Russia's financial meltdown and the global dollar system | Hacker News Reader

Russia's financial meltdown and the global dollar system

adamtooze.substack.com

It is just hard for me to believe the Russian economy can collapse in 2022 without causing a global financial contagion. We are probably already beyond the 1998 Russian financial crisis and that was in a far less interconnected global economy.

The global financial system is interconnected in unknowable ways. It is far too high dimension to reason about or model in any meaningful way. Especially the higher order effects of these decisions.

I would just be shocked that what Russia is planning to do will stabilize anything.

I just don't know if blindly pulling every financial lever available is the right move here given the fragility of the global economy after 2 years of COVID.

Russia is a petrostate with a few extremely wealthy insiders who have been skimming off the nation's profits for a couple decades instead of building a giant economy. What else besides oil and gas does Russia really provide to the world? Thankfully, there are many levers to pull to ease the shocks of cutting off fungible Russian energy.

Russia's economy is the size of Florida's.

Meanwhile not pulling your financial levers when a dictator pulls off the eastern war of aggression is a great way to ensure that you have lots of economic and human hardships in the future.

How will this impact Russia's will to continue to supply gas and oil to Europe? Is Europe paying them in euros or some other currency? Where is it "stored"? If Russia's money is frozen, what use is it? Or even if it's not frozen, but they cannot use it to buy goods and services in exchange, then why would they bother selling the oil and gas?

Russian organizations may receive euros as payment, which are still usable in Europe to buy things. This gives the EU a huge level of control over Russian spending in their markets; if they pay less, it's not like Russia can just exchange some rubles for eruos, they have to deliver products and services (which now cannot go to Putin's war effort).

Shutting down gas infrastructure is far more complicated that "turning off the spigot", especially when the people who know the correct order of buttons to push and knobs to turn work for British Petroleum and friends. Restarting those systems is even more complicated.

Shutting off the gas supply to Europe likely means self destruction of their gas production industry, because they will make drastic mistakes.

The point of sanctions is to show the world that economic collapse is worse than war.

How many Russians know they can't access their money? How many didn't bother to show up to work because they won't have customers. Knowing their boss can't pay them. How many Russians see that the troops aren't even near these new republics... that this was an invasion.

And the war is going very badly for Russia against a definite underdog. Russia is rushing to peace talks because they are losing.

If we as the human species can show even a nuclear power like Russia is unable to win a war of aggression because of sanctions. We become post-war. We can start working together worldwide to raise everyone up.

What if Russians (the ones with power to do so) decide to take the world with them?

Then whatever Western nations are left will apply crushing sanctions.

as if iran hasnt been hit enough and yet they are limping gladly

You think the (remaining) world response to Russia using nuclear weapons would be even remotely similar to the sanctions on Iran?

i suppose the same sanctions imposed on the USA after they dropped hiroshima and nagasaki bombs?

The world has changed a lot since then. No country, even the US, would get away with being initiator of a nuclear war (assuming enough of us survived).

I can imagine a scenario of acceptable first use of nukes, and that is against a country using nukes as a threat so they can conduct atrocities with conventional weapons.

I do not know what number or rate of dead I would get on board with vaporizing 12 million humans in Moscow to try and kill Putin. Is it 100,000 per day? 1 million per day? But there is a number, because if it keeps up, it just means this thing is not going to be contained to Ukraine.

And even if 12 million in Moscow are incinerated by a nuclear weapon, there'd be hope that we stop it before it gets even as bad as world war two. And that to me is a goal. ~90 million died globally in world war two, 1/3 from famine. Not that I'd be given a choice but being vaporized sounds better than starving to death and likely becoming a murderer in hand to hand combat fighting for food to survive. Seriously fuck that, nuke me.

Don't be ridiculous. The world knows, Russia included, what the consequence of any use of nuclear weapons by Russia.

Russia will be deleted from existence.

That's another point of sanctions; they aren't one-way. It's to show others that while cooperation is ideal, if your partners act in bad faith you can survive just fine without them and are ready to accept the loss of their contributions.

If you're talking about a MAD scenario, it's safe to assume russian weapons are just as highly-maintained as their military. Given last week's battle performance, they're likely to blow up on launchpads.

>What if Russians (the ones with power to do so) decide to take the world with them?

Traditional military is being wrecked by underdog Ukraine and probably massive proxy war. Russia is losing big time.

Evil will burn down the world to rule over the ashes.

Everyone is looking to the Russian people who must prevent this evil from happening. They must rise up and overthrow their government.

