The Neo-Communist Stock Market
It’s getting rather embarrassing these days to be a Kremlin flunkie.
One minute you’re given marching orders, for instance, to tell the world the Kremlin isn’t buying up shares in Russian enterprises in a cosmically insane effort to create a Potemkin illusion of prosperity just like they used to do in Soviet times. But no sooner do you start parrotting that absurd line (as a number of Commissars of the Internet did right here on this blog) than the Kremlin comes out and admits it’s going to do exactly that, spending 15% of the National Welfare Fund starting on Monday.
And sure enough, on Monday the RTS dollar index was up nearly 5% with the key equities of interest to the Kremlin (Gazprom, Lukoil, Rosneft, etc.) and the overall oil & gas index up over 10%. But other sectors were down, particular the consumer & retail index, which was down nearly 5%. Electrical and finanancial indices were also in the red.
The Kremlin also moved aggressively to support the value of the ruble, which has plunged right along with the stock market, by simply banning currency trading it doesn’t like and spending truly obscene amounts of money buying its own currency in order to create the illusion of value and staunch breathtaking inflation. This action is motivated by the same sort of “thinking” that tells the Kremlin it can protect the stock market itself by simply banning trades whenever they move in an undesirable direction.
The contempt being shown by the corrupt Putin regime for the basic principles of market capitalism is quit stunning. It’s as if the Kremlin has concluded that the rules of economics simply don’t apply in Russia, just the same view it adopted during Soviet times. The whole nation of Russia is rapidly turning into exactly the same kind of Potemkin Vilage that the Soviet rulers created, and day by day more and more ownership of property is moving into the Kremlin’s clutches. Indeed, at this point it’s quite difficult to say whether there currently exist any real bases of economic power in the country that are fully outside the Kremlin’s control.
Writing in the Moscow Times columnist Alexei Bayer sums it up:
Prime Minister Vladimir Putin recently said that the financial crisis has undermined confidence in the United States as the leader of the free world and destroyed trust in Wall Street — perhaps forever. It is an amusing assertion. Even though the debacle began in the United States, the dollar has been rising, gaining around 15 percent against the ruble. Investors have been dumping emerging governments’ Eurobonds and buying U.S. Treasury obligations — still the safest financial asset around.
The Kremlin risks emulating another arrogant government, the administration of U.S. President George W. Bush. Until recently, Bush and his economic advisers kept insisting that U.S. economic fundamentals were sound and that the financial crisis would take care of itself.
Russian leaders seem to think that their country will not only avoid the coming global economic calamity, but could actually benefit from it. In reality, Russia is facing an imminent downturn at a time when it is unprepared, isolated and with business and investor confidence badly shaken. There are troubling signs that Russia has been excluded from the important international decision-making process regarding key economic issues.
Ever since oil oligarch Mikhail Khodorkovsky was thrown into prison, the Kremlin has moved inexorably to wipe out such centers of power. And with them, of course, go the country’s ability to innovate and grow. Russia has once again purged dissent and information from its society, with the natural result being that it languishes in a state of economic malaise from which there is no escape.