Russian Capital Flight

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• published: 17 Dec 2015
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http://www.forexconspiracyreport.com/russian-capital-flight/ Russian Capital Flight By www.ForexConspiracyReport.com The Russian ruble lost about half its value against the U.S. dollar starting at the beginning of 2014. The precipitous drop in the price of oil and sanctions placed on Russia by the EU and USA because their annexation of Crimea and support of a secessionist civil war in Eastern Ukraine have further damaged the currency. However, a French economist blames the weakness of the Ruble on income inequality and capital flight. Bloomberg Business reports the story. Count Russian reserves as another casualty of income inequality that Thomas Piketty believes is reshaping the world’s biggest economies. Russia, which is struggling to rebuild holdings depleted during last year’s currency crisis, has missed out on building a bigger stockpile in the past 15 years by failing to create a more transparent financial system to ease inequality and distribute the spoils of a boom in commodities prices, said Piketty, the author of the bestselling “Capital in the 21st Century.” Jailing “a couple of billionaires from time to time” is no way to address the challenge, the French economist said in an interview in Moscow on Thursday. “In the long term, Russia should have much more reserves, given the level of its trade surplus,” he said. “It’s important to realize that Russia is being stolen money from, by capital flight and by the fact that billionaires and millionaires outside Russia and sometimes inside Russia are able to benefit from natural resources of Russia much more than they should.” According to the Global Wealth Report by Credit Suisse, the top ten percent of Russians control eighty-seven percent of household wealth. This is far higher than any other major economic power. The oligarchs are siphoning off the wealth of Russia and using it to buy villas on the Riviera and condos in London while the Ruble suffers. Foreign Direct Investment The Profitable Investing Tips website wrote about foreign direct investment. Money goes where there is the prospect of profit and that requires stability and a sound currency, both of which are currently lacking as Russia faces currency flight. If you are looking for offshore investment ideas, take a look at where foreign direct investment goes year after year after year. There have been changes afoot regarding where foreign direct investment is going. A very useful reference in this regard is the just published United Nations study, World Investment Report 2013. We have used 2007 and 2012 as bookend comparison years as 2007 was just before the onset of the worst recession in three quarters of a century and 2012 is the most recent year reported. Of note is that direct foreign investment has fallen in the large majority of nations but there are exceptions that should help guide investors with their fundamental analysis of where to put their money in the years ahead. First take a look at the data and then read about foreign direct investment. Russia is one of the nations that lost foreign investors between 2007 and 2012. That only got worse when Putin annexed Crimea and sent Russian troops into neighboring Ukraine. But, the basis of Russian capital flight is the large amount of wealth being siphoned off by a small percentage of Russians who then spend and invest outside of Russia where they believe economies and politics are more secure. China Too Rich Chinese are already taking what money they can and buying property or setting up businesses offshore. Investors expect a thirty percent devaluation of the Yuan in the coming months. Add Chinese capital flight to Russian capital flight and it adds investing capital in the West and it damages both China and Russia. “The downside scenario for China seems more intimidating than ever before,” billionaire Dan Loeb wrote on Oct. 30 to investors at Third Point, which manages $18 billion. “The new question is not whether but how severe the slowdown of the world’s foremost growth machine will be.” Russia is taking steps to keep capital in the country. It may be too late for China. https://youtu.be/4F0L0NR6cUY