Comments on: Observations From Atop the Volcano Research (on Financial Markets) Conducted by Other Means Sun, 23 Nov 2014 23:53:26 +0000 hourly 1 By: Timothy Post Wed, 24 Dec 2008 20:05:44 +0000 @Professor – Despite LaRouche’s penchant for the absurd, his need to create a weird personality cult, and his off-the-wall belief in conspiracies (particularly surrounding the British) his economic analysis has been quite prescient and his predictions accurate. Too bad its not possible to separate the ideas from the personality. The irony is that had our government simply implemented LaRouche’s economic prescriptions 15 years ago we would must certainly not be in the predicament we now find ourselves.

I was surprised to see you use the term “equilibrium levels” with respect to a currency. Do you still believe in the basic tenants of neoclassical economics? I find you too bright to believe that supply and demand curves should be determined independently of each other. Markets are not inherently self-correcting and often need checks and balances, in the form of regulation, to prevent the prevailing bias from too detached from reality. Economics is a social science not a natural science and as such, should not rely too heavily on its econometric models.

With respect to the scenarios you laid out above, is it not also possible that a 4th scenario is that the Russian authorities are concerned about the possibility of civil unrest (see link below) and are taking prudent measures to make sure things don’t get out of hand?

RE: “It is, in both Russia and the US, a politically driven allocation of resources to a lower value use, and will end up destroying rather than creating wealth,” see Krugman’s blog post

@NjNinja – See the following link: regarding the US War College on the possibility of widespread civil violence in the US. I think what this shows is that the Russian government is not unusual in its concern for maintaining order in times of severe stress. BTW, when did the US implement the option of a Presidential recall?

@Michel – How’d those so-called Orange and Rose revolutions turn out? I, for one, am sure glad with didn’t have a “Chess Revolution” here in Russia. I think the folks in Ukraine and Georgia would gladly exchange places with folks in Russia today.

Finally, the crux of much of our disagreement regarding Russia can be boiled down to how one reads Medvedev and Putin’s motivations. Some, like myself, think that both politicians have Russia’s best interests at heart and are taking steps they believe will make things better for Russian citizens. Others, like many of you, see nefarious motivations behind their decisions and policies.

As always, “where one stands depends to a great deal on where s/he sits.”

Happy Holidays to all regardless of where you “stand” with respect to Russia.

By: The Professor Mon, 22 Dec 2008 16:12:55 +0000 DR–Lyndon LaRouche? (IE, your larouchepac link). I mean, seriously. “Alternate media” or “alternative universe media”?

I’ll be on the lookout for contrails and black helicopters. LOL.

By: Global Voices Online » Russia: The Crisis and The Potential For Unrest Mon, 22 Dec 2008 15:23:10 +0000 [...] another post, Streetwise Professor cites a number of media stories “that openly discuss the potential for unrest in Russia, and the government’s likely [...]

By: Michel Mon, 22 Dec 2008 07:30:20 +0000 I agree with The Professor. Propping up the Canadian dollar would not have made much sense. The fall in the Canadian dollar helps Canadian companies deal with the rapid fall in the prices of their exports. Let’s say that an oil company is selling oil in US dollars and the price of the oil falls drastically. It is better for that company to have the Canadian dollar fall as well as it will be selling its goods and receiving a higher priced currency while the bulk of its expenses (salaries, for example) will be in a lower priced currency (the local currency). This allows it to cuts costs.

When the Canadian dollar drops in value vis-a-vis the American dollar, it also encourages consumers to buy local goods. Rather than buying a bottle of California or French wine, they will buy a bottle of B.C. or Ontario wine. This means that more money stays in the country, which is good if exports are dropping.

For these reasons, it makes much more sense to let the Canadian dollar fall.

By: Da Russophile Mon, 22 Dec 2008 06:23:52 +0000 @Njninja,

There are numerous signs in the alternate media that the US govrnment may be preparing to crack down harshly on dissent during the crisis.
“mobile prisons” us financial crisis pre-formed

Of course such things never make it into the managed MSM.

By: The Professor Mon, 22 Dec 2008 03:58:17 +0000 Timothy–

Re the Loonie v. the ruble. Yes, the Canadian $ has declined more than the ruble–precisely because the Canadian central bank has had the good sense to let the currency find an equilibrium level in the face of weakening fundamentals. Russia, in contrast, has spent almost $200 billion propping up the currency. If Canada had followed Russia’s lead, it would have imposed a substantial burden on its non-energy industries.

