By Tom Luongo
March 16, 2020 "Information
Clearing House" - I am an avid board game
player. I’m not much for the classics like chess or
go, preferring the more modern ones. But,
regardless, as a person who appreciates the delicate
balance between strategy and tactics, I have to say
I am impressed with Russian President Vladimir
Putin’s sense of timing.
Because if there was ever a moment where Putin
and Russia could inflict maximum pain on the United
States via its Achilles’ heel, the financial markets
and its unquenchable thirst for debt, it was this
month just as the coronavirus was reaching its
shores.
Like I said, I’m a huge game player and I
especially love games where there is a delicate
balance between player power that has to be
maintained while it’s not one’s turn. Attacks have
to be thwarted just enough to stop the person from
advancing but not so much that they can’t help you
defend on the next player’s turn.
All of that in the service of keeping the game
alive until you find the perfect moment to punch
through and achieve victory. Having watched Putin
play this game for the past eight years, I firmly
believe there is no one in a position of power today
who has a firmer grasp of this than him.
And I do believe this move to break OPEC+ and
then watch Mohammed bin Salman break OPEC was
Putin’s big judo-style reversal move. And by doing
so in less than a week he has completely shut down
the U.S. financial system.
On Friday March 6th, Russia told OPEC no. By
Wednesday the 11th The Federal Reserve had already
doubled its daily interventions into the repo
markets to keep bank liquidity high.
By noon on the 12th the Fed announced $1.5
trillion in new repo facilities including
three-month repo contracts. At one point during
trading that day the entire U.S. Treasury market
went bidless. There was no one out there making an
offer for the most liquid, sought-after financial
assets in the world.
Why? Prices were so high, no one wanted them.
