Let's unpack just the Putin useful idiot financial illiteracy of just the economics presented here, which will serve to illuminate the illogic of the rest of the argument:

1. High currency value doesn't equal economic health. The yen was at 75-79/$ in late 2012 and early 2013 when the Japanese economy was mired in generation long stagnation since the bubble burst in 1990. It's 135/$ now with a much healthier economy. (I shorted 20m JPY in early 2013 and bought a boatload of put options on the JPY. The trade of a lifetime similar to shorting the super % in mid 1985).

Similarly, the super $ of the US economy on the brink of a stock market bust and recession in 2000, was no indicator of economic health. An overvalued currency makes a country's exports uncompetitive and is a sign of economic ill, not good health. Germany benefits from being embedded inside the eurozone, which makes its exports artificially competitive and gives it a perpetual current account surplus, with exports = to 45% of its GDP. An undervalued currency is a sign of successful mercantilist export promotion policy--for China as well as Germany.

2. Russia's central bank imposed capital controls, which trapped the money of foreign holders of Russian stocks and bonds. It's now a controlled currency with a value as almost as phony as the Soviet ruble.

3. The ruble's rise off the initial panic-driven bottom in February means that $ denominated hydrocarbon sales converted into rubles buy fewer rubles. This means Russia must sell more barrels of oil at bigger discounts to India and China to buy weapons to feed its war machine. That's why its central bank has recently lowered its discount rate.

4. Sanctions have slashed Russia's imports, including essential tech imports for its military-industrial complex. One example among many: the production stoppage at the Avtovaz tank factory. Now Russia is deploying obsolete Soviet era T-62 tanks and has no way of replacing its supplies of precision guided munitions, which use unobtainable foreign components.

5. The eight years of austerity Putin imposed on Russians to build up foreign reserves were futile since 60% of those reserves are now frozen. No wonder Lyin' Lavrov called this "theft".

6. No insurance company will insure a Russian oil shipment, which makes shipping its oil much more costly and inefficient, necessitating at sea transfers from small tankers to larger tankers to ship oil to India and China. But don't take it from me. Listen to the Russian sources: "Russian Minister of Transport Vitaly Savelyev said in May that the sanctions "have practically broken all the logistics in our country."

""I think that's what people are missing -- the fact that Russia has to rip apart 30 years of integration into the global economy," said Elina Ribakova, the deputy chief economist at the Institute of International Finance." (https://edition.cnn.com/2022/06/17/politics/nerd-warriors-treasury-department-sanctions-economic-war-russia/index.html)

7. Listen to Russia's talented central banker, Elvira Nabiullina: "But it's premature to say that the full effect of the sanctions has materialized."

8. What Nabiullina is getting at: a petrol station economy like Russia depends on oil industry logistics, which run by air. An airline industry with uncertified planes getting cannibalized for spare parts will struggle to deliver crews and spare parts to remote Siberian oil fields inaccessible by road. Russian oil production has already dropped by 18%. It will drop more as sanctions bite. Oil revenue is up since the per barrel price has risen from about $70 to $120. But Russia sells its oil at a 30% discount to India and China. The ruble's rise means Russia must sell many more barrels to buy the same weapons from its component-starved military-industrial complex. Not a pretty picture and time is not on Russia's side.

9. Sanctions have wiped out Russia’s post-pandemic recovery, putting it back in 2020. Official Russian government statistics tell us 8.5 million people have fallen into property. A growing economy has contracted by 15%, nearly as much as the USA from 1929–32.

The war unfolding as Putin predicted is absurd, as the discovery of the written orders of a dead Russian officer's body show. This poor devil's orders show Putin expected his airborne troops to take Kyiv government buildings in 12 hours. Nicholas I had the same fantasies of a quick victory over Britain and France in the first Crimean War. How did that work out? Far from being the second coming of Peter the Great he thinks he is, Putin is the reincarnation of the first Crimean loser, Nicholas I.


From Latvia and Porto I write to share learning from life in 8 languages in 5 countries & seeing fascism die in Portugal & Spain in 1974 and 1976.

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Lester Golden

Lester Golden

From Latvia and Porto I write to share learning from life in 8 languages in 5 countries & seeing fascism die in Portugal & Spain in 1974 and 1976.