By: Gazprom - ein kjempe på leirføtter Mon, 22 Dec 2008 00:12:47 +0000 [...] The Streetwise professor rapoorterer noko liknande: Nonetheless, it is apparent that Putin’s ruling “United Russia” party and Putin himself are terrified of popular unrest. One proof of this is a recent change to the Russian criminal code, voted into law by the United Russia party and the Liberal Democratic Party on December 12. The change forbids a trial by jury not only in terrorist cases, hostage taking and the attempts to overthrow the government, but also for “mass disturbances,“ “diversions,” “treason,” and “espionage” (Kommersant, December 15). [...]

By: Michel Mon, 22 Dec 2008 00:01:28 +0000 In my experience, Russian government officials and those close connected to Russian government officials were paranoid about the possibility of a color revolution à la Georgia or Ukraine when the petrodollars were flowing and the economy was getting better every day. I can only imagine the level of fear and paranoia now when the economy is tanking.

By: The Professor Sun, 21 Dec 2008 20:32:47 +0000 Timothy–

Methinks you missed one of my main points. Specifically, that there is considerable evidence that the government, including most notably Putin and Medvedev, are seriously concerned about the prospect for serious civil disorder. They say so in their words, some of which are quoted above, but also in their deeds. The new treason legislation, and moves to eliminate jury trials in such cases, are quite clear evidence of this. And if “a few [ticked off] guys in Vladivostok” are such an irrelevance, and a harbinger of nothing, why were many arrested?

So, if I am highlighting the potential for civil unrest, then Putin, Medvedev, the Duma, and the security structures are doing the same. What does this say? Several possibilities: (1) they, with their extensive information about domestic conditions, have a reasonable basis to believe that such potential is real, and a threat to them; (2) they are paranoid, and hence exaggerate the potential (though, the Nirvana line “just because your paranoid doesn’t mean nobody’s after you” could fit here); or (3) they realize the threat is minor, but are manipulating the situation to enhance their political power.

Alternative (1) is not supportive of your thesis that I am overstating the risk of civil unrest, for to me the strongest evidence of this possibility is the authorities’ statements and actions. Alternatives (2) and (3) would support your thesis, but are hardly flattering to the government.

I should also note that even in the highly constrained Russian media, there are numerous voices (of whom Gontmakher has received the most attention) raising this issue. So, it is not just the product of a fervid imagination thousands of miles removed from the country. There are many in Russia doing the same.

It is clear that things are not as severe as 1998, and are unlikely to become that bad. Cold comfort, that, as things can get far, far worse without approaching 1998. I have said the volcano is rumbling, not that it has erupted. As the last paragraphs emphasize, moreover, the full impact of the economic situation is still to come. Predictions for next year are growth of around 2 percent on the high side (a very optimistic prediction, in my view, especially inasmuch as it is predicated on $70/bbl oil), to -15 percent on the low side (probably unduly apocalyptic). Given the expectations of continued growth, and the banishment of anything even approaching 1998, such prospects cannot be at all comforting to the authorities.

And, finally, re your dismissal of a few malcontents in Vladivostok–revolutions have sprung from smaller beginnings, so do not dismiss them too readily. Especially in a country as vast as Russia, where centrifugal forces have challenged rulers for centuries, seemingly scattered protests can pose serious dangers for the center. Which, returning to my original point, goes a long way in explaining the government’s robust response–which would be overkill if your diagnosis is correct.

By: NjNinja Sun, 21 Dec 2008 19:35:07 +0000 In response to timothy-post last comment in which he stated that mass unrest is more likely in the U.S then in Russia.

I violently disagree with that because of the difference in the 2 countries’s political goverment.

First of all , the U.S will bring in a fresh president in January…No one blames him for the crisis , so he will have a lot of leeway to soften the crisis blow.

Russia , on the other hand , has the same guys running the entire country and they wont be able to escape blame if things continues to deter in the next 2-3 months.

Also , in the U.S if you hate your local or national politician , you can always vote him out…If you feel a politician is making the crisis worse , you can vote him out or even recall him if you cant wait for election-time.

In Russia , if you hate Putin , there’s really no way to vote him out…therefore , russian are more likely to revolt in massive numbers because of the frustration that they are stuck with the same people who created the crisis.

This is why massive unrest is more likely in Russia then the U.S.