How Exposed Is Our Financial System To Another Russian Default?

[westwall]

Here is what you said:

No, what he does is buy insurance for the possibility of a loss.

Gosh, you are truly stupid.


It is pathetic you are such a hack that you can't admit you were wrong. I guess we know who is truly stupid.



.

No, you dumbass, there is insurance for everything. He would get an insurance policy specifically for that event.

Moron.

 

[Fort Fun Indiana]

No, you dumbass, there is insurance for everything. He would get an insurance policy specifically for that event.

Moron.

To cover gambling loss?

JFC dude. Snap out of it. You are embarrassing yourself.

 

[g5000]

No, you dumbass, there is insurance for everything. He would get an insurance policy specifically for that event.

Moron.

Sad.

 

[westwall]

Sad.

Yes, it is sad that you don't know how the real world works.

That type of insurance has been around for decades.

 

[Fort Fun Indiana]

g5000 wtf?

 

[g5000]

g5000 wtf?

westwall has a peculiar obsession with me.

 

[Fort Fun Indiana]

westwall has a peculiar obsession with me.

What a bizarre series of postings.

 

[g5000]

What a bizarre series of postings.

Yep.

 

[whitehall]

It's a provocative question that the mainstream media only wants to deal with during a republican administration.

 

[CrusaderFrank]

I haven't looked at the numbers, but I'm guessing that our banks will get through it in one piece. Hey, maybe we can tell Russia to fuck themselves on our Treasuries!

Regarding "too big to fail", that's a self-inflicted wound. It only got worse after the Meltdown. We don't seem to learn shit.

Great idea! Let the world lose Faith in the US Dollar and financial system faster and better than we destroyed our credibility with the Afghanistan Unconditional Surrender

 

[Fort Fun Indiana]

Great idea! Let the world lose Faith in the US Dollar and financial system faster and better than we destroyed our credibility with the Afghanistan Unconditional Surrender

Russian residents hold US treasury securities. The Russian government does not.

We will almost certainly not default on them. It's $4 bil, btw

 

[g5000]

"That's a default, folks."

 

[g5000]

What happened?​

Moody’s Investors Service downgraded its long-term debt rating for the Russian government from B3 to Ca, leaving Russia’s credit firmly in the “junk” (or non-investment) grade status. In other words, according to the agency’s experts, the Russian state will not make the next payment on its external debt and, therefore, will be recognized as a country that does not fulfill its obligations to creditors. “The outlook is negative,” Moody’s explained in a research document published on March 6.

​

A default like in 1998? And afterwards a total collapse?​

The differences between then and now are significant.

In 1998, the default was the start of the crisis (though the problems that caused it had been accumulating for a long time). In 2022, however, it’s just one of many signs of the difficult situation in which the Russian economy finds itself. An important distinction is that the 1998 default directly and primarily affected banks that had purchased government short-term bonds (GKOs) for which the state then stopped making payments. Today, the first to suffer will be foreign borrowers who bought federal loan bonds (OFZs).

So, Russia is allowing itself to go into default?​

Yes.

In particular, the government has issued special decrees stating that payments to entities in “unfriendly” countries (this list includes virtually all the world’s developed nations) can be made in rubles. Foreign creditors view this as a default because rubles are now of little value, and they cannot exchange rubles for a foreign currency and withdraw it from Russia. In fact, these new decrees violate Russia’s contractual obligations insofar as the agreements for these debt securities stipulate that payments must be made in a foreign currency.

This is the difference between public and corporate debt. In some cases, the latter can be paid in rubles in Russia, but it’s stated clearly with public debt in which currency it must be repaid. Russia’s refusal to abide by these terms will be a violation of its obligations, constituting a default.

Russia’s looming debt default What the 2022 financial crisis will mean for the country and its people — Meduza

Moody’s Investors Service downgraded its long-term debt rating for the Russian government from B3 to Ca, leaving Russia’s credit firmly in the “junk” (or non-investment) grade status. In other words, according to the agency’s experts, the Russian state will not make the next payment on its...

meduza.io

 

[g5000]

Great idea! Let the world lose Faith in the US Dollar and financial system faster and better than we destroyed our credibility with the Afghanistan Unconditional Surrender

The dollar has gotten much stronger since the war in Ukraine began. The ruble has collapsed.

 

[Bootney Lee Farnsworth]

There's a guy down in Texas who sells mattresses. Every year, he runs an ad in which he tells the consumers that if a particular team wins the Super Bowl, he will refund them the money for any mattresses they bought in the past year.

This marketing strategy has reaped him tremendous returns.

But what if that team wins? He's screwed, right?

Well, to offset his risk, this same guy goes to Vegas and bets big on the OTHER team winning.

This is what the financial world calls a "hedge". The guy is brilliant and he makes millions every year.

This is supposed to be the same methodology "hedge funds" use. Thus the name.

In 1994, a hedge fund by the name of Long-Term Capital Management was started by a big swinging dick from Salomon Brothers and two other guys who shared a Nobel Prize in economics in 1997.

