Last night Russia announced a surprise emergency rate hike to 17%. It didn’t help. Oil continues to slide, Ruble collapsed and the Russian stock market tanked 13%. And while the Obama Administration is high fiving their Saudi counterparts for the time being, the situation is now out of everyone’s control. The markets have taken over and we don’t know how far they will take it. This is reminiscent of the 1998 financial crisis.
We do not yet know the counterparty risk associated with this oil and Russian collapse. Are there hedge funds out there that just got blown up? Will Russian corporations begin defaulting on their massive loans? Will that snowball throughout worldwide capital markets? Will this devastate US Shale Oil industry? When will this tidal wave hit the US markets? Is it already happening?
That is to say, there are more questions than answer. Yet, rest assured, this stunt that the Obama administration pulled will have severe negative consequences on the US Economy and capital markets. They just haven’t manifested ……..quite yet.
