Special Extra: In Russia, Black Tuesday — the End of Days

The Russian stock market is collapsing just like the USSR itself

The Russian stock market is collapsing just like the USSR itself

Despite aggressive attempts to prevent it by the impotent Kremlin of Vladimir Putin, the Russian stock market has totally collapsed, suffering its worst day since the 1998 economic meltdown, closing down almost 11.5%  at 1131 on the RTS Index, a massive loss of almost 150 points on a base that had already been emasculated into insignificance.  In just the month of September, the RTS ruble index has plunged sickeningly from a high of 1650, a breathtaking drop of more than 500 points or one-third its total value at the start of the month.  The MICEX index, which is measured in dollars, crashed into triple digits, smashing the crucial 1,000 point psychological barrier.  It was down at one point over 15% to below 900, before recovering slightly. Share values in Sberbank, state-owned and dominant in the market, were down more than 20%.

The Kremlin is in full-on panic mode.  Both the MICEX and the RTS were forced to impose the draconian measure of a halt in trading for a full hour, a clear sign of desperate fear that the entire market could implode before gaping eyes.  Had this not occurred, for all we know the current value of the market might be zero. Heaven only knows what duplicitous behavior the Kremlin may right now be engaged in behind the scenes to keep the full nature of the collapse from the world’s prying eyes when the market opens tomorrow morning. Perhaps the Kremlin will simply spend the national rainy-day fund to buy the entire market and decree the prices. That’s what the USSR would have done.

Reuters reported:

 “It is pretty shocking,” said Lars Christensen, chief analyst and head of emerging markets research at Danske Bank. “It’s people moving into cash and … getting worried about who they are dealing with,” a Moscow-based trader at a Western bank said.

It’s people, in fact, finally waking up to the reality that Russia is ruled by a proud KGB spy. It’s the beginning of the end for the neo-Soviet state.  The government, however, is still asleep and in denial.  “There are risks in our system and when there is more shocks from the global crisis, more risks there are in Russia, but they do not have an extraordinary, systemic nature,” said Finance Minister Alexei Kudrin. This implies he wants us to believe that if there were an “extraordinary, systemic” basis for this collapse, he would admit it.  It’s nonsense, from the highest levels of Russian government.

And it’s all happening with oil prices at massively high levels compared to just a few years ago.  With its crazy behavior, Russia has killed its golden goose.  Consumed with a frenzy of hatred for the outside world, it apparently never stopped to think for a moment that Western demand is crucial for Russian economic prospects, so it needed to do all it could to promote the U.S. economy. Instead, Russia has relentlessly sought to attack and undermine the U.S., and now those chickens have come home to roost.

Anders Aslund says things will get much worse before they get any better, reminding us that Russia also has the business cycle to contend with, something that in its crazed nationalistic furor Russia seems to have forgotten about.

9 responses to “Special Extra: In Russia, Black Tuesday — the End of Days

  1. I can’t stop grinning. I may have a smile for a long time to come. What a beautiful schadenfreude moment!

  2. Russia is faced with an interesting dilemma. The monies owed by Russian companies to foreigners pretty much equals the 500-or-so-billion dollar stabilization fund Russia claims to have. If foreign creditors see that Russia is pulling money out of its funds to play the Russian stock market, this will make them very nervous as to whether they will be paid by Russian corporations (in effect state corporations by another name). Some might want to call in their debts if they think they will be stuck with worthless IOU’s. I am not convinced that Russia has full access to the monies that it has outside of Russia.

  3. It’s people finally waking up to the reality that Russia is ruled by a proud KGB spy. It’s the beginning of the end for the neo-Soviet state.

    This was being said for how many years now? Why are those people are so slow and dense to be waking up in such a small batches over a decade?

    LA RUSSOPHOBE RESPONDS: Good question! Got any answers? But perhaps 10 years is a very short time actually. After all, it took moronic Russians more than 70 years to realize that communism was bad, didn’t it?

  4. Fr0m the outside, it certainly does look like the end of the Putin regime. Unfortunately, Russia does not operate that way. Putin and his puppet Medvedev will blame saboteurs, opportunists, spies, and Western speculators on the collapse. Putin will use this opportunity to seize even more control of companies and the country. This has been his modus operandi every time there has been a crisis. Kursk, Beslan, Nord Ost. The situation will get much worse. It is the ordinary Russian, not Putin, who will feel the pain.

  5. From the Financial Times

    http://www.ft.com/cms/s/0/6ff9306c-83f1-11dd-bf00-000077b07658.html

    Andrei Sharonov, managing director of Troika Dialog, a Moscow investment bank, and a former deputy economic minister, said: “This is a vicious circle,” said , .

    “It is a situation of total mistrust. The liquidity crisis is being caused by a crisis of confidence in which people are frightened to borrow and frightened to lend.

    This is what happens when you build a society on a foundation of deceits. Complete meltdown.

  6. Anders Aslund believes that the crisis in Russia will get much worse before it will get better. There is little Russia can do about it. The problem is that Aslund has been trying to restore his badly damaged reputation as an economist after his Shock Therapy failed miserable in the early ’90’s. Under normal Russian leadership, like Nemtsov type of personality, Russia might just suffer a mild recession. Under Putin, Russia will problem experience hardships akin to 1998. Bank failures and bankruptcies. It will be interesting to see if Russia decides to print more currency like they did in the Soviet days. That will truly be a disaster. But the best thing Putin could do would be to resign. He won’t do that. So he will need to kiss Western leaders asses. He won’t do that either. I guess his can go back on CNN and discuss his conspiracy theories. That he can do well.

  7. What was going on in Soviet Union all these years was more or less totalitarian socialism (which was instituted after brief initial periods of proletarian dictatorship and limited-scale free-market experiment (NEP)), not declared communist democracy. That being said, I believe the pure communist nirvana is unattainable, for the fallacy of human nature. On related matter, “the beacon of democracy” (you-know-who) looks more like proto-fascist plutocracy, so, really, whom anyone’s to take an example from?

    LA RUSSOPHOBE RESPONDS: Still took them 7 decades to figure out it was bad though, however you want to call it, so maybe they are making progress if Putin only takes 2 or 3.

  8. “…and it never stopped to think that Western demand is crucial…” and that is why China is not telling the West and U.S. to go fly a kite, they get it (economically anyways). Poor Russia, never thought for a moment that she could have her blintzes and eat ’em too. If only she would wake up and realize that having a strong trading partner in the U.S. (and the West) would make her strong as well. Putin is a putz!
    Hey La Russophobe…time to post that cartoon again!

  9. KIT just went down. What losers the Russians are! Their stock market is tanking, and their banks are going bankrupt. Only a loser country has banks that go bankrupt and stock markets collapsing. Do svidanyia, bankrupt-bank losers!

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