Lets be realistic, if Russia does nuke the world. Literally nobody can sit back. The nuclear winter and nightmare of Earth would harm them just as much as anyone else. Even if the prediction of nuclear winter isn't true... it's only a matter of time that Russia goes after everyone else they didnt nuke already.

The entire remaining world immediately lays waste to Russia after they do this.

> decide to take the world with them?

Russia always threatens the nuclear option so while it shouldn't be ignored by defense agencies it also shouldn't be taken __too__ seriously. In order for the nuclear option to be used over sanctions there would need to be suicidally homicidal people in place from the top to the people turning the keys in the Russian regime and I think that's pretty unlikely. The sanctions can be unwound and Russia can at least recover to the point of getting by if not better, individuals with means can emigrate with their family, all for the price of one humiliating military defeat that is vastly overshadowed by the economic devastation their actions have wrought. I find it hard to think that most Russians would rather blow up the world than take that option.

Putin is unstable, and him losing power would make him fight like hell and potentially act exactly as you say, suicidal and homicidal.

We have exactly that in power right now. Putin wasn't rational before, and now he's at risk of losing power. I think it's more grave than anyone wants to admit.

He's an animal backed into a corner. It's not 'russians' calling the shots here, it's one Russian who is unstable and making very poor tactical decisions.

the counterbalance to this is (as always) the members of the military. They, too, are human beings, and it takes more than one or two of them to cause actual nuclear weapons to actually launch.

On many occasions in history, wars have stopped because too many people in the military decided that their political "masters" were too insane to be obeyed. We can hope that this pattern would repeat itself.

> Putin is unstable, and him losing power would make him fight like hell

If Putin can single-handedly cause the rockets to launch then your fear is possibly rational. However, if there are any other people in the loop at all then Putin is unlikely to convince everyone else to commit murder suicide on the entire planet.

Makes me feel a little more hopeful about the future, thanks for responding

Putin is an oligarch, he considers the war in Ukraine worth it because it benefits him personally. Another cold war isn't impossible but Putin isn't doing this to destroy the west. Who is he going to sell his oil to?

I grew up in late 70's early 80's UK and remember distinctly as a child the threats the USSR (then Russia) would make in this regard as they were being hammered by Sanctions.

Its a pretty cruel threat to live under that you don't quite understand - but now I'm older and do, cant help but feel the fear inducing threat of this is infinitely more destructive than actually facing people like Putin.

Russia is run by mobsters who operate using fear and intimidation. Fortunately, there is an even bigger bully just hanging out off the coasts of Russia ready to hit hard if provoked. The world wouldn't end, but the Russian regime would.

This is a what-if you mostly have to ignore when fighting from a defensive position. If you give in to the dictator, we might as well just get rid of our nuclear arsenals right now and save billions of dollars per year because MAD is useless. Every single brutalist in the future will know your threats mean nothing and they can simply cower you waving their hand around the nuclear button.

I thought the point of sanctions is to inflict enough financial damage to the Russian people in the hope that they will start to turn on Putin?

Also sanctions can be an instrument susceptible to abuses compared to nuclear weapons because it's so one-sided --- there is little point for any country to sanction the US, for example, but a total US sanction would be disastrous for most countries.

> hey will start to turn on Putin

Sanctions usually don't lead to the population turning on the regime, after all it tends to make the population more dependent on the regime, but sanctions do frustrate the regime's ability to wage war etc.

>I thought the point of sanctions is to inflict enough financial damage to the Russian people in the hope that they will start to turn on Putin?

Primary of primary purposes is to reduce their ability to fund a war. War is very expensive, the reason for war can never be resources these days. These sanctions have certainly put a threshold of this war probably around 6 months.

Putin expected this to be over in 72 hours, he kind of needed it to be over in 72 hours.

The secondary possibility is that the Russian people oppose this and overthrow the government. That would be an ideal situation. I dont think that's necessarily high on what will happen.

If sanctions fail and an accident happens like invading or shooting at NATO. We won't be post-war. We start a world war in which Russia loses... just look how unified the world is against Russia.

> Putin expected this to be over in 72 hours, he kind of needed it to be over in 72 hours.

This is highly unlikely.

However the coming weeks and months shake out in this war and in the broader political picture, it's important to approach the situation realistically.

This isn't a video game, cartoon or Hollywood movie. The timeline isn't going to be measured in days and the primary agents' motivations and actions aren't as simple as in cartoons.

Pretending otherwise will only confuse you, over and over as events transpire, about why things aren't going like they would in a cartoon.

