Tuesday, November 25, 2008

President Medvedev, Set the Ruble Free (Let the ruble fall)

I am about to propose something that in the modern world of economics seems to be an insanity of the highest order. As nations spend the combined fortunes of multiple generations to keep their fiat, artificial currencies high against each other, especially in what is now clearly the early stage of a world wide Depression II, I say: let the ruble fall.

Many here will remember the pain and suffering of 1998 when the ruble fell and fell hard. But it was the results of that fall that finally saved Russia. Two things happened in 1998, first, the American economic "experts" who flooded Russia and helped force unsustainable "reforms", that is, who helped rape her of over $500 Billion in assets, were finally and fully discredited. They fled Russia shortly after.

The second thing that happened and the more important one: US and European and Japanese goods also fled as the falling ruble made the foreign goods to expensive for the already poor Russian. However, demand for these goods remained and as so often happens in economics, the demand was filled with local companies who hired local Russians who than earned money and spent money and thus a new economic boom was born, even without the great boost that oil later gave. When foreigners returned, they started producing in Russia for the local market.

However, Russia did catch some of the credit craze and a population with rising incomes, started importing more and more manufactured goods from the US, Europe and Asia.

Along comes the new Depression.

Several things have happened in the past several months, key amongst them is a severe depressionary drive on all commodities, just now starting to make its way into finished goods.
This has set Russian manufacturing off against cheaper Chinese and Indian firms, at a time when demand is falling quickly.

It is time to set things right. Russia is in a unique situation, a position shared with a bare few nations, where she is effectively resources self sufficient. There is no real resources that Russia absolutely needs to import to survive day to day. The only one she needs to grow quickly is the human resources, first in her diaspora and than in talented immigrants of other races and nations. As such, she alone can survive and prosper without a hard currency.

So, since this is not 1998 and the government of the RF has wisely, under Putin and Medvedev, removed almost all international debt, a devaluation of the Russian currency will be a positive thing.

The first thing that will happen is once again the imported goods of foreign nations will flee, but Russian companies will take their place, employing more Russians and upholding a self sufficient economy. The second thing that will happen is those companies, such as the oil/gas companies and other manufacturers, will be much more prompted to go to Russia to get their parts since their currency will buy more goods. This will again employ more Russians and continue to support the internal economy.

True, not many Russians will to be travelling to Europe to vacation, but many Europeans (at least those with any disposable monies left) will be travelling to Russia to spend a lot more tourist euros. Who knows, the more talented ones might actually stay.

1 comment:

erikSF99 said...

I agree--except be sure to raise the price of Russian oil, gas & natural resources to compensate and avoid selling off Russian resources on the cheap (again). Luckily for Russia, the U.S. is now entering its own Yeltsin period. Read Michael Hudson's article here:http://counterpunch.org/hudson11262008.html

As Hudson notes: Obama’s ties with the Yeltsin administration are as direct as could be. He has appointed as his economic advisors the same anti-labor, pro-financial team that brought the kleptocrats to power in Russia in the mid-1990s. His advisor Robert Rubin has managed to put his protégés in key Obama administration posts: Larry Summers, who as head of the World Bank forced privatization at give-away prices to kleptocrats; Geithner of the New York Fed; and a monetarist economist from Berkeley, as right-wing a university as Chicago. These are the protective guard-dogs of America’s vested interests. ///

So, the kleptocrats are now completely in charge in the U.S. and it's good-bye to the U.S. as we know it (not that the way it is now is a good thing). I guess the Russian's know this already as a professor in Russia is predicting the collapse and break-up of the U.S. (article in Bloomberg news). See below.

The main thing is Medvedev and Putin need to hire Michael Hudson to help advise them. http://michael-hudson.com/ He gets it all like no other western economist and he explains how non-U.S. countries can extricate themselves from the dollar system.
Nov. 24 (Bloomberg) -- A professor at the diplomatic academy of Russia’s Ministry of Foreign Affairs said the U.S. will break into six parts because of the nation’s financial crisis.

“The dollar isn’t secured by anything,” Igor Panarin said in an interview transcribed by Russian newspaper Izvestia today. “The country’s foreign debt has grown like an avalanche; this is a pyramid, which has to collapse.”

Panarin said in the interview that the financial crisis will worsen, unemployment will rise and people will lose their savings -- factors that will cause the country’s breakup.

“Dissatisfaction is growing, and it is only being held back at the moment by the elections, and the hope” that President- elect Barack Obama “can work miracles,” he said. “But when spring comes, it will be clear that there are no miracles.”

The U.S. will fracture into six parts: the Pacific coast; the South; Texas; the Atlantic coast, central states and the northern states.

“Now we will see a change to the regulatory system on a global financial scale: America will cease to be the world’s regulator,” to be replaced by China and Russia, he said.