"Russians don't take a dump without a plan"MilSpecMusing has a take on the "Russian Plan" over at his house. Good reading on this Sunday before we get locked in on football...
"Russians don't take a dump without a plan"MilSpecMusing has a take on the "Russian Plan" over at his house. Good reading on this Sunday before we get locked in on football...
I see some pretty serious holes in this theory. First of all the collapse of oil prices dramatically hinders Putin's financial ability to pay off the oligarchs, modernize the military, and give crumbs to the masses. Second, his currency is in total collapse. In June the ruble was at 33 to the dollar. On Friday it closed at 46.72. Normally a 10 percent move in the currency markets is considered huge. To have the ruble drop 30 percent in a few months has enormous implications. Everything Russia imports (cars, food, high tech equipment) just got 30 percent more expensive. This will drive inflation into double digits. Also here is something most are not talking about that is incredibly painful for him. Russian banks often issue debt in dollars or euros in order to get lower interest rates. The danger of that strategy is now apparent. If you are a Russian bank and you borrow in dollars that are now worth 30 percent more than they were a few months ago, your liabilities increased by 30 percent. Imagine you are a homeowner and your mortgage principal just went up by 30 percent but your income is going down. Obviously you are in a world of pain. This is the situation the Russian banks now face. Furthermore you have all the Eastern European and Baltic states increasing defense spending and military procurement to counter Putin. Finally the areas he has absorbed in the Crimea and eastern Ukraine are all dirt poor. Those regions will be money pits for him. It would be like the US annexing the Dominican Republic. The moment you do that the welfare rolls explode.
ReplyDeletei disagree. i notice how all these people that watch the Russian economy always leave out what is happening in Europe...and the roots of the economic downturn in Europe can be traced directly back to the sanctions that the US (yeah i hate US bashing but in this case the bashers have a point) pushed on the Europeans because they did not want to be more muscular in their approach to the Russian invasion.
DeleteI also find it funny that they same people (and they're usually globalist) always talk about the Russian economy as if it exists in a vaccum and doesn't affect others. China is getting below the 10 percent growth that they need to keep a lid on public dissent at home. europe is in the toilet. the BRIC nations are under stress and the US economic revolution is a mirage.
this has consequences and it can't be poo=pooed away.
Sol, Europe has never recovered from the 2007-2009 crash. The Eurozone GDP is still below where it was in 2007. The roots of their problems are their anti-business labor laws, regulations, and a terrible response to the global financial crisis. The sanctions are definitely hurting the Europeans, but they did not start until a few months ago. The economy there has been shit for years so the sanctions cannot be the cause. I couldn't agree more with the rest of your commentary. Brazil is in recession, as is South Africa, Russia is in recession, and China is clearly slowing down dramatically. The only one of the Brics that is making the right economic moves is India. Here is a little anecdotal info. I met a guy this summer who works for one of the oligarchs (who I promised not to name) investing his money in the US. He told me last week was the first time he has ever seen his boss really worried. The boom that Russia had from 2001 to 2008 was built on rising oil and gas prices. Now that that is over Putin has some very tough choices to face. I thought this article last week was fascinating as well. http://www.nytimes.com/2014/11/02/world/europe/putins-friend-profits-in-purge-of-schoolbooks.html?module=Search&mabReward=relbias%3Ar%2C%7B%221%22%3A%22RI%3A7%22%7D
DeleteIn the last month Putin put the last oligarch who has a big independent oil company (Bashneft) in jail and nationalized the company. Now he is moving into medium sized and smaller profitable private companies and stealing them in order to pay off his cronies. In the short run this obviously keeps the oligarchs happy, but in the long run it will destroy the economy. Entrepreneurs simply will not invest in a country where the government can steal their business at will. Russia has tried this state run economy once before. It didn't work then and it won't work now. Remember, a key difference is that the Soviets never had to worry about their currency or the financial markets because they were not integrated into the global financial system. Modern Russia does not have that option, and if they aren't scared they should be.
one minor tidbit.
Deletebefore the sanctions Germany was still floating high and the rest of Europe looked to her to help them. now Germany is failing. the whole point of this is why are we suppose to think that the whole world is in economic trouble but believe that the US is somehow escaping this mess when it is tightly integrated into the global economy?
everytime i think about dipping a toe we see irrational nonsense in the market that has me scratching my head and wondering WTF! the economy rising because the Republicans won the election? seriously? they're going to push trade deals that will just piss everyone off! and not even begin to deliver the economic benefits that are promised. name one trade deal that didn't cause the US to lose more jobs!
