There is a chance that promised US-EU sanctions against Russia might be actually beneficial to Russian economy in a longer run. As once Churchill said: “Never let a good crisis go to waste”. Russia, as most of emerging markets was a destination of “easy money” squeezed out developed countries in the search for yield. The flow of cash is not drying up any time soon, with ECB preparing for its own QE program in March. This creates multiple misbalances and potential for asset bubbles, economic inefficiencies and risk of disorderly unwinds, as we saw on Monday. “Easy money” like heroin. Sanctions might lead to review of economic policies, focusing on support of local producers, increase of economic efficiency and diversification of external reserves away from zero-yielding and toppy DM paper. Crisis 1998 was a blessing in disguise for Russian producers. The sanctions can be the wake up call to finally push through reforms, with less liberal rhetoric and more reality. The situation might give politicians a much-needed chance to implement short-term painful changes, which otherwise would not be politically acceptable. Now these changes would be seen in public opinion as legitimate response to actions forced on Russia by external parties as a punishment for steps which find wide internal support in the country.
Posted on: Wed, 05 Mar 2014 11:40:14 +0000
Trending Topics
Recently Viewed Topics
© 2015