Why Russia's US treasuries?

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2018-03-26 08:42:16

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In the Summer of 2016 Russia increased investments in US treasuries and brought them to 91 billion dollars, although only two years ago, in August 2014, with the first introduction of sectoral sanctions against Russia from the West, investments fell to 66 billion dollars. Why Russia's US treasuries? Will try to sort out this issue.

The first Reason: maintain the ruble exchange rate

us treasuries

No matter How much shouting various “trolls” on the Internet and the patriots on the streets, who have little understanding of what the economy, support «enemy», US government bonds is extremely necessary.

To begin we need to dispel a major myth: the money for such purposes do not go from the state budget. Securities for debt obligations of the United States coming from the reserves of the CBR (Central Bank of the Russian Federation) that is spent on the maintenance of the ruble, ensure the currency of importers, debtors, etc.

If someone thinks that any grandmother does not receive a pension due to the fact that the Government lends to “enemies”, he is seriously mistaken. CBR is an independent financial institution, one of the functions of which is to issue rubles. She, in turn, depends on the state of the economy as a whole, but rather on the trade balance.

The more economically developed a country is, the more you want to print domestic currency. If the balance is not respected and the Central Bank will print a lot of money, they will turn into ordinary confetti, candy wrappers.

Let's imagine that every citizen gets a million dollars, then what is? The answer is obvious: prices will simply go up because nobody will sell scarce goods for paper. In Economics this is called hyperinflation.

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The second Reason: the liquidity of the national currency

Depending on the state of the economy, the Central Bank released the ruble in reserve. But the main trading operations are made in euros, us dollars, Japanese yens, British pounds. Also today they added the Chinese yuan.

To rubles had liquidity (weight), you need to monetize them, otherwise they will remain ordinary confetti. Previously, as a loan was secured by gold. That dollar supported the precious metal, gained control of the world, while the French President Charles de Gaulle, one day, brought to US a ship with the American currency, which demanded gold. After such blatant action was decided to abandon the ensure “bucks” precious metal. Instead, the currency became backed by the guarantees of the United States that “all is well” and is, in fact, is US government bonds.

In Other words, the ruble should be provided with something to not be ordinary papers, which can cut any child from a notebook. In this role US treasuries, which are provided in the truest sense of word of honor of the American government.

Securities of US debt are the guarantee that the ruble at any moment can be exchanged for dollars and Vice versa. Given that all trading transactions are in foreign currency in several countries, including the US, is a guarantee of stability of trade operations.

To make it clearer why buy US government bonds, simulate the situation: in this room has three children. Two of them print their own money, and the third buys. The first carves its own currency from sheets of notebook paper and does not provide, the second – smarter, he changes his paper “bucks” things along a certain course, for which you can buy anything in a real store. Thus, the second child just will not be giving them away, unlike the first, which can print “money”.

As for the issue of funds, the situation is similar with the second child in our situation: the Central Bank released the ruble, reinforces securities, which are referred to as US treasuries. By themselves, the dollars also be purchased from the Federal Reserve by the US Government for such bonds, which collectively form the external debt.

The third Reason: profit

In Addition to the two already mentioned reasons, one should not forget that investing in US government bonds bring in real income.Russia increased investments in us treasuries as investors may be Central Banks, governments, commercial institutions and private investors. The yield is around 2-3% per year. At first glance, the figure is very small, but there is one advantage-the low percentage kompensiruet confidence in the return of your capital and profits. No financial instrument, in contrast to government bonds most developed countries, does not give absolutely no guarantees, it is possible not simply to obtain the percentage of the expected high profits, but to lose all your capital.

In a world of such investment instruments, which guarantee a profit, in fact very little. As such, and deliver US government bonds with the most influential government in the world.

Reason four: conservation reserves

Everyone in our country knows to keep money in glass jar & ndash; it is equivalent to burn them at the stake. CBRInflation for a few yearswill reduce it significantly, despite the fact that the number of zeros on the banknotes will not change.

