Considering the billions spent on 'intelligence gathering' by the US and western countries the failure to foresee an aggressive response from Russia supports the need to reform and restructure intelligence agencies. Does anyone think shutting down the CIA would have a negative impact?Originally Posted by Firn
quoting myself:It's long overdue to recommend Krugman's blog post "Globalization
and Macroeconomics". These days experience a high tide for remarks
about how very much connected certain counties are economically
and how this affects the risk of war.
The sad truth is, the European countries were trading very much
(despite tariffs) prior to 1914, and the Great War still happened.
@Fuchs: I have read it some time ago and it should be clear that trade interactions don't put an end to war.
Personally I feel that there might be a (strong) tendency that beneficial trade integrations does indeed lessen the dangers of war between two entities. Of course there is always the danger that the guy(s) in power care much more about their personal goals, which can work for some time.
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The Ukrainian thread is locked and Crimea is right now doubtlessy under control by Russia so I will post it here.
In the other thread it became quickly obvious that Crimea with it's 2M people is difficult to supply if the trade routes to Ukraine are cut or disrupted. The harbours lack capacity. Inflation is inter alia the logical consequence. The loopsided nature of the brave new Crimean economy was also a pretty safe bet. Tourism has been hit even harder then I imagined due to Putins adventures in Eastern Ukraine. Some time ago the NCC water channel was said to have been cut, we will see how that develops....Faced with spiraling price inflation, Crimean Prime Minster Sergei Aksyonov threatened price-hiking retailers on the peninsula with "coercive measures" and canceled licenses.
Since Russia annexed Crimea from Ukraine in March, the price of many goods has doubled, the head of Crimea's Trade Union Federation, Vladimir Klychnikov, told Interfax.
Aksyonov said retailers of food and medicines would be first in line for authorities' attention.
... "We need officers capable of following systematically the path of logical argument to its conclusion, with disciplined intellect, strong in character and nerve to execute what the intellect dictates"
General Ludwig Beck (1880-1944);
Speech at the Kriegsakademie, 1935
Today it seems the KyivPost has a rather sad article on the impact the lack of irrigation water has on the Crimean agriculture. As we saw a long time ago Crimea depends on the rest of the Ukraine for it.
It will hit the Crimean economy very hard, especially those in the North where mostly Ukrainians and Tartars live. The lack of tourism will be felt mostly Russian-speaking areas, although Russia-speakers have a far higher share of public workers and retirees.Saidablyayev’s potatoes, like everyone’s crops in Pervomaysk, rely on the North Crimea canal. This Soviet engineering project of the 1960s-70s delivers 1.8 billion cubic meters of water annually from the Dnipro River in Ukraine to Crimea, providing over 80 percent of the peninsula’s water. Usually the canal sluices are opened in March, in time for spring sowing. This year, following Russia’s occupation of Crimea in March, and a Russian law incorporating this Ukrainian territory into the Russian Federation, Ukraine instead reduced the flow to the lowest possible volume of just seven cubic meters per second. Crimea has few water sources of its own, particularly in the north and southeast. Farms throughout these regions are now completely deprived of water for irrigation.
... "We need officers capable of following systematically the path of logical argument to its conclusion, with disciplined intellect, strong in character and nerve to execute what the intellect dictates"
General Ludwig Beck (1880-1944);
Speech at the Kriegsakademie, 1935
After the specific look at Crimeas economy it is well worth to give a glance at Russia's economy as a whole.
Service and manufacturing are contracting
Pension funds targeted to offset failed bond issuesSBC's Russia Services purchasing managers' index, or PMI — under which values above 50 signify growth, and below 50, contraction — fell to 46.1 in May from 46.8 in April.
The PMI figures — based on monthly polls of executives at 300 private companies — also showed that manufacturing output in Russia contracted for the fifth month running, though less swiftly than in the services sector, pulling the composite output index to a five-year low of 47.1.
Overall almost all of the economic news leads to the conclusion that Russias economy is growing at best slightly above zero. Personally I think that it is more likely that has already started a recession.State pension funds in Russia — where the greater part of the country's 2.5 trillion ruble ($71 billion) pensions pot is stored — have long been stoppered by laws that severely restrict their investment activities. But over the past year the wheels of reform have been turning, the Finance Ministry said, and the floodgates may be opened on Jan. 1, 2015.
The influx could relieve an economy on the edge of recession and with restricted access to overseas sources of finance in the aftermath of Russia's annexation of the Crimean peninsula from Ukraine in March.
The longer Putin promotes terrorism against a neighbour, the more likely deeper economic damage at home will be.
... "We need officers capable of following systematically the path of logical argument to its conclusion, with disciplined intellect, strong in character and nerve to execute what the intellect dictates"
General Ludwig Beck (1880-1944);
Speech at the Kriegsakademie, 1935
An important statement by the Bank of Russia, which obviously has to make lots of hard choices, trying to find the least bad path through the difficult economic ground.
