Collapsing Russia Fantasizes Over Collapsing United States

I am in relaxation mode here in the universe of Blax Alternate. With a week of vacation to go, I am trying to savor the not working part, while remaining glad that I've got a job to return to. So many don't, and the ranks of the unemployed will surely swell like we have not recently seen.

I picked up a Wall Street Journal today, which carried an article about a Russian professor who predicts that the United States will collapse by 2010 due to financial and moral decay. This was old news, having been widely reported a month or so back, and on a prediction that he has been making for some time. He concludes that eventually Russia and China will form the backbone of the world's future financial regulation.

It tickled my ha ha as I waited for my laundry to exit the dryer. For if the United States is to enter civil war and split into his predicted parts, surely Russia itself is headed for pure fire and complete collapse. It is amazing how hell is always so far away, the blaze at our backs unfelt. It must have been a really slow news day, because U.S.A. Today ran with the same story.

While the man with the whimsical mind, this Igor Panarin, is looking this way, finger pointed, the ruble daily takes to lower levels and once great flagships like Russia's Gazprom struggle under the burden of massive debt. This while China and India and certain Middle Eastern nations remain flush with cash.

Igor does make a valid argument that the U.S. national debt is one huge ponzi, and surely if that is not addressed we will in fact be flat on our face. By that will not occur by 2010, nor will it happen before Russia itself experiences a huge collapse. You cannot build your house on any one thing (like oil) or any two things (like oil and gas), for you remain at the mercy of pricing in such a narrow band of endeavor.

Today I was more amused than concerned. We have some time here in the States; we tend to bounce back. We make sure not to repeat the same bubble twice when blowing bubbles.

What we will see, and certainly in 2009, is major havoc in Russia as people grow angry over collapsed currency, falling incomes, loss of jobs, and the complete inability of the Russian government to weather the storm. I say this as a fan of Putin, to the extent that I believe all nations want leaders who are strong and who bring dignity (which I believe Putin has done, faults included). But Putin did not take the steps necessary to create a truly diverse economy. Unlike the Chinese, who proceed in deliberate fashion, and seem to learn from every error (and history), Russians will suffer greatly from Putin's shortsighted miscalculations of his nation's strength.

Not to say we won't join Russia on the heap. It's just that we will not get there first, if at all. We are also a nation with a short attention span, which allows for instant reinvention.

Christmas 2008: Cookies for Santa

It's very peaceful now. It's Christmas Eve, and all is quiet here in my part of the woods, oatmeal cookies on the table near my keyboard. The screen door is open and smells of winter are floating in, but with the warmth of the heat hitting me from the opposite direction. It's dark in here, but a small strand of Christmas lights glows from behind. There are no cookies for Santa because I am sitting eating them and because he does not exist.

We end the year rolling in the debacle created by ponzi master Madoff, who seems to have duped a rather large number of people into believing he could provide them with a steady 12% a year investment returns, regardless of the direction of the wider market. Had the economy not been so bad, forcing some of his investors to want to tap their cash holdings with him, he might have been able to maintain the illusion for a lot longer.

But there is no Santa, and things are bad, and now many things hidden are coming to light. Despite the difficulties of tight credit, job and 401K losses, and the decline in housing values, the light shed upon our economy is a good thing. True value is now evident. Or not quite. But at least we are being forced to march inevitably toward true value, and truth.

There are many times when faith is of great value. It leads us to reach for more, to try harder, to trust, to dream, to continue when all things obvious shout out "No, never, not". Many placed their trust in Madoff because he seemed a man of simple honesty and humility. But somewhere along the line Madoff lost his way, and departed from truth.

But he is not unique, nor are the rather high end investors who believed in him. Our entire economy in recent years was built on faith that home values would continue to rise. President Bush pushed the concept of the "ownership society" with genuine intent and everyone was willing to place their faith in the ability of assets to rise indefinately.

Sometimes faith, without the levening of truth, can lead to all sorts of unexpected outcomes. It's not merely believing, but what you believe, and how you believe. This year we have learned that truth matters and without truth, faith collapses and trust dissipates.

As I sit here in the dark, I know two things now and repeat them. There is no Santa, and, there are no cookies left to be eaten.

Daily Update: Happy Birthday Jesus and Year Old Recession!!

“‘When there’s a threat, find God,’ goes the proverb in Poland,” said Rafal Antczak, an economist at Warsaw University. “And that is what has happened."

(N.Y. Times)

That quote comes to us with the news that several European nations that previously rejected the euro (aka "God") are now starting to see the merits of the currency. Being forced to defend individual currencies against devaluation has pushed certain nations, like Iceland, into drastic and unforseen lifestyle changes. Poland, with their zloty, and Denmark, with their "picture perfect model of economic management" (N.Y.T.), are seeing their citizens warm to the idea of joining in a larger more powerful currency block.

This has to leave the Russians somewhat nervous on two fronts. Via this crisis, nations that were not fully integrated with Europe will seek to become even closer to the West, and second, it highlights the great difficulties Russians are having in keeping their own currency at sufficiently respectable levels. They are using the third largest pile of reserves in the world to protect their currency, but that pile is starting to shrink.

Russia's economy is spiraling downhill much faster than many expected just a few weeks ago. Companies have slashed up to a fifth of their staff, economists have drastically cut their growth forecasts, there are concerns of a steep currency devaluation and oil prices are in the doldrums - no good thing for an economy based on energy exports.
(U.S. News)

From the Economist:

Russia insists that its US$453bn reserves are large enough to prevent any sharpmoves in the exchange rate—yet these reserves have fallen by 24% since
August and the rate of depletion is accelerating.

Things are not likely to end well for Russia, no matter what they insist, and lacking a diversified economy or tradition of recent financial stability. If the United States is declaring a recession today, (with considerable backdating to last year), then we hardly see how the Russian economy will be able to withstand the rush to quality as people seek to put their money into the perceived safe hands of various gods (whether Treasuries or the euro).

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In case the actual economic news thus far has not totally convinced us of how much trouble we are in, the official word is in. No it's not the official definition of six months of negative growth, though we should hit that mark as we exit this festive holiday month, but rather, the word of the folks at the non-profit National Bureau of Economic Research. It's both Jesus' and the Recession's birthday, with the recession turning a year old this month.