russia would cause or exacerbate a crisis, not prevent one. The best thing for Russia to do is let the decline play out.The market will eventually find a level. In the meantime, there is little or nothing Russia can do. Global Currency Crisis on Deck Yes, Russia is facing a currency crisis. So is Ukraine, Turkey, Venezuela, and numerous other countries. I believe a global currency crisis is in the works. For more on the global currency crisis thesis, please see Next Phase in Currency Wars: Yen Plunge, Yuan Devaluation, and "Tidal Wave of Westbound Deflation". Mike "Mish" Shedlock http://globaleconomicanalysis.blogspot.com |
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