The BoR has to set it's key rate with two big conflicting problems in mind, very weak growth and high inflation. It seems that the inflation target has the higher priority, perhaps not surprising if you consider the recent Soviet and Russian history.The Bank of Russia Board of Directors has decided today to leave the key rate unchanged at 7.5%. We have taken this decision despite the persistently high inflation rate, which currently stands at 7.6% on an annual basis.
The decision is based on the analysis of trends in the economy and the financial sphere, as well as the medium-term macroeconomic forecast.
Considering time lags in the monetary policy transmission mechanism, the effect of the earlier increase in interest rates on inflation has not yet been exhausted. The policy of maintaining the rate at the current level in the coming months will suffice to attain the target for consumer price index in the medium term. Nevertheless, we emphasise the existence of considerable inflation risks at present, namely, the risks of inflation falling slower than required for the downward path to comply with the medium-term 4% target. If these risks materialise, the Bank of Russia will continue raising the key rate.
Our previous press conference was held in mid-February when the market participants’ attention was drawn to changes in the policy of the US Federal Reserve (the Fed) and their impact on emerging market economies (EME). However, it was actually immediately after the Bank of Russia’s February monetary policy decision that geopolitical factors came to the fore. The unconventional situation that had emerged required unconventional measures from the Bank of Russia. That is why I would like to explain in greater detail how we view the developments of the past period and how they influenced our forecasts and today’s decision.
The four factors outlined by the BoR are well worth repeating:
1) A sharp increase in pressure on the rouble in early March
2) The acceleration of inflation
3) The slower growth of deposits and the banks’ rising dependence on refinancing from the Bank of Russia amid the accelerating demand for loans.
4) The slowing economic growth.
The most important long-term problem is of course factor four. I agree with the Governors words on it's structural nature:
The 'geopolitical factors' mentioned earlier are of course doing their considerable part to weaken the Russian economy.Let me note that unemployment remains low, despite a considerable economic slowdown, which we observe today. This suggests that growth acceleration is impeded by structural factors. The main problem is stagnating labour productivity amid unfavourable demographic trends. In this context, the Bank of Russia expects a slow economic growth recovery in the subsequent years to 0.9% in 2015 and 1.9% in 2016. The positive contribution of investment will be observed to recover, while the influence of net exports may fall to zero or slightly negative values.
Last edited by Firn; 06-17-2014 at 07:50 PM.
... "We need officers capable of following systematically the path of logical argument to its conclusion, with disciplined intellect, strong in character and nerve to execute what the intellect dictates"
General Ludwig Beck (1880-1944);
Speech at the Kriegsakademie, 1935
Why Economic Growth Doesn't Matter in Russia is the eye-catching title of an interesting piece by Vladislav Inozemtsev, professor of economics, director of the Moscow-based Center for Post-Industrial Studies and editor-in-chief of Svobodnaya Mysl. It is always interesting to get a look from different angle.
Perhaps the key statement matches to a good degree what I wrote earlier: The Russian balance sheets looks strong but the economic prospects don't, if Russia is unable to reform it's economy. So far there is little indication for the latter.Today's Russia is not a normal country. A significant portion of people who can adequately assess the situation either left the country or are leaving it right now. Many entrepreneurs sold their businesses to bureaucrats and pulled money out of the country, realizing the futility of their labors.
But as long as energy resources can be exported and the prices for them are high, the Russian government does not need to worry about the economy. Special budget reserves exceed $175 billion; the public debt is less than 2.8 percent of GDP, the budget still runs a small surplus, and even if it dips into red it may easily be balanced by a soft devaluation of the ruble since the export duties on oil and gas are denominated in dollars.
Of course, the problems are piling up — so sometimes they will come out. But both the speciality of Russia's situation and its difference from these in democratic market economies lies in the fact that the first alarm signals will sound when it will be too late to react. We will probably see a repetition of the dramatic events of the late 1980s — but, of course, this may not happen for awhile. Time during which economic problems will not preoccupy the Russian president — leaving him free to surprise the world once and again with his political follies.
So while leading Russian in the long run towards an economic trap, Putin has also lots of time to harm his and other countries in other ways. As outlined before it is key to distinguish between Putin's goals and Russia's interests. There are certainly distinct, even if hard to treat as such with the great personal concentration of power Putin enjoys...
Last edited by Firn; 07-01-2014 at 01:15 PM.
... "We need officers capable of following systematically the path of logical argument to its conclusion, with disciplined intellect, strong in character and nerve to execute what the intellect dictates"
General Ludwig Beck (1880-1944);
Speech at the Kriegsakademie, 1935
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