There is news Turkey is providing drones to Ukraine. Should this continue too long Ukraine may very quickly have the best armed military in the world.

recent joke in Ukraine it's that Nato is asking to join Ukraine

The longer the war the more likely Russia will lose. They won’t be able to control a large country as Ukraine, bordering NATO’s members, against a hostile population and well funded and well equipped insurgence. Their puppet that they will install in Kyiv won’t be recognized by anyone. In fact I’m not sure what Russia’s end game is. They only stand a chance if Ukraine’s people support them, which looks more unlikely by the day.

What if it is a resource war? Annex the oil rich territory. Destroy the oil infrastructure in the rest of Ukraine. Now your position as the oil oligarch of Russia i.e. Putin is safe. No need to occupy the country. Just wreck it and be gone.

This doesn't usually work in authoritarian countries with well functioning secret services. Economic situation in North Korea is much worse and I would not expect an uprising there.

Well, the secret service people also have their families to feed. Discontent and disloyalty will eventually make their way up.

I've read a scientific text where the liquidity/holding cost of power is "guard labor", effectively a portion of the population is willing to work for the authoritarian ruler for money but this can only buy so much time. As the country becomes more unstable the need for guard labor increases until it reaches a critical point where the guard labor is powerful enough not only to suppress the rest of the country but also the authoritarian ruler himself leading to a classic military coup.

This begs the question if Putin's secret service is well functioning.

You don't think they might have some kind of a backup plan?

Russia can have all the backup plans it wants, it doesn't matter. You can't run a modern economy without interacting with the global economy, and interacting with the global economy is pretty hard when there is an absolutely unprecedented alliance of nations committing to limiting your ability to do so.

That fact that Putin went directly to threatening the world with nuclear war speaks volumes to the amount of outs Russia has and the quality of it's "backup plans".

Huh won't this just accelerate the alternate swift and other economic systems with BRICS countries ?

America and significant parts Europe are undergoing various forms of decline like economic stagnation, cultural violence, rising ultranationalists/populists, and energy independence issues.

Even China is making a move on taiwan, and the biden adminstration is trying to rush into talks with them.

I have a very different take, we are watching the end on a unipolar world, and the birth of true multipolar one.

I think the 'decline' has been greatly exaggerated, in part because it actually helps right-wing populism to exaggerate it. Yes, in some ways, there has been a decline in manufacturing labor required, but it's not strictly because of off shoring, but also because of automation. If you look at various industries, their output hasn't actually declined, while the labor inputs have declined greatly.

When you look at Energy production (US top oil/gas producer in the world), entertainment (hollywood still dominates global soft power), tech leadership (Silicon IP from Apple, Qualcomm, NVidia, AMD, et al still #1 in the world), EVs (Tesla), Space (SpaceX, Rocket Labs, Relativity Space, Axiom, etc), Medicine (mRNA vax), online services, machine learning advancements, software, etc I don't see any trend of 'decline' in leadership from the West. Now, some will counter "but but, China! Look at all of the AI", and certainly, they have deployed a lot of AI, mostly in surveillance, just like they've deployed a lot of high speed rail, but in terms of the truly disruptive research papers that have driven some of the biggest breakthroughs? They've often been centered in Western companies and universities. (Now, there's usually a lot of Chinese co-authors on these papers, often working in Western tech firms, so I'm not bashing Chinese researchers here, I'm just pointing out, there's no real decline in the output sponsored and published in the West, especially when you weight papers by importance)

What's happening is that the participants in the system are becoming more diffuse, and people all around the world can participate and contribute, and access tech centered from the West, and fork off their own regional variants, but this is happening in-addition- to, not at-the-expense-of, the US and Europe. I don't think China's rise is equal to the US decline, that line of thinking I feel is part of the political problem, and it's especially problematic under Xi's China with the excessive Wolf Warrior nationalism that has this air of 'inevitable US decline and Chinese supremacy' to it. It feels like copium to me on the part of nationalists, hoping for a collapse that isn't going to come.

Let's just say the reports of the West's death have been greatly exaggerated.

Russia just an oil and gas tap for the west. The nukes are terrifying but other than the usual oversized military what is there to fear? Putin is in ig trouble if the west can get off fossil fuels.

After all, the entire reason behind the war is to prevent Ukraine from becoming a bargaining chip against Russian oil and gas. It's just way too convenient that they annexed crimea first which has 80% of the oil and gas resources in Ukraine.

When you read German comment sections you see people worrying about energy cost due to sanctions. That is exactly why Russia is untouchable.

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