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Daily Archives: March 1, 2022

Charts: The Central Bank of Russia Raised Its Benchmark Policy Rate to 20%

Highest in almost twenty years

Source : Trading Economics

The Impact of a SWIFT Ban on Russia and the World

Daniel Lacalle wrote . . . . . . . . .

SWIFT (Society for Worldwide Interbank Financial Telecommunication) is the global financial system that allows immediate and secure transfers of money across borders. It is the web that verifies all financial transactions. It links 11,000 banks and institutions in more than 200 countries, with 40 million messages a day. Using SWIFT ensures that transactions happen in seconds in a secure way. Around 1% of those messages involve Russian payments, according to the BBC.

As part of the West sanctions against Russia, its banks have been banned from the SWIFT system. Additionally, the United States and the European Union have announced restrictions on the Russian central bank that block access to more than $600 billion in reserves. The Bank of Russia reports that only 22% of its international reserves are US Dollars, while gold accounts for 23%.

What does this mean? On the one hand, the move aims to block all options of the central bank to defend its currency from plummeting even more against the US dollar or the euro. In recent years, the Russian central bank has been reducing its exposure to US treasuries and shifting from US dollar reserves to euro and yuan, as well as gold. Access to those reserves is more difficult now, and in the case of euro and yen, probably close to impossible.

For Russian banks, the ban from the SWIFT system increases the risk of a bank run as citizens fear for the loss of their deposits and a collapse in daily operations, even if they start to use other alternatives.

However, we cannot forget there is an important impact on European banks as well. According to JP Morgan, European banks have up to $80 billion in claims with Russian banks. Being banned from SWIFT does not make these claims disappear, but if Russian banks fall into a de-capitalization process, the risks of defaults multiply.

Only three countries have been banned from SWIFT. Iran, since 2012, North Korea and now Russia, albeit partially. Oil and gas exports as well as other key commodities remain in the system.

Without SWIFT, Russian banks and the central bank are effectively blocked from operating on a global scale which means an added risk of a domino of defaults from issuers and the impossibility to conduct the most basic international operations.

However, Russian banks may bypass the SWIFT system and use other alternatives, mainly though a parallel system in China, called CIPS (Cross-Border Interbank Payments System), which facilitates transactions in yuan. According to CIPS, at least 25 Russian banks conduct yuan transactions through their system.

Using CIPS and other direct or indirect tools to bypass SWIFT has been an alternative for Iran and North Korea but does not solve the problem of access to reserves of the central bank nor does it truly mitigate the impossibility of conducting global transactions. The yuan is only used in 4% of global currency transactions according to the BIS (Bank Of International Settlements).

Russian banks and the central bank may moderate the financial blow using alternative systems, but the negative impact cannot be underestimated.

There may be a backlash for the United States as well. If other countries find that there is a valid alternative to SWIFT, they might feel compelled to strengthen ties with China.

Banning Russian banks from SWIFT may cripple many Latin American and Middle East economies that have deep financial connections with Russia, but there is a risk for the United States that the CIPS alternative, which is marginal at best today, grows rapidly.

The United States and Europe cannot fully ban SWIFT due to the importance of Russian oil, gas, metals, and wheat exports, and this may create numerous challenges that significantly limit the so-called “nuclear option”. The Russian central bank’s large gold reserves are also a differentiating factor compared to other economies.

No matter how we look at these sanctions, there is no doubt that there are unintended cross-border impacts and there may be unexpected negative consequences for everyone involved.

There is no doubt that the SWIFT ban is probably the most severe of financial sanctions possible and that there are no easy alternatives, but as time passes it is also clear that the widespread negative consequences of the Ukraine war will likely last for many years.

Will this measure accelerate a global financial shift toward China? Probably not in the short term, given the relatively modest use of the yuan compared to the importance of China in the global economy, but the ramifications of this measure in the global financial world are yet to be fully understood. A global financial transaction system remains as the undisputed leader only if it is truly global and far-reaching. The negative impact for Russia is unquestionable, but the long-term implications of this measure must be seen.

Source : Daniel Lacalle

Ukraine Invasion Spotlights the Delicate State of Democracy

Ted Anthony wrote . . . . . . . . .

The secretary-general of the United Nations opened the most recent annual meeting of Earth’s leaders with a bleak assessment of the planet’s state of affairs. Humanity, he said, faced “a moment of truth.”

“Peace. Human rights. Dignity for all. Equality. Justice. Solidarity. Like never before, core values are in the crosshairs,” Antonio Guterres said. “A sense of impunity is taking hold.”