But the ordinary citizen easier if he has money he wants to keep for a few years, enough to come to any Bank and open a Deposit account, which can put the accumulated money at interest. Of course, a lot of this does not work, but the main goal – to save money in real terms, not nominal. In other words, no matter how many zeros on a banknote, it is important – how much they can buy products in the store.

Of Course, banks are going bankrupt, are closed, they can revoke the license, but today the state after the 2008 crisis, reliably insures all deposits within a reasonable amount.Russia us treasuries

All the banks depend, in turn, from the Central Bank, which issues a license, sets the refinancing rate, etc. But what to do CBR? Inflation directly for him has not been canceled, and therefore, the reserves in rubles equivalent to the storage of savings in a glass jar of any citizen is stupid and pointless. Like the instruments of the conservation reserves and are gosoamerica “enemies”.

Why US?

Of Course, tell about the greatness and power of Russia can be any number, but today the debt securities of the U.S. Government meet three key requirements:

  • Reliability;
  • Liquidity;
  • Profitability.

The United States is one of the few countries in the world where economic policy of the state does not depend on the “host” the White House.why Russia us treasuries Who would not come to power in this country, the situation has not changed. In addition, the state is not reeling from the various riots, revolutions, changes of regimes, financial reforms, wars, etc. In this country know the main rule in the economy – money loves silence.

When will the end of “the era of the dollar”?

Today we can see various movies, TV shows, speeches of politicians about the imminent collapse of the “American financial pyramid”. investing in us treasuriesA “guru” in the economy say that it will happen, we have to wait some couple of years. But the real economists even in the medium term (the next half-century) term, such chances do not see.

The Amount of debt the U.S.

Of Course, the amount of debt the U.S. is impressive – more than 19 trillion dollars, which is 109.9% of GDP.  why buy us treasuriesFor example, the debt of Greece, Ireland and Iceland as a percentage of GDP of more than us, and Ukraine's debt in the coming years also can surpass these figures. Here we have to consider is not the nominal debt, as percentage of GDP and its service to the U.S. Government, costing just $ 250 billion. If you compare with the returns of the budget is about 3.5 trillion dollars, the amount will be miserable. So to trumpet loudly about the imminent US default in the next 50-100 years too early.

Russia: US treasuries are the best

As for the third key factor – returns, then there are US treasuries in the first place. Now, many will be surprised, but the five leaders on three-year government bonds include those where the income is negative. This is not a joke: securities Japan losing about 0.2%, France – 0,5%, but in the us you can earn up to 1% per year.

Then Why invest? The answer is simple – not to lose more from inflation.

Reason four: political influence

In fact, those countries that have a significant percentage of government bonds of another country, can it politically to influence. Throwing all their reserves of securities that can derail the price of them, thus she will not be able to sell other bonds, which is equivalent to financial collapse.

But it's not the best Russia's share is only 5% of US debt.

In 2014, the Central Bank of the Russian Federation, in the period of sanctions against separate sectors of the Russian economy, dumped on the market for almost 2/3 of US government bonds. One version of such actions – an attempt to bring down the financial system of Americans. But Russia is not China, where half of all overseas debt. China is enough to hint that they're going to think about resetting all us assets, like the recent panic in the currency markets.

Conclusion

You Can sum up, saying that investing in US treasuries, Russia can get from the various dividends:

  1. Supports the national currency.
  2. Adds ruble liquidity at the trading venue.
  3. Profit.
  4. Tries to get political leverage.


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DE: https://tostpost.com/de/news-und-gesellschaft/25388-warum-russland-us-staatsanleihen.html

ES: https://tostpost.com/es/noticias-y-sociedad/25409-por-qu-rusia-bonos-de-los-estados-unidos.html

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PT: https://tostpost.com/pt/not-cias-e-sociedade/25292-por-que-a-r-ssia-t-tulos-do-governo-dos-eua.html

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UK: https://tostpost.com/uk/novini-ta-susp-l-stvo/25329-nav-scho-ros-derzhobl-gac-ssha.html






Alin Trodden - author of the article, editor
"Hi, I'm Alin Trodden. I write texts, read books, and look for impressions. And I'm not bad at telling you about it. I am always happy to participate in interesting projects."

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