Streetwise Professor

November 18, 2008

Like Minds

Filed under: Energy,Politics,Russia — The Professor @ 8:05 pm

A couple of blogs have posts that make points familiar to SWP readers.   One is at Cicero’s Songs.   He also argues that the economic crisis raises the specter of internecine warfare and civil unrest in Russia. (Since Cicero describes himself as “an economic liberal”–as am I, in the British/European, rather than American sense of the word–this confluence of opinions on Russia probably reflects a similarity in worldviews.   A worldview that differs notably from DR, for instance–hence our almost perfectly negatively correlated opinions on virtually every issue;-)   Except for ethanol, perhaps.)

Although I agree with Cicero’s bigger points, I have a few quibbles.   Putin didn’t consciously elect for Russia to suffer the resource curse–it was endowed with it.   That said, Putin et al have done everything to exacerbate, and nothing to palliate, all of the pernicious effects of this curse.   They revel in it.     Also, the “85% of GDP relies on the extraction of raw materials” figure is clearly wrong.   I think Cicero means that 85 percent of export earnings are derived from natural resources.

Another SWP-approved post is this one from Political Betting.   Author Balakirev argues that economic reality is slowly dawning on the folks in power.   That is likely, although there are still behaviors that suggest that denial has not been banished altogether.   Now the question (implicit in the previous post) is: when will everybody else in Russia figure this out?

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  1. One thing I noticed in the WB report (apart from all the disconnect between its measured analysis and the hyperventilation of much of the MSM).

    Most of the debt of Russian companies and banks are due at will (i.e. right now) or in Q3 and Q4. It also has a big table with all the spending the government has begun to mitigate the crisis.

    So this implies that the drain on the foreign currency reserves should slow in 2009, and that similarly the financial position of said companies/banks should become somewhat more stable then.

    Comment by Da Russophile — November 19, 2008 @ 2:58 am

  2. It is becoming an increasingly common theme. This is what Kasparov has to say:

    “Kasparov criticized the Kremlin’s failure to invest the vast wealth generated by a 10-year economic boom in Russia.

    Instead, he said, money was skimmed off by corrupt officials and spent overseas. Fights would break out among the ruling elite for scarce resources as state coffers emptied, he said.”


    Comment by Michel — November 19, 2008 @ 1:13 pm

  3. Great finds, SWP. As usual, a leading source of economics insight about Russia.

    I wonder how the insane Russophile set would react if the World Bank released a report packed with good news for Russia and then some Russophobe picked out of some footnote the fact that Russian corporate debt was fixed to increase significantly next year, and suggested that meant big trouble and the failure of the Putin regime.

    Probably, they’d say that Russophobe was really, really quite insane.

    Meanwhile, consumer price inflation in Russia is already a staggering 12% this year, which isn’t even over yet, and wage arrearages rose 33% in October. Electricty generators are faced with bankruptcy if prices aren’t raised, everybody else is if they are. The Kremlin is spending a truly sickening $1 billion each and every day to prop up the ruble, billions more to “save” the banks (state-owned Sberbank down a shocking 13% today on the RTS) and keep the stock market from attaining zero valuation (today the MICEX flirted with 400-point territory). The price of crude oil is now one-third what was a few months ago, and the MICEX has lost a truly startling 80% of its May value.

    The Kremlin’s response is twofold: A massive new crackdown on media reporting about the crisis and an extension of presidential terms so voters can’t do anything about the Kremlin’s incompetence.

    And the Russophile wackjobs go right on muttering!

    Comment by La Russophobe — November 20, 2008 @ 7:45 am

  4. The Urals Blend was trading yesterday at $45 a barrel. How long do you think it will take before we have it drop below $40 a barrel?

    Comment by Michel — November 20, 2008 @ 2:04 pm

  5. Tomorrow. That’s only said slightly in jest. Today (per WSJ) Urals closed at $43.83, down about $2.50 from yesterday. Given that NYMEX crude was down almost $5.00 today, and the Urals quote occurred before a good deal of the NYMEX price decline, it’s likely that at this instant Urals would be trading at $41 and some change. Given the volatility in prices in the last couple of days, I’d say the odds of a $1.50 decline are around 40 percent.

    It’s interesting to note that previous statements about the Russian budget were to the effect that it was in balance at $60/bbl. I’ve seen more recent statements that suggest $70/bbl. Either way, it ain’t in balance now. Which means that more of the various reserve funds will go to current expenditure, rather than to investment in desperately needed infrastructure, health care, and on and on.

    The ProfessorComment by The Professor — November 20, 2008 @ 6:51 pm

  6. “A worldview that differs notably from DR, for instance–hence our almost perfectly negatively correlated opinions on virtually every issue;-) Except for ethanol, perhaps.” – Agreed on the ethanol. Probably on gun rights too.

    I am amazed at Cicero’s capacity for doublethink, which must surely match that of La Russophobe. I said that I would not be posting on his blog again and intend to keep to it, so I’ll reply to that last comment of his here.

    “Well I am very glad you will not be posting again: Gulag denial would get you barred anyway. Ignorant, Arrogant, Effluent.”

    So let’s see what he does here: unfounded accusation, followed by the barring thing and ad hominem. The sheer cognitive dissonance between his description of himself as a “liberal”, with the nice little support Denmark link at the top right, for free speech to insult Islam*; and the reality of him as a censorious, conceited thug, is quite difficult to comprehend.

    And going back to a prior comment:

    “You, however, by being relentlessly one-eyed in your support of a totally corrupt and pretty immoral regime show a wilful blindness that undermines your credibility as a serious analyst.”

    So I’m being one-eyed, yet his heated rhetoric – as if printed verbatim from one of Lucas’ Russophobic rants from a British rag like the Daily Mail – are the peak of objective analysis…

    “The guy’s a disgrace. Whoever bankrolls his operation really ought to take stock of the strategy. It ain’t working.” – fh

    Plus the obligatory reference to my KGB financiers…

    * As a matter of fact I did think some Muslim reactions to the Jyllands-Posten affair were intemperate and that one should be free to publish pictures of Mohammad with a bomb in the turban, but I also support extending that freedom of speech to all viewpoints, including even pro-Nazism. Nonetheless, it is clear that (at least) Cicero’s conception of “British liberalism” only extends to freedom of speech he agrees with, thus revealing himself as an authoritarian, and worse, a hypocrite.

    Comment by Da Russophile — November 26, 2008 @ 1:28 am

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