“‘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.
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