Russia May Swap Some U.S. Treasuries for IMF Debt

Google Query (3rd result) ^ | 6/10/2009 | Alex Nicholson and Dakin Campbell

[mikelike]

(Excerpted from the 3rd result of the Google Query -"Russia swap US Treasuries")

Russia may switch some of its reserves from U.S. Treasuries to International Monetary Fund bonds, the central bank said today. The comment drove Treasuries and the dollar lower.

Alexei Ulyukayev, first deputy chairman of Russia’s central bank, said some reserves may be moved from Treasuries into IMF debt, reiterating comments made last month by Finance Minister Alexei Kudrin. Ulyukayev’s remarks were confirmed by a Bank Rossii official who declined to be named, citing bank policy.

Treasuries fell, pushing 10-year yields toward the highest level in seven months, in response to Ulyukayev’s statement. The dollar fell against the euro on speculation that Russia will reduce its holdings of U.S. debt.

About 30 percent of Russia’s international reserves, which stood at $401.1 billion on May 29, are currently held in Treasuries, Ulyukayev said. Kudrin said on May 26 that Russia planned to buy $10 billion of IMF bonds using money from its foreign reserves.

The IMF securities would give countries a different way to contribute to the fund and are unlike traditional bonds because they pay an interest rate pegged to the IMF’s basket of currencies, known as Special Drawing Rights.

China is expected to buy as much as $50 billion of the bonds, IMF Managing Director Dominique Strauss-Kahn said yesterday.

The IMF, which has rescued economies from Pakistan to Iceland in the past year, has never issued bonds before and is seeking more cash to finance loans and aid to member countries during the worst economic slump in the fund’s 64-year history.

[brydic1]

Do you seriously believe that U S politicians will honor the stated purpose of those inflation indexed bonds. To believe so is to believe in the tooth fairy. Those bonds will not keep up with inflation if inflation runs more than 6% p/a. The lying politicians will not hesitate to repudiate the terms of those contracts anymore than government thru Chrysler and GM repudiated the terms of the senior secured bonds.

[CharlesWayneCT]

That may be true, but if so, it also means the government won’t be trusted to keep any of their other obligations either, which means people who work for the government can’t count on their paychecks, people who expect to be paid for work for the government won’t count on it, and in the end, the government will collapse.

In which case, I won’t be any worse off than the rest of the world. And at least I won’t be stuck with a room full of worthless gold bars that I can’t eat and that nobody has any money to pay me for.

[brydic1]

I can not guarantee the value of gold or silver coins in your scenario but I can assure you that they will hold more value than that bushel basket of paper currency. I am not sure that the government would collapse if their was a realization that our debts were just too extensive and there was a need for partial default. It has been done before and with a resolve to restrain the future issuance of huge debts (should it be believed) the nation could get a fresh start and recover.

[maxsand]

I will be paying my taxes with treasuries

[CharlesWayneCT]

Gold is only valuable if other people decide they want to hold it because it is valuable. In a collapsing economy, it has almost no utilitarian value, and you can’t eat it.

“A piece of bread will buy a bag of gold”.

[brydic1]

I really have no evidence of what the value of gold will be during an economic collapse. However, perhaps some small consideration should be given to its continued and persistent role as the ultimate money for the last 5,000 years should be given some small consideration along with the fact that no currency ever issued has managed to hold its worth for any prolong period of time. I might also add that some friends of mine would not be alive today if they had not paid in gold to escape from communist Viet Nam.