The Russian Ruble fell about 12% earlier today as the foreign exchange (forex) markets opened. Today’s Ruble losses mean that the Russian Ruble has fallen nearly 50% against the USD in 2014. The Russian Ruble and the Russian economy have been suffering in light of Western sanctions and collapsing oil prices. Currently, there is a global oversupply of oil, largely due to the increase in American oil production. Elsewhere, the usual fount of oil in the Middle East have not abated their output; as a result, the world’s oil prices have fallen steadily.
Russian Central Bank Tried to Stymie the Decline
In an attempt to control the falling currency, Russia has increased interest rates for lending all the way to 10.5%. For comparison, the inflation rate in Russia has risen above 9% for the first time since 2011. The intended effects of Russia’s large market moves have largely been counteracted and overwhelmed by the simultaneously falling price of crude oil. Crude oil is one of Russia’ main exports, and with its declining global importance, the country’s economy sags ever more. Russian bank experts and researchers have warned that the entire country’s GDP may contract by up to 4.5% next year if crude oil prices were to remain at or below $60 a barrel. According to German research, the Russian government needs a $100 per barrel crude oil rate just to balance its budget.
A Free Floating/Falling Ruble
Just last month, Russia’s Central Bank announced that the Russian Ruble was going to become a truly free floating currency, with the cessation of previous unofficial linking between the Ruble and the USD or Euro. In November, the plan was to stop regular, automatic interventions in the Ruble foreign exchange market; instead, Russia planned to let its economy stand on its own two feet and only intervene in the case of emergency. Obviously, Russia’s Central Bank is in emergency mode now. Just last week, the Russian Central bank spent $4.53 billion USD to try and support the ruble in forex markets, to no avail. With the current slide in the Russian ruble’s price, the ruble may actually end the year down more points than the Ukrainian hryvnia, which suffered greatly as a result of Russian actions earlier this year.
According to Bloomberg, the Russian government has admitted that its overall economy is set to shrink by at least 0.8% in 2015 in the country’s first recession since 2009. Dmitry Dudkin, the head of fixed-income research at a Moscow Financial Corporation, said:
People start pricing a long period of low oil prices. And in these circumstances, Russia doesn’t look like a place where one should invest money, even without sanctions.
House Pushes Forward With Trump Tax Plan Amid Dissent
The U.S. House of Representatives is pushing hard to move President Trump’s tax proposal through the legislative process, even as growing dissent rattles confidence in the landmark bill.
An analysis by the Joint Committee on Taxation concluded Tuesday that tax cuts for lower- and middle-income Americans would fade over the next decade at a faster rate than those for high earners. The analysis found that four out of every five tax filers earning between $50,000 and $75,000 would receive tax relief from the bill in 2019. However, by 2027, that figure would drop to 60%.
Meanwhile, those earning more than $1 million would also see their tax savings fade, albeit at a slower rate than the smaller income brackets. In 2019, about three-quarters of those earning $1 million-plus will get tax relief, a figure that drops to two-thirds in 2027.
The conclusion could spark another round of debate as the Trump administration seeks to push forward on tax reform this year. The tax plan has faced attack from both sides of the political divide, with high-tax state Republicans criticizing individual deductions for state and local taxes.
The reform bill, which promises to reduce the number of tax brackets, cut the corporate tax rate and implement a one-time repatriation fee, has been described as the most ambitious since the Reagan administration. Through Reagan’s tax reform, the U.S. economy managed to grow by an average of 3.4% annually until the beginning of the Obama administration. And that includes three recessions between the two presidents.
To his credit, President Jimmy Carer before him implemented the biggest regulatory overhaul in postwar history.
Republicans have good reason to raise questions about Trump’s tax reform, especially those in high-tax states such as California. Already faced with a difficult re-election next year, California’s GOP Representative Darrell Issa said he wouldn’t endorse changes that “may make it the tremendous burden felt by California taxpayers even worse.”
Republican Ed Gillespie of Virginia was defeated in state elections on Tuesday, a clear sign that the GOP-controlled Congress is under attack. South Carolina is seen as an important barometer of the Democrats’ chances of winning in crucial swing states ahead of next year’s midterms.
