A question from a web site reader:
A web site reader wrote:
> Check this one out:
> It's about the Russian end of the meltdown - they are ahead of us
> on this one and it scares me to think about where this will lead.
> I don't think the Russian bear is going to take this lying down.
> The only thing is who will its anger be directed against?
Here's an excerpt from the article you're quoting:
Anders Aslund wrote:> Today, the whole world is being hit by a tremendous financial
> crisis, but Russia is facing a perfect storm. The Russian stock
> market is in free fall, plummeting by 60 per cent since May 19, a
> loss of $900 billion. And the plunge is accelerating. As a result,
> Russia's economic growth is likely to fall sharply and
It's surprising that Russia could be in any financial trouble at all,
given their enormous oil revenue, even at current prices of around
$100 per barrel, down from almost $150 per barrel. But recall that
only a few years ago, it was around $30 per barrel, so Russia should
be rolling in money.
But Russia is still in a "post-unraveling," pre-regeneracy era, and,
just like America's leaders, Russia's leaders have no idea of the
dangers of a worldwide financial crisis, and believe it can never
Thus, the Russians have been just as profligate and sloppy in their
use of money as Americans, though in a different way. Putin in
particular has been contemptuous of private investment in Russia's
oil firms, as I recently summarized in an article on Georgia.** Russia continues to tighten its grip on a humiliated Georgia
During 2004, I followed the situation with Yukos very closely (see
links in the above article). At the beginning of the year, I was
asking, "What is Putin up to?" By the end of the year, it was
apparent that Putin's intention all along was to nationalize Yukos in
the most brutal possible way, and still retain personal deniability.
This is nature of Russia's financial unraveling. Led by Putin, the
Kremlin has adopted the "norm" of the Soviet Communist days: That
private property is improper, that everything belongs to the
Communist state, and therefore the Communist state has the right to
take anything it wants from anyone (and, incidentally, jail or kill
anyone who gets in the way).
Just as America's politicians, pundits and executives ignored the
laws of the universe by manufacturing phony structured securities
that turned out to be worthless, Russia's officials ignored the laws
of the universe by thinking that they could nationalize everything.
Abraham Lincoln said it best: You can fool some of the people all of
the time, and you can fool all of the people some of the time, but
you can't fool all of the people all of the time.
Structured securities and nationalization are two attempts to fool
all of the people all of the time. In Russia's case, the private
investors finally figured it out, and now Russia's economy is in
possibly more trouble than the American economy.