1/ THOUGHTS ABOUT RUSSIA, which helped precipitate today's oil price crash by increasing oil production amid the #coronavirus-induced demand slump. This isn't the 1st time Russia took a run at the US & the West, but this time it just might work. Deep history here, so bear w/ me. 
2/ Punch line: Russia has a strong balance sheet bc sanctions essentially blocked it from Western financial system for yrs so it couldn't lever up as most others did. This saved it from yet another debt trap. Yep it prob can weather $25-30 oil for 6-10 yrs:cnbc.com/2020/03/09/reu…
3/ Wouldn't surprise me, since Russia's oil costs are in rubles & its revenues are mostly in US dollars. Here's what I wrote about this phenomenon in 2016 when my curiosity about Russia's history took me on a 10,000km trek across Russia on the Trans-Siberian Express for ~3 weeks:
4/ Guess what? Russia did all kinds of things that drive mainstream economists crazy--the exact opposite of their advice (it CUT govt spending, it BOUGHT gold (the horror!😱) as its currency declined, it built its own payments system). It resolutely rejected Keynesian economics😵
5/ Meanwhile Putin was lying in wait to pounce on Western weakness. He'd tried it in 2008 & almost succeeded. Think I'm crazy? Here's a description from Treasury Secretary Hank Paulson's memoir about Russia's 2008 actions (which I confirmed w/ mtg traders):businessinsider.com/russia-asked-c…
6/ So there was a geopolitical angle to the 2008 financial crisis. That should surprise no one--when a financial system is THAT leveraged, of course it's vulnerable to shocks--incl attacks from enemies. It didn't work for Putin tho bc the US still had balance sheet capacity to...
7/ ...re-inflate its system, which is exactly what it did. And it succeeded, for more than a decade. Back in 2008 I estimated that US had ~$5trn of unencumbered balance sheet capacity (in other words, its aggregate net worth exceed aggregate US dollar-denominated debt by ~$5trn).
8/ I was pretty bummed at the time, bc I realized a regime change was prob coming during my lifetime--federal deficits would eat thru that ~$5trn equity cushion in <10yrs. But in 2012 I came across something that changed my world view & made turned me into an optimist again. 😊
9/ I'll drop that hint but not say it explicitly here (I've left you enough bread crumbs to figure it out easily with an internet search.) Instead of introducing that topic into this thread, though, what I'd like to leave you with is this: BALANCE SHEETS REALLY, REALLY DO MATTER.
10/ Which country has the strongest balance sheet in the world? Well, it's certainly not the US, Europe, Japan or even China--all of whom succumbed to the debt binge that gutted their balance sheets. The US & Europe especially have consumed more than they produced, for decades.
11/ So...where does that leave us? Did Russia just make another run at the US by forcing oil prices to $30, which is roughly $20 below the US shale companies' cost of production, thereby attempting to force US shale producers out of business? moneymaven.io/mishtalk/econo…
12/ I dunno--I'm not an insider. I'm just someone who understands balance sheets, who understands that they REALLY REALLY do matter, & is curious about the world. It's not difficult to put the puzzle pieces together though. Be safe out there folks--things are gettin' jiggy. 🙏
PS -- if you're interested in my blog post from 2016 about the Trans-Siberian Express trek, it's here:
caitlin-long.com/russias-trans-…
caitlin-long.com/russias-trans-…
an excerpt:
