That’s 42% lower than where it traded versus the dollar at the start of the year.
And it’s more bad news for Russian citizens.
On top of Western sanctions on their country’s exports… the prices of imported goods they buy have gone through the roof.
Now, you probably don’t care much about what Russians are paying for French wines or German cars.
But the story behind the ruble’s slide teaches an invaluable lesson about what it means to “have money.”
It’s a reminder of the difference between savings in the bank… and savings in our favorite sound money alternatives here at the Cut – bitcoin (BTC) and gold.
And it points to strong rallies ahead in both alternatives.
The next month, he annexed the Crimean Peninsula in eastern Ukraine.
And it knocked the ruble down about 50% versus the dollar.
The collapse was so bad, the Russian central bank had to spend $130 million of its foreign currency reserves to prop up the ruble’s value.
And it showed Putin something important…
If you invade your neighbor, the West may not send troops to stop you. But it’ll hit you with economic sanctions.
That can hurt your currency. So you need a big “war chest” of foreign currency to stop any slide.
Since then, Russia almost doubled the size of its foreign exchange reserves from roughly $340 billion to $630 billion.
This is money Putin thought his central bank could deploy again to shore up the ruble’s value.
Russia’s reserves aren’t in banknotes in a vault in Moscow. They exist as account balances at central and commercial banks in the U.S., Europe, and Japan.
And over the weekend, these countries’ governments blindsided Putin.
They sanctioned Russian businesses and commercial banks.
They also sanctioned Russia’s central bank.
They’ve frozen its accounts… and outlawed transactions with it.
Russia’s money is still there. But if its central bank can’t access it… it’s of no use to the country.
Look at what happened to Greeks in 2015…
The government decreed that savers couldn’t withdraw more than €60 (about $66 at the time) a day from their banks.
Argentines suffered a worse fate at the turn of the millennium…
I (Chris Lowe) experienced it firsthand. I was living and working there at the time.
To stop a bank run, the government froze bank accounts as the currency cratered. And it banned withdrawals from U.S.-dollar-denominated accounts.
But it’s even more sinister because it targets certain political groups.
Last month, Prime Minister Justin Trudeau announced extraordinary emergency orders in his battle against the “Freedom Convoy” in Ottawa.
They empower the Canadian feds to freeze the accounts of folks protesting vaccine mandates and restrictions. As Bloomberg reported…
The emergency orders require virtually every participant in the Canadian financial system – banks, investment firms, credit unions, loan companies, securities dealers, fundraising platforms and payment and clearing services – to determine whether they possess or control property of a person who’s attending an illegal protest or providing supplies to demonstrators.
If they find such a person in their customer list, they must freeze their accounts and report it to the RCMP [Royal Canadian Mounted Police] or Canada’s intelligence service, the regulations say.
This isn’t a government’s economic warfare against an aggressive foreign power. It’s a government’s economic warfare against its own citizens.
A lot of folks don’t understand this. Bank deposits are liabilities of the bank. They’re IOUs – promises to pay you money when you go to withdraw it.
But if your bank goes bust… or a powerful enough politician says that money is no longer yours… good luck getting it.
That’s why I’ve been spreading the word on the need to own some bitcoin and gold since we first launched the Cut to all paid-up Legacy Research readers in August 2018.
Bitcoin and gold are fundamentally different from government-issued currencies. They’re not someone else’s liabilities or promises to pay.
They’re bearer assets. That just means he who bears them owns them.
And they have value because they’re hard to confiscate.
All you need is a private cryptographic key to access and spend your funds. And nobody can get to your funds without this private key.
Banks don’t come into play. Same goes for gold.
You can keep gold somewhere safe at home. You don’t need a third party to access it.
With gold, you have to lug it somewhere and transact with someone in person. With bitcoin, you can transact online with anyone, anywhere in the world, 24/7.
But otherwise, they’re more or less the same. They’re money you can hold yourself that’s hard for the government to take from you.
That makes bitcoin and gold great ways to store and protect wealth.
And as economic warfare against governments AND citizens heats up, it’ll push more people into these bearer assets.
That means great things for bitcoin and gold prices in 2022 and beyond. More on that next week…
Regards,
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Chris Lowe
March 3, 2022