After russia's recent attack on Ukraine, what Guagege has been paying attention to is not the dynamics of the war, but a real case rare in the history of world finance: the Central Bank of Russia was sanctioned. The economic sanctions imposed by the United States and The United States and Russia have led to a sharp depreciation of the Russian ruble recently, and the ruble has depreciated by more than 30% against the us dollar after Western countries took several measures to isolate the Russian economy.
Text/Gua Brother Family
Considering the sanctions against Russia's largest bank, as well as the fact that other companies were cut off from the international banking system known as SWIFT, the currency depreciation of the ruble makes sense. However, the measure that has the greatest impact on the Russian ruble is the Freezing of the Bank of Russia by the Central Bank of Russia in the West, which is the only time in the history of modern international finance, and I believe that this will also become an important research case in economics in the next few decades.
Sanctions began on Feb. 28, when the U.S. Treasury Department's Office of Foreign Assets Control blocked any assets of the Russian Central Bank in the United States, hurting the Russian government's ability to protect the ruble from rapid depreciation. Several other countries, along with the United States, have largely frozen russian banks' assets, including Japan, Germany, Britain, the European Commission and Italy, as well as the Chinese-led Asian Investment Bank, which has suspended Russian investment projects, and Chinese banks' overseas foreign exchange operations against Russia.
What does freezing the assets of a country's central bank mean?
Here the Gua Brother family wants to give everyone a popular science, because everyone is watching a lively, and the various interpretations in China are not comprehensive, resulting in friends who do not understand being misled.
The freeze action of Europe, the United States and Japan this time is not to "freeze" the Russian bank itself, but to freeze all the assets it holds abroad.
In today's modern financial system, most assets are not held in kind, but are digitally bookkeeped.
For the Bank of Russia, these cash and gold bars are held in Japan or the United States, despite the fact that it has large foreign exchange and gold reserves.
As a result, these jurisdictions can decide to prevent the country from acquiring these reserves — exactly what the United States and its partners have done against Russia.
Commenting on the action, the U.S. Treasury Department said: "This action effectively freezes any assets held by the Central Bank of the Russian Federation in the United States or by Americans, regardless of where they are located." ”。 Several European countries have taken similar action, as has Japan.
What is the impact of this on the ruble?
This is related to the reserves of the Central Bank of Russia of $630.2 billion, which, if not frozen, believes that it will help the country stabilize the ruble, which would not fall as sharply as it does now.
Since the value of one currency can fluctuate depending on foreign exchange flows around the world, central banks typically hold a war fund of other countries' currencies (sometimes gold) to deal with any risk of depreciation.
When a country's currency falls, it can buy the depreciated currency with reserve assets (i.e., the US dollar) to support its value recovery. But if they cannot use those reserve assets because sanctions prevent them from using them, it will be much more difficult to confront them.
Starting with U.S. sanctions over the past few years, the Central Bank of Russia has spent a lot of dollar reserves to buy rubles in order to stabilize the economy, stabilizing the exchange rate. Including Russia's large-scale sale of gold reserves to stabilize the ruble exchange rate, but also let the ruble stabilize in recent years, although Russia's internal inflation economic problems led to public resentment boiling, but the monetary system has been stabilized, and now the Russian central bank has no foreign exchange reserves to stabilize the exchange rate, the consequences will be more terrible.
Can't Russia use other reserve assets?
Of course, this is also an important reason why Russia has reduced its dollar holdings in recent years. According to the data queried by Gua Gejia, as of 2021, only 16.4% of Russia's reserve currency is the US dollar, and its gold holdings account for about 21.7%, and the renminbi accounts for about 13.1%.
But the collective efforts of the international community have made the sanctions even stronger, with sanctioning countries accounting for at least 48.6 percent of Russian banks' foreign exchange and gold asset reserves when looking at where Russian bank assets are stored.
Since half of Russia's foreign exchange reserves have been frozen, its ability to withstand currency depreciation has been greatly weakened. The impact of the ruble's depreciation is severe, making it more expensive to buy imported goods and exacerbating fears of a banking collapse. The risk of bank runs has also increased as people worry about the value of the national currency, and Putin has announced some restrictions.
This isn't the first time central banks have been targeted for sanctions, but it's by far the largest economy to be subject to global sanctions and the amount of impact is also the largest. They don't know what the results will be, but it does show that coordination between the United States and its closest allies can indeed take action on anything they want to do.
This weekend Putin also made new regulations, Russian companies are allowed to pay foreign creditors in rubles to avoid default, while capital controls are still in effect, now rubles a day a price, who takes rubles who suffers!