Guterres’ message to the U.N. General Assembly takes on even more relevance with the Russian military’s invasion of Ukraine. Those things he outlined? They are bedrock principles of democracy — a once-on-the-upswing method of human governance that in recent years has been taking body blows across the world.

Vladimir Putin’s invasion advances the anti-democratic trend – one that has seen strongmen, some elected, prod their nations toward dictatorship and ignore once-solid democratic norms. In doing so, they are collectively pounding at the door of democracy’s always-delicate house.

The invasion is “surely a watershed moment for the future of global democracy,” says Stephen E. Hanson, a professor of government at William & Mary in Virginia and author of “Post-Imperial Democracies,” which in part examines Russia after the Soviet Union dissolved.

In recent years, the ascent of a group of what some consider dictators within democracies — Putin, Rodrigo Duterte of the Philippines, Jair Bolsonaro of Brazil, Narendra Modi of India, Viktor Orbán of Hungary — has gradually chipped away at the outer boundaries of democratic systems while still talking the talk of democratic principles. Appearing democratic, it seems, is the new democracy.

In the United States, Donald Trump has produced similar concerns, stoked by his ongoing claims of a stolen election. That has helped inspire efforts to change state laws to limit access to polls, and to stock election administration roles with allies, stoking fears that a free and fair vote may be overturned in a nation that was, until recently, a beacon for the world’s democracies.

The rub: Each of these leaders has been chosen by their people — or, at least, by democratic-style systems. “Globally, populists that undermine democratic norms have gained more traction in elections over the past 20 years,” says Douglas Page, a political scientist at Gettysburg College in Pennsylvania.

This gradual rebranding of democracy for the 21st century has been exacerbated by leaders of more traditionally authoritarian governments who call their systems democratic, too. Even China’s Xi Jinping, never a democrat, has maneuvered his nation’s hybrid of communist tenets and market economy into a personality-driven rule that is presented as a form of democracy.

So when Putin orders the invasion of Ukraine in a manner that tacitly invokes democratic principles even as he circumvents them, he offers up a face of democracy as viewed through a glass, darkly. Experts say this is designed to give him cover as a democratic leader at home while allowing him to do pretty much what he wants elsewhere.

“The space he holds on the democratic scale, he is not a full-blown authoritarian leader. He doesn’t have the same means available to oppress his people. He still has democratic elements, even though they’re vanishing,” says Stefanie Kasparek, an assistant professor of government at Franklin & Marshall College in Pennsylvania who studies international political institutions.

Not that Putin has worried excessively about appearing democratic. At home, he has spent years harshly stamping out both public dissent and political opposition, targeting rivals and jailing opposition party leader Alexei Navalny, whom the Kremlin declared a terrorist last month. Nevertheless, says Kasparek, “There are democratic elements that he can’t fully ignore.”

That was illustrated Tuesday when Russia’s upper legislative house, the Federation Council, voted unanimously to allow Putin to use military force outside the country. Yet the ask — largely pro forma, given Putin’s level of authority — gave him cover to say that his actions were endorsed by democratic systems within his own nation.

“Democracy led to Putin being in power in the first place and has served him considerably as a tool to keep power,” Crystal Brown, a political and social scientist at Worcester Polytechnic Institute in Massachusetts who studies the effect of institutions on global political systems, said in an email.

Why is the appearance of democracy — or, at least, the surface reliance on it even when a leader’s actions seem undemocratic — so important? It’s a complex question.

In Putin’s case, while his through-line may be a glorious re-aggregation of the Soviet Union, he is playing to a domestic audience that includes many who turned their back on that same communist-era collection of republics — and in some cases did so using democracy as a North Star. To them, the principle is important.

So Putin deploys raw power externally, in everything from his approach in Crimea to the online attacks on U.S. elections — and thus is able to flout the West, which holds itself up as democracy’s standard-bearer. Internally, he is constrained by the support he needs from those inside Russia wary of dictatorial authority being used against them.

This two-pronged approach to democracy — making a show of upholding the very tenets one is violating — is hardly limited to Putin. It has played out in other nations, with sometimes chaotic outcomes.

In the United States, for example, Trump’s baseless allegations of fraud in the 2020 election won by Joe Biden — an attempt to wipe away a democratic process — helped fuel the rage that produced the Jan. 6, 2021 attack on the U.S. Capitol by supporters trying to overturn the outcome. Through it, Trump insisted he was the champion of democracy, not the one getting in its way.

