Why Did Russia Dump All Its U.S. Treasury Holdings?
Newsflash: Russia dumps U.S. Treasury holdings. Well, not all, but most. The total holdings of its Central Bank dipped under $30 billion ($14.9 billion in May). At that level, the U.S. Treasure Department no longer reports on Russia's holdings, as $30 billion is the threshold that marks "major holders" of Treasuries.
What did the Russian Central Bank do with all the cash it got in exchange for its Treasuries? For one thing, its gold holdings jumped a full 1%. It now holds more gold than it has for decades. The head of the Central Bank explained:
The head of the Central Bank of Russia (CBR) Elvira Nabiullina explained that the slashing of the holdings was result of the systematic assessment of all kinds of risks, including financial, economic and geopolitical.
At one time, the central banks of countries who wished to engage in international trade had to hold a good chunk of U.S. Treasuries. The UST was recognized as the safest, most stable holding a country could hold. It paid interest in US dollars as well. The US dollar has been - and continues to be - the so-called "reserve currency."
For some years now, we've heard that the U.S. dollar is slipping as the world's reserve currency. Various theories posit its replacement by the Chinese Yuan; others by a basket of currencies; others by so-called SDRs, a type of international monetary reserve created by the International Monetary Fund. We've been hearing of the toppling of the USD really ever since gold began its mighty bull market in 2000.
So far, nothing of note has occurred. The USD remains the world's reserve currency. But we might ask ourselves whether moves such as this one taken by the Russian Central Bank signals the beginning of the end. After all, if Russia can conduct world commerce without - or with greatly reduced amounts of - US dollars, that means Russian enterprises no longer feel the need to have the USD anymore to pursue international commerce.
The thing to remember here is that Russian international commerce is quite small compared to the two giants: the U.S. and China - three giants if you throw in the EU, that conglomeration of European nations bound together as trading partners. So maybe the Russian central banks move - significant as it might be for Russians - doesn't really signal anything momentous.
One last thought: Since we really don't know exactly what's behind this dumping of US Treauries (Let's face is, Ms. Nabiullina's statement is rather vague.), we might consider a direct inquiry here. She does appear to have some sort of scheme in mind here, doesn't she?
And if she's reluctant to spill the beans, perhaps we might loosen her up by serenading her with this classic American country song by the Oak Ridge Boys...
What did the Russian Central Bank do with all the cash it got in exchange for its Treasuries? For one thing, its gold holdings jumped a full 1%. It now holds more gold than it has for decades. The head of the Central Bank explained:
The head of the Central Bank of Russia (CBR) Elvira Nabiullina explained that the slashing of the holdings was result of the systematic assessment of all kinds of risks, including financial, economic and geopolitical.
At one time, the central banks of countries who wished to engage in international trade had to hold a good chunk of U.S. Treasuries. The UST was recognized as the safest, most stable holding a country could hold. It paid interest in US dollars as well. The US dollar has been - and continues to be - the so-called "reserve currency."
For some years now, we've heard that the U.S. dollar is slipping as the world's reserve currency. Various theories posit its replacement by the Chinese Yuan; others by a basket of currencies; others by so-called SDRs, a type of international monetary reserve created by the International Monetary Fund. We've been hearing of the toppling of the USD really ever since gold began its mighty bull market in 2000.
So far, nothing of note has occurred. The USD remains the world's reserve currency. But we might ask ourselves whether moves such as this one taken by the Russian Central Bank signals the beginning of the end. After all, if Russia can conduct world commerce without - or with greatly reduced amounts of - US dollars, that means Russian enterprises no longer feel the need to have the USD anymore to pursue international commerce.
The thing to remember here is that Russian international commerce is quite small compared to the two giants: the U.S. and China - three giants if you throw in the EU, that conglomeration of European nations bound together as trading partners. So maybe the Russian central banks move - significant as it might be for Russians - doesn't really signal anything momentous.
One last thought: Since we really don't know exactly what's behind this dumping of US Treauries (Let's face is, Ms. Nabiullina's statement is rather vague.), we might consider a direct inquiry here. She does appear to have some sort of scheme in mind here, doesn't she?
And if she's reluctant to spill the beans, perhaps we might loosen her up by serenading her with this classic American country song by the Oak Ridge Boys...
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