Sorry, Putin. Russia’s economy is doomed

Washington Post ^ | 15 Dec 14 | Matt O'Brien

[elhombrelibre]

A funny thing happened on the way to Vladimir Putin running strategic laps around the West. Russia's economy imploded.

The latest news is that Russia's central bank raised interest rates from 10.5 to 17 percent at an emergency 1 a.m. meeting in an attempt to stop the ruble, which is down 50 percent on the year against the dollar, from falling any further. It's a desperate move to save Russia's currency that comes at the cost of sacrificing Russia's economy. So even if it "works," things are about to get a lot worse.

It's a classic kind of emerging markets crisis. It's only a small simplification, you see, to say that Russia doesn't so much have an economy as it has an oil exporting business that subsidizes everything else. That's why the combination of more supply from the United States, and less demand from Europe, China, and Japan has hit them particularly hard. Cheaper oil means Russian companies have fewer dollars to turn into rubles, which is just another way of saying that there's less demand for rubles—so its price is falling. It hasn't helped, of course, that sanctions over Russia's incursion into Ukraine have already left Russia short on dollars.

[Greetings_Puny_Humans]

I haven’t done a single thing harmful to your country personally

Yet you come on this forum to tell us lies for Mother Russia. If we all agreed with you, your country would rape and murder us just like they do every country they get their bloody hands on, and you would praise it.

[wetphoenix]

~Yet you come on this forum to tell us lies for Mother Russia. If we all agreed with you, your country would rape and murder us just like they do every country they get their bloody hands on, and you would praise it.~

What lies, rape and murder? You sound pretty much paranoid right now.

[ansel12]

wetphoenix has told FR that he serves in the FSB.

“The Federal Security Service of the Russian Federation (FSB) is the principal security agency of the Russian Federation and the main successor agency to the USSR’s Committee of State Security (KGB).”

Past Directors of the FSB—Vladimir Putin, July 1998 – August 1999

“Under the federal law, the FSB is a military service just like the Armed Forces, the MVD, the FSO, the SVR, the FSKN and EMERCOM’s civil defence, but its commissioned officers do not normally wear military uniform.”

[elhombrelibre]

It looks more like Putin is the aggressor to me. Perhaps you’re aware of some evidence to the contrary that would be helpful. I don’t like the progressive philosopy or its policies, but blame shifting seems constant if it’ll help get Putin off the hook.

[elhombrelibre]

From the article:

"And this is only going to get worse. Russia, you see, is stuck in an economic catch-22. Its economy needs lower interest rates to push up growth, but its companies need higher interest rates to push up the ruble and make all the dollars they borrowed not worth so much. So, to use a technical term, they're screwed no matter what they do. If they had kept interest rates low, then the ruble would have continued to disintegrate, inflation would have spiked, and big corporations would have defaulted—but at least growth wouldn't have fallen quite so much."

[elhombrelibre]

Don’t forget that Russia must pay its foreign debts, too.

[elhombrelibre]

Go read how your country treated its Soviet satellites, comrade. Rape is how it began and violence was what kept them under Russia’s dominance. Putin says he wants his empire back.

[FredZarguna]

It's been analyzed.

There are a lot of news stories in the trades that the Saudis really cannot sustain a $40/bbl price, even though they say they can. They have a lot of projects they need to keep going in order to placate their somewhat restive population. But they also have a ton of cash. So they can let prices fall for a while, but long term, here's what energy economist Matthew Hulbert [who has been pretty good historically] published in the European Energy Review in 2012:

Notice that their budgetary breakeven price is nearly two orders of magnitude greater than the $2/bbl profitability the media nincompoops keep talking about. Notice also, that everyone North of Saudi Arabia needs prices over $106/bbl. They're ALL toast.

People haven't talked much about firming prices on the demand side, but that is going to happen. Germany is shutting down their nuclear energy, and Japan may also scale back nuclear [in Japan's case, what's going to happen isn't clear. They're moving slowly on this, and by the time significant nuclear energy production scalebacks might occur, public sentiment in Japan may not be as antinuclear as it is now in the wake of Fukishima.] And US consumers have traditionally shown that they will go back to bigger cars, SUVs and trucks as gas prices fall.