“Everywhere these men make the same basic argument: The `neoliberal’ order merely pretends to be democratic, when in fact it is run by representatives of the `deep state’ who conspire to steal from ordinary people and undermine social order through the destruction of traditional moral values,” Hanson says.

“They portray themselves as the unique saviors of the traditional nation, and demand unconditional personal loyalty from all who serve them,” he said in an email. “That such a recipe for the destruction of democratic institutions has proven to be so potent around the world is one of the most remarkable developments of the early 21st century.”

What, then, might the unfolding of the Ukraine saga mean for democracy writ large? Biden insists the outcome is certain: “In the contest between democracy and autocracy, between sovereignty and subjugation, make no mistake: Freedom will prevail,” Biden said in an address Thursday.

He made it sound obvious. But given recent years’ events — including those leading up to his inauguration — reality is less definitive. Democracy doesn’t always prevail. And even when it does take hold, its permanence isn’t guaranteed — a lesson that, just like during the Cold War, goes far beyond what’s happening in eastern Europe right now.

“The world does not want to enter into a large-scale conflict. That gives a lot of leeway for leaders to push those boundaries of democratic appearance without actually being democratic,” Kasparek says. “It’s effectively a game of chicken.”

In that metaphor, democracy itself is the car. But the problem with a game of chicken quickly becomes obvious: Eventually, inevitably, you crash.

Source : AP

Map: Where Young People Can’t Find Jobs

Source : Statista

An Hour of Weight Training Per Week Can Extend Your Life

Steven Reinberg wrote . . . . . . . . .

Adding regular strength training to your exercise routine may not only make you stronger, but let you live longer, too, researchers in Japan report.

Their new study says 30 to 60 minutes a week of muscle strengthening may reduce your risk of dying early from any cause, and from heart and blood vessel disease, diabetes or cancer by up to 20%.

“Doing muscle-strengthening activities has a health benefit independent of aerobic activities,” said lead researcher Haruki Momma, a lecturer in medicine and science in sports and exercise at Tohoku University Graduate School of Medicine in Sendai.

Strengthening exercises include lifting weights, using resistance bands and doing pushups, situps and squats. It can also include heavy gardening, such as digging and shoveling, researchers said.

“Although several physical activity guidelines recommend that adults perform muscle-strengthening activities based on musculoskeletal health benefits, our findings support this recommendation in terms of preventing premature death and major chronic diseases,” Momma said. “Also, our findings suggest that optimal doses of muscle-strengthening activities for the prevention of all-cause death, cardiovascular and cancer may exist.”

For the study, Momma and his colleagues pooled data from 16 published studies. The studies, which included both men and women, ranged in size from nearly 4,000 participants to almost 480,000.

The analysis found that muscle strengthening was linked with a 10% to 17% lower risk of premature death from any cause, as well as from heart and blood vessel disease, stroke, diabetes, lung cancer and cancer as a whole.

They found no link between muscle strengthening and any reduced risk of colon, kidney, bladder or pancreatic cancer.

The greatest benefit was seen when strength training was done up to an hour a week.

But more wasn’t necessarily better. After 60 minutes of strengthening exercise in a week, no further benefit in preventing premature death was seen.

Even better than strength training alone was combining it with aerobic exercise. (Aerobic exercises include swimming, cycling, walking and rowing.)

The combo reduced the risk of dying prematurely from any cause by 40%; heart and blood vessel disease by 46%, and cancer by 28%, the researchers found.

The findings were published online in the British Journal of Sports Medicine.

Dr. Russell Camhi, a sports medicine specialist at Northwell Health in Great Neck, N.Y., reviewed the new study.

“There’s good evidence that people should be incorporating strength training as part of their workout regimen,” Camhi said.

For men, strength training increases testosterone. For both men and women, it helps keep bone density up and decreases the risk of falls and fractures, he said.

“Strength training has also been shown to help with mental health and mood,” Camhi said. “There’s a lot of benefits that come from the muscular system being activated.”

Camhi recommends starting with weight-bearing exercise and gradually working up to using weights or other equipment. Weight-bearing exercises include walking, dancing and stair-climbing.

“Start with simple weight-bearing exercise, and then start adding in small weights as tolerated,” Camhi advised.

“You don’t want to go into strength training too quickly, because that can lead to some overuse and sometimes injury if not done correctly,” he added.

Camhi noted that videos and other instructional materials are easy to find online, and classes and personal trainers can also get you going.

It’s never too late to start a strength-training regimen, he said.

“There’s always benefits that can be gained. We cannot always undo all the loss from chronic disease, but there’s always benefit that can be gained from exercise,” Camhi said.

Source: HealthDay