So of course everyone wanted in on this fund, right? Too bad. You had to be a gazillionaire to be allowed to invest with these big brains.

Now let's suppose our mattress guy borrowed a million dollars to place his bets in Vegas. That's called "leveraging". As long as he can cover his bets after the Super Bowl, no problem. But if he over-leveraged, and the first team wins, he's screwed.

That's what happened to LTCM. They were massively over-leveraged. But they hid that fact from their investors. Their collateral chains were so complex that no one caught on.

Until...1998. That's when Russia defaulted on its debts.

It turns out LTCM had made some incorrect assumptions. Every financial institution makes assumptions. They have to. Human nature is unpredictable, so you do the best you can.

When Russia defaulted, LTCM imploded. And all that leverage they had was owed to other banks. Uh oh!

And thus we ended up with what is called "systemic risk". The domino effect.

The US government did not really rescue LTCM. They did step in and sold off the bits and pieces of LTCM to their creditors and dissolved the hedge fund.

Fast forward to 2006. Once again, the financial world over-leveraged itself and used a formula to calculate their risks which contained assumptions.

No one ever thought to look at the formula and ask, "What if instead of a positive number for assets, we plug in a negative number?"

As in, what if housing prices fall?

BOOM!

So here we are. 2022. Russia's economy is collapsing, and a LOT of banks have loaned money to Russia. And a LOT of banks have derivative bets on Russia's debt.

And our banks are no longer too big to fail. They are too big to save.

Mattress Mack?

Brilliant business man. He started out selling matresses out of tent. He's nearly a billionaire now.

 

[g5000]

Mattress Mack?

Brilliant business man. He started out selling matresses out of tent. He's nearly a billionaire now.

Yep. Smart guy.

Not quite a billionaire, though.

Jim McIngvale Net Worth

What is Jim McIngvale's net worth?

www.celebritynetworth.com

 

[Bootney Lee Farnsworth]

Yep. Smart guy.

Not quite a billionaire, though.

Jim McIngvale Net Worth

What is Jim McIngvale's net worth?

www.celebritynetworth.com

Pretty nice guy too. Me and soon-to-be-Mrs. Bootney met in person back in the 90s at his Gallery Furniture store.

 

[CrusaderFrank]

The dollar has gotten much stronger since the war in Ukraine began. The ruble has collapsed.

Odd that Blackstone, et. al. are all talking about what comes after the dollar loses it's reserve currency status.

Hint: it's not a good thing for the USA

 

[g5000]

Odd that Blackstone, et. al. are all talking about what comes after the dollar loses it's reserve currency status.

Hint: it's not a good thing for the USA

People have been babbling about the dollar losing its reserve status for decades.

It has gotten stronger under Biden. Sorry!

 

[AzogtheDefiler]

There's a guy down in Texas who sells mattresses. Every year, he runs an ad in which he tells the consumers that if a particular team wins the Super Bowl, he will refund them the money for any mattresses they bought in the past year.

This marketing strategy has reaped him tremendous returns.

But what if that team wins? He's screwed, right?

Well, to offset his risk, this same guy goes to Vegas and bets big on the OTHER team winning.

This is what the financial world calls a "hedge". The guy is brilliant and he makes millions every year.

This is supposed to be the same methodology "hedge funds" use. Thus the name.

In 1994, a hedge fund by the name of Long-Term Capital Management was started by a big swinging dick from Salomon Brothers and two other guys who shared a Nobel Prize in economics in 1997.

So of course everyone wanted in on this fund, right? Too bad. You had to be a gazillionaire to be allowed to invest with these big brains.

Now let's suppose our mattress guy borrowed a million dollars to place his bets in Vegas. That's called "leveraging". As long as he can cover his bets after the Super Bowl, no problem. But if he over-leveraged, and the first team wins, he's screwed.

That's what happened to LTCM. They were massively over-leveraged. But they hid that fact from their investors. Their collateral chains were so complex that no one caught on.

Until...1998. That's when Russia defaulted on its debts.

It turns out LTCM had made some incorrect assumptions. Every financial institution makes assumptions. They have to. Human nature is unpredictable, so you do the best you can.

When Russia defaulted, LTCM imploded. And all that leverage they had was owed to other banks. Uh oh!

And thus we ended up with what is called "systemic risk". The domino effect.

The US government did not really rescue LTCM. They did step in and sold off the bits and pieces of LTCM to their creditors and dissolved the hedge fund.

Fast forward to 2006. Once again, the financial world over-leveraged itself and used a formula to calculate their risks which contained assumptions.

No one ever thought to look at the formula and ask, "What if instead of a positive number for assets, we plug in a negative number?"

As in, what if housing prices fall?

BOOM!

So here we are. 2022. Russia's economy is collapsing, and a LOT of banks have loaned money to Russia. And a LOT of banks have derivative bets on Russia's debt.

And our banks are no longer too big to fail. They are too big to save.

You are truly an idiot. He is insured for this so he is NOT screwed the insurance company is.

OMG