I don't agree that Germany was floating high. I think Merkel and Germany's strength were vastly overrated and now people are starting to realize that Germany is caught in a garbage situation. Every European country is turning against their hard money economic stance, and now Germany itself is almost in recession (European GDP figures are reported this Thursday 3am eastern time). The economy and market certainly aren't rising on the election. That's a moronic explanation for what's happening. The reason the market rallied last week is the data continues to be constructive and you have nowhere else to go than the stock market to invest. Bond yields obviously are pathetic. You have hit an interesting point though. This is the big debate right now. The dollar has been screaming upwards the last few months (80 to 88 in the dollar index). Obviously this will hurt US exports. It remains to be seen if the US economy can really accelerate without the rest of the world. Personally I tend to doubt it, but I am open minded. Trade is a long discussion but I hear you.
Deletehttp://time.com/3547935/putin-pugachev-oligarchs/
ReplyDelete“Putin is not someone who sets strategic plans; he lives today,” says the former aide, Sergei Pugachev
“Vladimir Putin does not understand economics. He does not like it. It is dry. It’s boring to hear these reports, to read them. He likes clear things: Russia’s moving ahead; how great everything is. He does not have a deep understanding of what is happening,”
True Russia isn't doing great...but neither is the US...or anybody. That was the main point. Russia isn't doing great but they also aren't as massively in debt as the US. The US government spends like a drunken sailor on leave. So does Europe. And Europe spends nowhere near what they should on defense because they always have expected America to do the heavy lifting. Unlike European countries which have spent themselves into a hole, the USA has no one to bail us out. No one. Neither did Russia in the 80's.
ReplyDeleteTheir oil market is down, yea, so is...everybody else who makes oil. But Russia supplies the Natural gas that Europe depends on. Yes, the North Sea has promise but it is still not enough to supply all Europe.
And there have been more than a few reliable reports of Russian trying to work with China to drop the US dollar down the drain and replace it with the yaun. China has said no so far, but their economic cooperation is increasing. Russia has no goals in Asia, but China does and if they choose to cooperate at the West's expense they can. Add to that the recent Hacker attacks on financial institutions by Russia.
Putin doesn't understand or like economics? Does he need to? He was KGB, he understands history and governments. Reagan wasn't a Ph.d in economics. He had plenty of people in his administration including his VP (Bush Sr) say he was wrong.
Hitler had been a corporal in the Army and studied art: Not military science and economics. But he correctly judged how every country in Europe would react to his actions in Alsace-Loraine, Czechoslovakia, and Austria. He believed France was a paper tiger when European experts felt it was among the strongest. His own General staff believed they couldn't seize Europe as fast as they did. In 15 years, he turned a country with almost no army or navy into the world's premier superpower (while the US army was smaller than Romania).
Putin believes in two things: Himself and a greater Russia. That is often the only two things a nations needs to increase its power: belief in themselves and their nation's potential. Russia has apologized for nothing.
America apologizes for everything. Never underestimate the power of leadership and morale. Never.
Russia gets paid for its oil in dollars. So even with the fall in the price of oil plus low ruble, it is probably getting more rubles per barrel than before.
ReplyDeleteDear Sirs, what I can say (as a regular Russian orc) about the issue with all due respect:
ReplyDelete- Our godforsaken World is obviously on the verge of global changes. It is not new – troubles of current leader civilization (generalized “the West”) reminds me history of an another leader civilization – Golden Horde. Their military and economical mighty was based on horses’ usage. A single horseman because of nomadic cattle-raising was able to feed several dozens of people (it was unbelievable level for other civilization this time). Main tataro-mongol’s tactic was rapid cavalry archers strikes – it was terrible effective and rational this time. But as it was said in the Bible - ” this too shall pass”. The Golden horde disappeared, and we, Russians, are the main their heirs. The Western economical and military mighty is revolved around “oil” and “currency” – but the Western civilization had gathered up lot systems contradictions and internal and world-wide tensions and faces the Decay.
-the West do not won Great game toward Russia, but won a battle not the whole campaign. The USA (current basement of the Western civilization) won campaign against Japan (with significant help of Russia) and shared results of Russian victory against the Nazy Germany ant their allies and satellites. Both – Germany and Japan are still occupied by USA’s forces, both country signed relevant papers. But not Russians. We are not a good health by now, but anyway.
- I’m agree with the main sense of the article – Russia carefully conducts a study of American playbook and we took some tidbits from it. Ukraine campaign is just a beginning. We are in the Great Game – likes the West this or dislikes – no matter.