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There will be a default on April 15. A world war. Turbulences like this happen.
Expert analysis on the potential Russian default on April 15, comparing 1998 crisis and current geopolitical factors.
Key Takeaways
- Russia may face a technical default due to frozen funds despite having sufficient reserves.
- Default consequences include investor flight, economic stagnation, inflation, and social anxiety.
- Current crisis differs from 1998 as it is driven by geopolitical sanctions, not economic mismanagement.
- Legal grace period until April 15 will determine if default is declared.
- Understanding and adapting to the crisis is crucial for individuals and businesses.
Summary
- The video discusses the possibility of Russia defaulting on its debt by April 15, as predicted by Morgan Stanley.
- It explains what default means legally and financially, emphasizing the role of frozen Russian forex reserves.
- Putin's decree to pay foreign debts in rubles is seen as a default by Western creditors.
- The period between March 16 and April 15 is critical for legal settlements regarding debt payments.
- Default would make Russia toxic for investors, leading to halted projects, job losses, and inflation.
- The presenter shares personal experiences from the 1998 default, highlighting economic turmoil and inflation.
- Differences between 1998 and current crisis include the presence of money now but frozen, and geopolitical rather than economic causes.
- Similarities include widespread anxiety, inflation, and economic instability felt by the population.
- The video also touches on the rhetoric of world war and its economic implications.
- The presenter advises viewers to accept reality and adapt their behavior amid the crisis.
Chapters
- 00:00Introduction and Default Prediction
- 00:26What is Default and Why It May Happen
- 01:43Frozen Funds and Legal Default Explanation
- 04:01Putin’s Ruble Payment Decree and Western Reaction
- 04:35Impact of Default on Russian Economy and Investors
- 05:05Personal Experience from 1998 Default Crisis
- 06:19Comparison Between 1998 and Current Crisis
- 09:02World War Rhetoric and Economic Implications
- 10:20Behavioral Advice and Conclusion
Full Transcript — Download SRT & Markdown
Speaker A
Everyone is losing their money, everyone is trying to buy something. Do I owe you money? I absolve you.
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There are no jobs, no new projects. The ass is burning. What awaits us? CHANNEL No.1 ABOUT MONEY AND BUSINESS.
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Guys, today I’d like to talk about default, about a possible default.
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Everybody’s talking about it now. Even the date has appeared saying that there will be a default on April 15.
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So what is default? How will default affect the lives of all of us? I, who has already been in a state when a default was announced, will now lay it all out for you, and you’ll see and realize it all for yourselves.
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But first of all, subscribe to my Telegram channels, because it can all come to an end with YouTube at any moment. Stay tuned, and here we go.
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Let’s begin with some statements. Morgan Stanley, one of the world’s respected investment firms, says that default is almost imminent. As a matter of fact, they are the ones who give the date of April 15, referring to falling prices of shares and bonds,
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blocked reserves and so on. They say that default is imminent. As you may recall, I said in previous videos that Fitch has already given Russia a pre-default status. Peskov, Putin’s spokesman, has already spoken out on this and said that there are no preconditions for default,
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but if default is created artificially, then sorry. Let’s explore together why default may happen.
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Russia’s forex reserves are now at an unprecedented level. Russia’s reserves fully cover its debts and there will be plenty left over. Moreover, debts don’t have to be paid all at once, so the small amounts that have to be paid
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could easily be paid by Russia. However, Russia can’t pay the debts because the money is in the banks, and the banks have frozen the money. Imagine: you have to pay your obligations to the tax inspectorate today, otherwise you’ll be arrested and it won’t be good.
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You come to the bank, give an order, and the bank says, “Your money has been arrested, we can’t execute your order,” and the one waiting for your payment says, “Due to the fact that you haven’t paid, you are being declared in default.”
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Look, legally the inability or unwillingness to fulfill an obligation is all the same, no matter.
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The money didn’t come in time, so you’re in default. And then the legal consequences begin which are very scary and which immediately, like a domino effect, spread far and wide and affect heavily and very painfully.
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So, the technical inability to fulfill the payment in time is really a prerequisite for default to happen.
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This is exactly the situation Russia is in now. The money is in the accounts, but it’s frozen, so now we’re already in a state where whether there will be default or not depends… on whom? On those who impose
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sanctions and freeze the accounts. Another very important point: in response to the blocking of the forex reserves, accounts, and so on, Putin signed a decree allowing us to pay our foreign currency debts in rubles. It seems to be okay, at least in rubles,
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but for the Western creditors this means default. Everyone is anxiously waiting for the first payments on March 16, but in fact, the period from March 16 to April 15 is a month when all these legal cases may be settled,
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so from March 16, we’ll be able to see what will happen with the payments.
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A grace period, a period in which mutual claims can be settled, will pass, and default is most likely to happen on April 15 unless a solution is found, which right now is out of sight.
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Now we’re going to break down what default will mean for every Russian. So, a country that is in default becomes toxic for investors.
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Investors stop projects, they don’t want to go there. You know, when there’s a default, everything implodes. Do I owe you money?
