Connecting Some Dots Into Useful Economic Information – Week 4

Russia Wants Gold:

A population approximately 50% the size of the population of the United States with a GDP approximately 7% of the United States is one way of measuring the impact of Communism/Socialism on its citizens. Russia’s centrally controlled government is an elected dictatorship which we have seen fail in other countries.

Russia is experiencing a severe population decline estimated to be about 700,000 fewer citizens per year due to abortions and deaths including suicides. Population decline is a symptom of economic distress as well as a cause of economic decline.

However, just recently Russia announced they have reduced their international debt to one of the lowest levels for a country in the world. Additionally, Russia has increased their gold buying so that they now have approximately $535B of international reserves. Of that $535B, $108B is gold.

The press release from Russia that became a Wall Street Journal article was interesting because it explained that after President Trump instituted economic sanctions on Russia in 2018 Russia sold their US Treasuries in order to buy gold. This sale of US Treasuries was significant. It helped increase our interest rates in 2018 which slowed our economy in the Fall of 2018. Such a big buy undoubtedly increased gold prices.

Global finance decisions have ripple effects.

Our next blog series will examine the housing crisis (which is real), its origins, impacts and solutions.