Friday, December 19, 2014

Is that not the height of stupidity and self-delusion?

Listening to Obama's speech about Cuba I was stunned by the following statements:
After all, these 50 years have shown that isolation has not worked.  It’s time for a new approach.  (...) I do not believe we can keep doing the same thing for over five decades and expect a different result.  Moreover, it does not serve America’s interests, or the Cuban people, to try to push Cuba toward collapse.  Even if that worked -– and it hasn’t for 50 years –- we know from hard-earned experience that countries are more likely to enjoy lasting transformation if their people are not subjected to chaos.

Crouching sanctions, hidden revenues

by Lev Igorevich 

Dollars for borsch

There is a lot of speculation about the economic health of Russia in the light of tougher sanctions, falling oil prices and tumbling ruble. Concerns are raised whether Russia can afford it’s existence. However, those concerns are paper thin and are presented in more of a mocking spirit, because in most prediction acrobatics, actual revenues of Russian state are not considered at all. Many sources, in their predictions for Russian economy, are repeating the same mistake over and over again. Roughly speaking - assesments are made under the assumption that Russians pay dollars for their borsch. In reality, Russia sells borsch for dollars. This is important point to consider, because Russia pays it’s public sector expenditures (education, healthcare, pensions, police, army etc) in rubles!

Putin on the defensive forced to invest a lot of his personal political capital

Can this nightmare be averted?

Let's begin by what I personally consider bad news: either Putin really believes in liberal market economics or he has to say he does.  He began his Q&A and ended it with a categorical expression of full support for the policies of the Central Bank and its Chairwoman, Nabiulina, and a no less categorical expression of support for the Government and its Prime Minister, Medvedev.  Worse, Putin declared that he believes that market forces will by themselves correct the current disequilibria.  At most, he agreed that certain decisions should have been taken earlier or more forcefully, but that's it.  

Some will love it.  Lew Rockwell went as far as to say that he would hand Elvira Nabiulina the award of "Central Banker of the Year".  Not everybody agrees.  For example, Victor Gerashchenko, a former Chairman of the Central Bank, declared that if he had been in the position of Nabiulina today he would have "asked for a gun to shoot himself".

I have to admit that I personally am dismayed by Putin's apparent beliefs in market economics.  I say 'apparent' because there might be things going on which I am not aware of.  For example, while Putin speaks of "market forces" China seems to get heavily involved in the Russian economic crisis.  For those interested in these developments, please check the following sources:

Free Fall of the Ruble – A brilliant ploy of Russian economic Wizards? Who’s chess game?

by Peter Koenig 

The world is still hell-bent for hydrocarbon-based energy. Russia is the world’s largest producer of energy. Russia has recently announced that in the future she will no longer trade energy in US dollars, but in rubles and currencies of the trading partners. In fact, this rule will apply to all trading. Russia and China are detaching their economies from that of the West. To confirm this decision, in July 2014 Russia’s Gazprom concluded a 400 billion gas deal with China, and in November this year they signed an additional slightly smaller contract – all to be nominated in rubles and yuan. 

18.12.2014 Ukrainian crisis news. Latest news of Ukraine, Russia, Europe, Germany, USA


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