by AgentR11 » Tue 16 Dec 2014, 13:24:10
FT had an interesting piece from Moscow, kinda a man on the street thing. What was interesting to me, is that it fits perfectly with what I'm thinking is going on. One exemplar was trying to get his savings into dollars/euros as quickly as possible (with the banks apparently making *quick* a challenge, though not prohibiting it either); turns out he also has a mortgage denominated in.. Dollars. LOL. OTOH, another upper-middle class interviewee was working very hard to convert her rubles into... get this.. FURNITURE. Whats even funnier, is that furniture girl (basically a placid socker mom bargain hunting) was adamant that all of her discomfort was the fault of the USA, directly named us the *enemy*. Not partner, not competitor. ENEMY.
You couldn't draw a more perfect picture, on plan, for what Putin is up to.
As a resource state, you can do one of two things. Spain of long ago, and Saudi Arabia of this era; both used their raw materials to purchase finished product from others; and once the raw materials run out, they fall into a guaranteed, essentially permanent depression. Unfixable. The other model is to consume your raw material production internally and create a large portion of your own finished goods. Russia is entirely capable of producing modern consumer products, but up till now, anything you produced in Russia could not compete on price, even with goods from the EU. So Bob the German makes a widgit, and his cost, in rubles, was say 100; in the same instance, Bob the Russian's cost, in rubles, would be 200. Not due to any genetic or cultural defect, but simple because 1 Euro used to cost 40 ruble instead of 80 ruble. You know what is true today? 1 Euro costs 85 ruble. If we kinda hand-wave adjust for the modest deflation in Europe, and a likely real inflationary (wartime expenditure) pressure in Russia; the numbers match up.
Putin is forcing Russia to give up the leisure and lazy life of sucking on the resource export bottle. There will be no more cheap trips to London or Paris to buy luxury goods with half the labor that it should cost. No more imported whole milk that costs less and has better quality than anything a Moscow distributor could do with crappy powder. Stuff is gonna cost what it SHOULD cost. Once that happens, Bob the Russian can compete with Bob the German on price. Once that happens, Moscow really can join the modern, industrial world.
All of that requires one thing.
The central bank MUST NOT choose a value for the ruble. The market must choose, willing buyer, willing seller; nothing more, nothing less. A market valued ruble at 500/US$ would be far less destructive than a pegged value holding at 40. That pegged value was destroying Russia, as surely and as rapidly as a bucket full of meth would destroy some guy living in a trailrr. 40 is NOT good. It is catastrophically bad.
The corollary here though, is kinda bad for Europe. If you think the US has wasteful personal transportation and heating habits; Russia will make us look like Certified Green Party members. They really could, quite easily, get to the point of having no gas, nor oil to export; not because of failing production; but because they very well could consume every last bit of it. Worse... they have a massive, lightly populated region, where they could build countless coal fired generation plants (export electricity to China and Friends), where the prevailing global circulation would remove all the pollutants that make people want to be green, and dump them in the ocean far away from most of the population of Russia. You think Frozen Russia is concerned about Global Warming and the end of the US bread basket ????
That's where I see Putin's intention headed. If he can survive the enhanced displeasure of those tied to Western properties, and Western mortgages... and ruble income, that is.
Yes we are, as we are,
And so shall we remain,
Until the end.