[The Ghost of FReepers Past]

I was not comforting him. I was agreeing with him. I’ve read many of his posts over the past few weeks. I am not one who thinks Russia is our great enemy. We have FAR bigger problems and some people are just longing for the cold war days. The over-the-top anti-Russia rhetoric has been ridiculous. There are many happenings around the world we may not like or agree with, but what happened to the days when we considered national interest and whether or not it was our place to meddle? There is no genocide going on. There is much more to the story than many seem to be willing to admit. I just do not see one innocent victim country and one evil empire country in this.

We trade with and show respect to some major tyrants around the world. I just would not pick and choose the same as the Obama administration. Apparently you would?

[DemforBush]

"That's why the combination of more supply from the United States, and less demand from Europe, China, and Japan has hit them particularly hard."

There's a certain wry humor in the possibility that the man who has been running circles around Obama on the world political stage (i.e. Putin***) might be undone by policies Obama has explicitly opposed (i.e. drilling our way out of high energy prices).

*** Just so we're all clear, I am NOT, nor I have I ever been, part of the (now mostly silent) FR Putin fan club. Putin is a bad guy with dreams of empire. I'm just acknowledging he's been quite the diplomatic foe over the last few years.

[The Ghost of FReepers Past]

I don’t care if he is Russian special forces or not. Do you think Russia is not entitled to defend themselves just because of their history? Heck if that is the gauge no country on earth would be worthy.

I have not found Webphoenix to be dishonest at all. How can you just arbitrarily call him a pathological liar? You are just talking out of some old hollywood spy movie theory instead of listening and dealing with facts and giving a fair hearing to his points.

[ansel12]

I knew what you were doing, and that is why I posted that to you.

I disagree with you, and don’t start some silliness like you did with the Obama crack.

[The Ghost of FReepers Past]

Ok I am sorry about the Obama crack. Cheap shot. But still, Obama hates Putin for reasons that have nothing to do with Ukraine, imo.

[Berlin_Freeper]

Nobody taught the KGB Terror Master to diversify.

[Greetings_Puny_Humans]

I don’t care if he is Russian special forces or not. Do you think Russia is not entitled to defend themselves just because of their history?

SELF DEFENSE!!!

You are just talking out of some old hollywood spy movie

How I wish it were a movie! Then Wetphoenix's relatives wouldn't be actually raping and murdering people in East Ukraine, or in Georgia, or in Moldova, or soon to be a NATO country near you.

[elhombrelibre]

I agree. Obama will take credit for the squeeze that should change Putin and Putinstan. Yet it’s the US oil industry that’s truly made the pressure possible by doing what capitalism does best; they invested and they produced. What if Obama had not tried to stop them? What if he’d favored the Keystone pipeline? The effect would be even more profound. Our enemies want us dependent on oil. I include the leftwing environmentalist and OPEC in that grouping.

[ansel12]

Who cares, I have my own thoughts on national security and threats, and don’t have Obama on the brain, and don’t much care what he thinks as long as he doesn’t interfere with our efforts to stop Russia.

[elhombrelibre]

In your mind, Russia defends itself by threatening countries that are near it and waging an undeclared war on its peaceful neighbors. That's the logic of quislings.

[vette6387]

“I doubt it will work well, but its much closer to the US Fed in the early 80s tight money policy that caused skyrocketing interest rates.”

I just noticed the familial resemblance between Pooty Poot and Jimmah Cahatah! The have the same fiscal policies too. Brother Billy was right, there are Russians in their woodpile! Who knew.

[The Ghost of FReepers Past]

I do not see Ukraine quite as innocently as you do. They take all they can get without giving back and then expect the world to bail them out when they get in a pickle.

I think there is a lot of corruption and the citizens of Ukraine get shafted by everyone, not the least of which is their own leaders. But even they are not entirely innocent. They still do not know how to not be dependents. Oh they are learning to mouth off and talk big, but they fully expect other countries to fund and man their defense.

I do not think funding any part of this is what the U.S. should be doing. Neither do I think we should play world police there. Let the EU fund it since they are the ones involved. But that lily-livered bunch always wants to dump their messes on the U.S., too. The U.S. is in deep debt and needs to spend only where necessary. This ain’t it.