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I absolve you, I won’t pay you back anything, and so on. It’s clear that all investors, who are counting on getting their money back, are shunning, that is, investors are scared, they stop investing in the country.
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As a result, there are no jobs, no new projects and so on. A galloping inflation, price hikes and so on.
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We went through all this in 1998. My personal experience is that I lost money in the banks.
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The most reliable bank, Mosbusinessbank, which was the pillar of Russia’s economy, collapsed together with my money. I tried to withdraw that money, I withdrew almost a million dollars in cash, an entire truck, an armored car. I took this cash
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and wanted to buy roofing materials for this cash, which would then go up in price, because there were imported raw components, and when I started to deposit this armored truck of money, they had eyes like this, that is, they didn’t take the money.
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As a result, back in Kirishi, where I had brought this armored truck of money, the entire town and all the bandits in town knew that the armored truck full of money was standing and it had not been encashed at the cash desk, and when we drove back,
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we were really afraid that they were going to catch us, take us in. I don’t know what miracle it was that we managed to get to Moscow and deposit the cash in a bank. Thank God that the bank we were depositing the money in didn’t collapse.
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Well, I’m telling you these things now as if they were a kind of movie turmoil, but they are real, i.e. such turbulences happen in times of default, that’s it.
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Everyone is rushing somewhere, everyone is losing their money, everyone is trying to buy something.
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The simplest mundane examples: we used to go to the market and see the prices go up every day – something costs 1,000 rubles today, but when you come tomorrow, it’s already 1,500, the day after tomorrow – 2,000, i.e. the prices rose
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every day because of the inflation back then. Look, now lots of goods are produced in Russia, so there won’t be such effects and it calms down a bit, but in general the degree of anxiety is really high.
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While I’m telling you all this, I have an unpleasant feeling – I don’t want these damn things to happen, because default is a really sh*tty thing.
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So, let’s sort out what the situation of 1998 and today’s one have in common and how they differ. In 1998, there was a desire to pay, but there was no money. Now, there’s money, as well as the desire to pay, but there’s no opportunity,
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since the money is arrested. Second: in 1998, that was the default that caused a crisis, while now we’re already in crisis, and the pre-default state and a possible default will be provoked by this geopolitical and financial crisis, embargos, restrictions,
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the blocking of forex reserves, etc., that’s another difference. Third: the situation of 1998 totally destroyed Russia’s economy, which was a precursor and precondition of that default.
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Now, the state of the country’s economy, at least when it was entering this crisis, was rather stable, there were huge forex reserves and so on, so now the grounds are not economical but geopolitical, i.e. total confrontation in the world,
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so the difference is big here, too. Well, I’ve mentioned three differences between the situation in 1998 and the current one.
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However, there’re some similarities. There’s one similar thing – all of us feel that the ass is burning, that the prices are going up, all of us feel anxiety which is extending – this state invaded us in 1988, and so it does now.
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Everyone is worried about the things that await us, so let’s talk about it now. Firstly, the words ‘world war’ appeared for the first time in the rhetoric of U.S. President Biden.
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Everything actually starts from rhetoric, like the Overton window – everything starts with some words, then some people start speaking up in relation to these words, and after this it looks like we’ve been talking about it for a long time,
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so here it is. A world war. In my previous videos, I talked about the first economic and financial world war, and now you see that Biden also confirms that. Look, a world war, be it with default or without it, with an economic crisis
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and population’s i
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it can last for a long time, and the consequences of this destruction and pressure can be so enormous that it’ll take us dozens of years to crawl out of the rubble.
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The factors that determine the depth of this asshole are the following: ongoing sanctions, cutting out, closure, blocking of reserves, and so on surely aggravate the depth of all these dramatic changes. The second fact is how fast the situation in Ukraine will be resolved –
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it also determines whether these sanctions and pressure will be. Can we, sitting here, suppose anything about it?
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We can’t, since we have no influence on it, the only thing we can is to admit the reality the way it is and influence our behaviour in this situation. You see how many bad pieces of news we have, but there’s some good news, too.
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The year of 1998 didn’t last until the present times, it ended, and everything calmed down somewhere in 2000, and there was an enormous growth from 2000 to 2008, when the next crisis happened, following the cycle.
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So now the knowledge that all these crises and turbulences always come to an end, is the only thing I can lean on in order not to lose my mind and start doing some inadequate things.
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I suggest that those who’re watching me now adopt my model of behaviour, my behavioural strategy.
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This behavioural innovation helped me live through 1998, and I rely on this behavioural innovation to live through this turbulence and find myself in a favourable future. Follow me, subscribe to my channel, subscribe your nearest and dearest, send this link
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to people you just know so that we grow in numbers, so follow me and we’ll pass through this turbulence together. And, by tradition, let’s multiply good things so that there’s no room left for anything bad.
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CHANNEL No.1 ABOUT MONEY AND BUSINESS
Topics:Russia defaultApril 15 defaultRussian economy1998 Russian crisisinflation Russiageopolitical crisisforex reservesPutin ruble decreeinvestment riskseconomic sanctions