Democrat Ralph Northam will be the next governor of Virgina, various news outlets reported late Tuesday.
Featured image courtesy of Shutterstock.
Libertarian Speaks: Ron Paul Says U.S. Government Should Not Intervene in Cryptocurrency
The U.S. government has no place intervening in cryptocurrency, according to former U.S. presidential candidate Ron Paul.
In an interview with Kitco on Oct. 27, Paul said the government should “stay out” of bitcoin if people want to use it. The former Congressman acknowledged that he didn’t know much about cryptocurrency, but that he was “amazed” by the market’s growth.
“I take some very strong political positions on competing currencies,” Paul said, when asked if he was a believer of cryptocurrency. “And if you can come up with a competing currency, and there is no fraud, I think it should be.”
Although a lot has been said about bitcoin’s black market roots, Paul says government involvement shouldn’t be a given. That message has been lost on several nations, which have grown uneasy about the growth and widespread adoption of cryptocurrency. Major economies like China, South Korea and Russia have already stepped in to halt the expansion of crypto-assets. However, most policymakers appear to be open to regulating cryptocurrency insofar as its criminal elements can be controlled.
Libertarians like Ron Paul are very weary of government involvement in all aspects of life. It should therefore come as no surprise that bitcoin and its altcoin competitors have received strong buy-in from the libertarian, free market community. While the United States has a strong libertarian presence across key segments of its society, this has largely failed to translate into meaningful political reform.
Bitcoin’s market capitalization climbed back above $100 billion over the weekend, with the sum of all coins valued at around $179 billion. Cryptocurrency is by far the fastest growing asset class of 2017, dwarfing stocks, crude oil and other traditional financial assets.
“I am amazed,” Paul said, ” at all the capitalization on these cryptocurrencies. It’s a huge amount of money.”
Featured image courtesy of Shutterstock.
Draft of U.S. Tax Bill Coming Within Days, According to GOP Lawmaker
It won’t be long now before congressional Republicans table their first draft bill to reform the U.S. tax code, according to House conservative Mark Meadows. GOP lawmakers are under the gun to meet President Trump’s ambitious goal of delivering a major tax overhaul by the end of 2017.
Draft Bill Coming in Less Than Ten Days
House Freedom Caucus Chairman Mark Meadows says the House Ways and Means Committee has promised to release a preliminary tax bill about seven days after this Thursday’s vote on a budget resolution. Based on that timeline, the tax bill should be published on or before Nov. 3, according to Bloomberg.
Last week, Republicans stuck together to pass a 2018 budget plan that many say is the preamble to tax reform. The budget resolution was approved by a 51-49 vote. Rand Paul of Kentucky was the lone GOP member to vote against the measure.
Before giving the final approval, lawmakers must go through another voting process that will begin Thursday and run into Friday morning.
The new plan, which was first unveiled by the White House this past spring, is pursuing drastic changes to the tax regime. This includes reducing the number of tax brackets, slashing the corporate tax rate and instilling a one-time repatriation tax to encourage multinationals to bring offshore profits back home.
President Trump and fellow Republicans face numerous challenges implementing the most ambitious tax reform of a generation. This includes balancing promises of major overhaul against a self-imposed $1.5 trillion limit on the size of those cuts over the decade.
Analysts say that President Trump has considerable leeway to influence the proposal, but that the ultimate penning of the bill is a legislative process. This means it will be Congress, not the president, that will put the final details together.
Tax overhaul was a cornerstone of Trump’s election campaign. Combined with deregulation of key industries and massive infrastructure spending, tax breaks are expected to boost economic growth and make the U.S. more resilient to cyclical downturns.
That’s exactly what happened under the Reagan tax cut more than three decades ago. Although often maligned today, the Reagan tax plan laid the foundation for 25 years of strong, noninflationary growth. The U.S. economy grew an average of 3.4% annually between Reagan and Obama despite three recessions. To be sure, President Carter also helped lay the foundation by leading the biggest deregulatory effort in the postwar era.
Featured image courtesy of Shutterstock.
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