Another Russian Selection
A couple of months ago, we wrote about something we called a “Russian selection.” Similar to a “Hobson’s choice,” a Russian selection is the typical situation in Russia, where no matter what option you pick you end up with disaster — as for example when in 2000 Russian voters were presented with a choice between a proud KGB spy and a proud Communist apparachik for their next president, or asked to select between a shameless Kremlin sycophant and a lunatic fundamentalist for their next pope.
And now, Russians face yet another “Russian selection.” It seems that when Vladimir Putin is confronted with a dilemma of this kind, he takes a page from American Christians, who ask “what would Jesus do?” and queries his Russian variant: “What would Stalin do?”
The chart at left shows the recent progress of the U.S. dollar against the Russian ruble. Pick your poison, Russians. Do you want your currency stable, as it sometimes is at certain points during this three-week period, or do you want it falling against the dollar, as it is doing at other periods? Either way, you lose.
If the currency is stable, that means the price of foreign goods you need to live a normal life isn’t soaring beyond your ability to to pay for them. But it also means that your government is squandering literally billions of dollars every day in foreign currency reserves to buy your own currency and artificially inflate its value, a practice that simply can’t go on indefinitely and leaves you without the resources to address other types of more immediate financial emergencies.
On the other hand, if the currency is allowed to fall freely under market conditions in order to save reserves, you may soon face inflation that will leave you with nothing but ridiculously inferior and even dangerous Russian-made products in your cupboard, taking you all the way back to the worst Soviet nightmares of shortages and corruption.
The most important thing to understand about a “Russian selection” is that it’s not a case of Russians being victimized, as some Russians would like to pretend. All these circumstances, from president to pope to economy, are those of the Russian people’s own making. They could have demanded better choices for leadership, and had they done so they would have better economic choices now. But the people of Russia didn’t do so, and even now they continue to favor their proud KGB spy/dictator with 80% approval in polls. Even if the polls are rigged and overstate Putin’s popularity by a factor of two, it’s still way too high. Russians chose lunatic mass murderer Josef Stalin as a major symbol of their country in a recent Internet poll, and for all we can see they had it exactly right: Russia = Stalin.
Meanwhile, there’s a wild card: Russia is running out of reserves to the defend the ruble. Now, it is moving forward with plans to simply ban banks from converting rubles into foreign currency rather than using reserves to inflate the value of the ruble. It’s akin to simply ordering retailers to stop raising prices, something Putin actually tried not long ago. It can’t work, and will create an economy in Russia not unlike what we see in Robert Mugabe’s banana republic of Zimbabwe. Russia as a nation will go the way of the dodo.
In other words, it’s exactly what Stalin would have done.