EDITORIAL
Russia, Enslaved
Two weeks ago, investors began worrying that the Chinese government would raise interest rates in order to keep the reins on inflation as the Chinese money supply outstrips production. If it happened, it would be a sign that China’s recovery from the global financial crisis was faltering, since increasing rates would reduce the amount of capital available for investment and growth. That would mean reduced Chinese demand for many foreign imports, chief among them crude oil.
Immediately, the price of crude began to fall, between January 19th and January 29th shedding over 6% of its value.
Russian stocks immediately fell as well, dropping well over 5% of their value during the same span. The Goldman brokerage house issued a warning to investors to abandon their Russian positions in order to avoid being caught in a wicked backlash.
Russia was revealed, once again, to be a helpless slave of the crude oil markets even though it is ranked as the 55th least globalized of 60 major world economies because of the relentless isolationist policies of Vladimir Putin. That is a true testament to the pathetic weakness of the economy Putin has built.