Matt O’Brien is unstoppable! “It turns out that having your economy entirely based on oil is a bad idea. All it takes, as Russia is finding out, is for oil prices to unexpectedly drop, and you’re left with an economic crisis that turns into a currency crisis that morphs into a financial crisis—which, of course, only makes the economic crisis even worse. It’s a cycle of doom that’s hard to stop, no matter how vehemently you insist that your ‘bear’ won’t let itself become a ‘stuffed animal’ by having its ‘fangs and claws’ torn out. (That was how Vladimir Putin put it during his annual press-conference-as-performance-art on Thursday.) The latest news is that Russia’s banks are going to need a bailout, and soon. The interest rate they charge each other on short-term loans—which shows how much they believe in each other’s solvency—shot up to 28.3 percent on Thursday, higher than it was even during the 2008 crisis. […]” “The Russian government needs more dollars, and the easiest way to get them is to stop Russian people and companies from getting them. What economists call capital controls. Putin swears he won’t do this, but that’s a lie. He’s already starting to. The Russian government, you see, has started monitoring when big exporters sell any foreign currency they earn, and, according to one official, will ‘instruct’ them when to sell dollars. Putin can call that whatever he wants—I’m sure there’s a bear analogy in there somewhere—but those are soft capital controls. If Russia ever decides to diversify its economy, maybe it should start making stuffed animals. Kids love teddy bears.”
Posted on: Fri, 19 Dec 2014 11:19:28 +0000