Those Of Us From A Certain Generation Remember This Poster

Nuclear Attack Was a Thing

When I was growing up, there was always a threat of nuclear attack. There was a “doomsday clock” which was significant. Now, it’s sort of satirical. A Republican enters the White House and they move the clock. Wonder if they moved the handles yesterday?

We did drills on our schools for what to do if bombers dropped bombs on us. You were supposed to get under your desk, curl up, and hold your hands over your head face down. Teachers would be real official with whistles.

When I was 12, my friend’s older brother had this on the wall of his bedroom. #7 is what will really happen to you if nuclear war happens to break out.

Putin is nuts. But, I don’t think he is that nuts. He certainly is scared of his own people. That lack of trust permeates through everything.

This isn’t social distancing due to Covid. By the way, why are all the despots of the world short? Putin is a little man.

I saw a couple of interesting tweets this evening.

First, why are business reporters reporting business when they don’t know what the SWIFT system is?

ron insana @rinsana

@Neil_Irwin To my discredit, I had never even heard of SWIFT prior to worries about it. And I agree. When the plumbing is broken, there is usually more than one leak!

Ron is a hard-core lefty. Most reporters are. But, if you are going to report on business intelligently, and offer some insight, shouldn’t you actually know the fundamentals about business along with the plumbing?

We think about the big things that get taken out by sanctions. When Russia was taken off the SWIFT system, the ruble plunged. Interest rates in Russia shot up. We think about banks not being able to wire or receive wires for money. But, actions like this have real consequences for ordinary people. Suppose you are Russian and emigrated to another country. When you work, you send some pay home. Can’t do that anymore. Pipit, a company I am invested in might be able to make it work because they don’t use traditional networks to move money around. But, it would be a herculean lift to get it off the ground, even if they wanted to.

Jason Corcoran @jason_corcoran

Apple Pay and Google Pay no longer work on Moscow's metro system, leading to long queues as people fumble about for cash

People will need cash. However, how much actual cash does a bank have? Sure, Russia built up a stockpile of reserves prior to invading its neighbor Ukraine. $600B worth supposedly. The government also has a lot of gold, but I wouldn’t expect it to trickle out into the populous.

Last night in a private conversation, I opined I thought the ruble would fall 30%. It took a bit but it did going 40% lower before rebounding. I was totally wrong on Bitcoin though. I thought Bitcoin would retest its recent lows, and instead it rallied.

Now that pile of cash is basically worthless. What’s bid in the Russian Ruble? My friend Craig Pirrong pointed out that it won’t freefall to zero. The oligarchs Putin has fattened will buy rubles to cushion the fall. They owe him. It’s sort of like an ad hoc shadow banking system lurking in the background. But, the oligarchs are under severe pressure too. Craig is an expert on oil, and thus, has become very familiar with Russia over the years. Worth a read now.

I saw the Russian banking system said any banks looking to redeem Russian securities would be shut out. That was in retaliation. If a bank is holding Russian government debt paper, that paper is now worthless too. How soon before Russia defaults on outstanding notes?

The banking system being shut down means companies in Russia have a significantly more difficult time doing run-of-the-mill transactions.

Social unrest in the streets of Russia cannot be far away in the timeline. What then?

One of the first exhibits you see at the National World War Two Museum is “The Arsenal of Democracy”. America’s economy, and economic influence, can play a huge role in bringing Putin to his knees.

However, you have to be able, and willing to pull those levers.