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Russia Buying Bitcoin In February?

Since the Great Recession, asset prices have become extremely overbought. Buying low and selling high looks really good if you bought in the depths of the crisis. Returns have been quite extraordinary over the last decade. Equity markets have been propped up by decades of government malfeasance, social entitlements, and Fed chicanery. The law of averages has to come eventually. Headlines of the U.S. budget deficit sitting at $1 trillion, the national debt sitting at $22 trillion, and battles over the trade deficit are everywhere. For decades, governments have used quantitative easing to keep assets propped up, and even the slightest hint at quantitative tightening has brought a lesson in normal market volatility that most money managers have never seen. Easy money and low rates are the only reason for asset prices being where they are.  Maybe that’s why Russia is buying other things?

Clueless Fed?

Trillions have been pumped into markets around the world, and countries such as Russia and China know that the U.S. will have to continue its campaign of devaluing the world reserve currency to cover its deficits.  As discussed in previous articles, the evidence of the cluelessness of the Fed is everywhere. The Fed has no models that make any sense. They are beholden to whatever the market dictates. Previously, data suggested that the Fed will implement more QE and rate cuts than rate hikes. Other countries that hold Treasuries in their arsenal know that more QE will devalue their holdings. Nations buy gold with Treasuries on a monthly basis. The U.S. constantly attacks countries who buy the precious metal or use SWIFT to lock these countries out of payments. Gold can be used to bypass U.S. sanctions.

Kremlin To Buy Bitcoin?

Bitcoin or cryptocurrencies happen to be one of these alternatives. They are a more cost-effective way to not have to use a devaluing currency in trade. An economics professor in Russia, who has ties to the Kremlin has suggested that Russia will begin buying Bitcoin with USD to bypass U.S. sanctions. Vladislav Ginko, of the Russian Presidential Academy of National Economy and Public Administration, recently said, Russia would diversify cash reserves into Bitcoin.

“Because of U.S. sanctions, Russia’s elite are forced to dump U.S. assets and U.S. dollars. They are beginning to invest into Bitcoin.  The Central Bank of Russia sits on $466 billion of reserves and it has to diversify in case there are limited opportunities to do so in the future. I believe that the Russian government will start diversifying its reserves with Bitcoin in February this year when U.S. Congress will introduce new sanctions against Russia.”

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It’s no surprise that Russia is looking to move away from dollars. Dollars are an inflated currency backed by the U.S. Government and printed at any time for any reason. Why would a country, person, or entity own a currency that is used as a strategic weapon? As other countries continue to develop systems outside of the Western-dominated systems, geopolitical discourse will ratchet up. Iran has created a crypto rial, China buys gold every month, Russia buys gold every month, and the U.S. prints money every month. Remember what Putin said?

“Because there’s instability when it comes to doing business with a dollar, gives rise to a desire and it’s happening all around the world to find alternative reserve currencies and the creation of a financial system independent from the dollar.”

Cheers,

Colin

 

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