Putin, the Economics Professor

Long ago I thought that someone who tells others to do differently from what she or he does was called a hypocrite. This is the definition from Webster's dictionary: "a person who feigns some desirable or publicly approved attitude, esp. one whose private life, opinions, or statements belie his or her public statements". Later on, about 10 years ago, the then well-known then "Dr." Laura said that such person, when applied to her, is called a teacher.

We've just got ourselves a new economic teacher: Russian Prime Minister, nee President, Vladimir Putin. In his Davos speech he called on others not to allow too much government intervention into business, not to fall into protectionism, and a lot of other smart things. Other things were not that smart. For example the idea to have more reserve currencies and to make reserve currencies issuers accountable to other countries. Yeah, right. Putin has been talking for 3 years about making the ruble a reserve currency. He just doesn't understand that you can't appoint reserve currency, it becomes such in decades, if not hundreds of years. In all of history there were just a handful world reserve currencies: Roman, then Byzantine denarius, Venetian lira, English pound, US dollar. Maybe I missed one or two. Th yen and the euro both are gradually becoming reserve currencies now, but the jury is still out.

But the main thing is: Russia has just set huge tariffs for imported cars. So much for talking about the threat of protectionism. As for government intervention in business, Russia is a champion. Any businessman in Russia knows that whatever the government wants from him, it gets. Many give money, shares in their business, even abandon businesses to the government without a fight. Nobody wants to follow the steps of Khodorkovsky, who founded the best oil company in the country, was robbed of everything and sent to prison on fabricated charges. Niall Fergusson is absolutely right: “The idea of the Russians lecturing the West about how to run the economy is absurd,”

Of course, the best judge of economic ideas is the market. And what does Mr. Market tell us? The ruble fell another 3.5% against dollar on Friday.

I missed one opportunity to short Russia using Market Vectors Russia ETF (RSX). Maybe it's not too late?

Full disclosure: At the time of publication author did not have any positions in RSX. Positions can change any time.

Comments

[Ferdinand E...:]

It's difficult to say who is a hypocrite and who is not. There are/were many hypocrites running countries, and George W. was probably better than Putin on that score. The difference is that George was surrounded by hypocrites, whom he evidently thought had something upstairs. I don't think that Putin is impressed by ignorance or incompetence.

Feb 02 08:43 AM

[beentheredo...:]

Spudster, FYI, Bush never claimed to have won the 'conflict' in Iraq, a common misconception perpetrated by the media and the ill informed. He was refering to the battle between U.S. forces and organized Iraq military units under the command of Saddam. Also FYI our venture into Iraq was not a 'conflect', it was a War.


On Feb 02 08:21 AM Spudster wrote:

> Are you a paid shill for Khodorkovski or just dumb?
>
> Khodorkovski did not build a great oil business any more than Bush
> won the conflict in Iraq.
>
> Or perhaps your definition of build actually means steal?
>
> As for Putin - absolutely the situation in Russia isn't good. But
> it is amusing how Russia's economic situation is due to corruption
> and mismanagement, but the economic situation in the US, the UK,
> the Baltics, the rest of Eastern Europe, Japan, etc are due to <br/>"housing
> bubbles", "global recession", "high energy prices", etc etc.

Feb 02 08:59 AM

[kelm:]

Our world leaders are indeed united - they all have sunk to the same level. Or maybe they were always at that level and the better economic conditions simply masked the fact. You may still have a short opportunity for Russia.

Feb 02 09:08 AM

[Gtarras:]

with average P/E of 3.5 (lowest for all markets) and oil/metals scraping the bottom, I would be VERY careful shorting russian markets based on whatever Putin says... whatever he says has not changed since mid-08, when the RTS was ~5 times higher...

Feb 02 09:27 AM

[ken wender:]

The Russian people are great but their government is a criminal enterprise.

Feb 02 10:06 AM

[auto44:]

I see three letters(KGB).

Feb 02 10:08 AM

[kotika98:]

western leaders are just as blatant about self-serving grand words, just that Putin does not have Harvard or Oxbridge educated speachwriters, so it all ends up sounding very crude. But i like his courage - he is basically saying, put your savings into rubles. No different from an american president saying he is in favor of "strong dollar policy". what a joke...

i think i'll convert my cabbage into Mexican Pesos, and i'm serious.

Feb 02 10:16 AM

[OldLimey:]

The same could be said about quite a few countries, don't you think?


On Feb 02 10:06 AM ken wender wrote:

> The Russian people are great but their government is a criminal enterprise.

Feb 02 10:39 AM

[carey_jim:]

Some hypocrites are only benighted optimists who think others can do better than they did.

But historical truth is there for everyone to see. (No country, including America is 'without sin.')

I recommend a recent, well-written book on the subject by the economist Ha-Joon Chang:

Bad Samaritans, The Myth of Free Trade and the Secret History of Capitalism. www.amazon.com/Bad-Sam...

Feb 02 11:57 AM

[Onecent:]

Hey, Spudster, Khodorkovsky inherited a debt ridden state owned oil company with antiquated declining production and turned it into an efficient transparent shareholder friendly company by all western standards.

And, give us a break, Putin's Kremlin elite are as corrupt as the Sopranos. There is no equivalency to those government thugs at the top enriching themselves except in African hell holes. Get real.

Feb 02 12:03 PM

[Amvet:]

Khodorkovsky was part of the in-group of the Kremlin that stole Russia blind and were supported by the US government and media. The ax fell when Khodorkovsky tried to sell out to a foreign company. Luckily for Russia, Putin is a patriot and that is why Washington and touts hate him.

Feb 02 12:22 PM

[xmichaelx:]

Any claim of Bush's is irrelevant to the comparison Spudster was making. There's no reason that being a Bush apologist should hinder basic reading comprehension.

(BTW, whether the Iraqi conflict is a war or not will depend on your definition. No official declaration of war was ever made.)


On Feb 02 08:59 AM beentheredonthat wrote:

> Spudster, FYI, Bush never claimed to have won the 'conflict' in Iraq,
> a common misconception perpetrated by the media and the ill informed.
> He was refering to the battle between U.S. forces and organized Iraq
> military units under the command of Saddam. Also FYI our venture
> into Iraq was not a 'conflect', it was a War.
>
>
> On Feb 02 08:21 AM Spudster wrote:

Feb 02 01:49 PM