Monday, March 24, 2014

How Putin Plans to Break America





How Putin Plans to Break America
By Geoffrey Pike | Monday, March 24th, 2014
 
Geoffrey Pike
Last week, I wrote about the possibility of Putin and Russian officials seeking revenge on the U.S. In particular, I mentioned that Putin could step up to a microphone and announce that the Russian government would be selling off all U.S. Treasuries that it currently owns.
Since that time, the people of Crimea have voted to secede from Ukraine and join Russia. It looks as though the U.S. government will respond, at least at first, with minor sanctions targeted at certain Russian officials. At this time, we can’t say whether this action will be enough to trigger an all-out economic war.
Regardless of your thoughts on sanctions, this is something that must be closely followed for investors, or really for anyone. While I am against sanctions, it doesn’t matter whether or not you are morally opposed to them and whether or not you think sanctions work. Regardless of your opinion, there could be real economic consequences here and it won’t just be for the Russians.
While I previously stated that Putin could announce to the world that Russia will be selling off its U.S. Treasuries that it holds as reserves, perhaps a more likely scenario is that Putin will say nothing at all. In fact, if there's going to be any kind of rush out of U.S. debt by foreign governments or anyone else, then the wise thing to do is to quietly reduce your holdings.
The only reason Putin would publicly make such a bold announcement would be to stick his thumb in the eyes of the U.S. politicians. But if he did that, it is possible it could just escalate things that much more. And making such a statement would mean that the Russian government would not be able to sell its U.S. debt at as high of a price, particularly if any other foreign governments joined in the selling.