When Hindsight Is No Longer Perfect

By
Real Estate Broker/Owner with Daytona Condo Realty, 386-405-4408

I believed that I understand and follow things in Russia, but they change so fast, and so unpredictably, that even my hindsight is no longer perfect…

You gotta love those conspiracy theories, which presume that everything is planned in advance and then meticulously executed. What conspiracy, when nobody can predict with certainty what would happen in a week? But Russians love the theory, that America has nothing better to do than seeking to destroy Russia for decades and centuries.

I do not envy our government, as it is really tough. Of course, they brought it upon us, as they seemed to have little if any idea of the world around us, that it is not even funny. Yes, what we have in Russia, is to a huge measure the result of America’s foreign policy, or lack thereof.

Last Friday the official exchange rate of $1 for 58.28 rubles. It was crazy high. The exchange rate was for many years pretty stable and was in low to mid 30 rubles for $1. 

So, on Monday I checked Bloomberg, and the rate was 64.2 rubles for $1, and it was 11% increase in one day. And then today the rate jumped yet another 15% (later in the day it got a little less) and there was a moment when it even reached 80 rubles for a $1.

RussiaIt is a crisis. Russia is not China, and they do not manufacture much besides weapons. The country lives of oil and gas, and the budget is based on price of oil of $96 a barrel. Falling oil prices affected ruble. Sanctions do, too, as there are no cheap money to borrow anymore. The way they used to do it, when they borrowed at 3.2% interest and would lend to Russians on short-term loans at 15%-18%. Banks were leaving high. Now there is no cheap money, and Central Bank raised the interest rate 17% to curb currency speculation.

Russian propaganda is trying to tell people that there is no problem, tomorrow the ruble would gain and rise above the dollar, and the dollar is doomed to fall (I hear it for so many years, it is not even funny anymore), and that if there are problems, they are because the west and USA wants to destroy Russia and put it on its knees for trying to be free.

Putin has grossly miscalculated the West and the USA. The reaction to the Anschluss of the Crimea was a huge surprise to Putin. The weak and appeasing West and USA, who did nothing to Putin for playing war games in Georgia in 2008, suddenly are going strong and united, and standing for the principles. To tell you the truth, it is a surprise not only to Putin, but to me as well. In this case, a pleasant one (of course, for me, not for Putin).

Yes, he is a bully, and he miscalculated the whole thing, but the west and USA never made it clear to him. They were letting him do whatever he wanted with no ramifications. He was our LEnfant terrible, and our Presidents loved him, and did not smack him. And he thought that he figured them out. That they are weak, they are afraid of any confrontation, and he needed to act, bluffing or not.

Like many bullies, he saw a short term gain and hoped that everything else would somehow work out. He did not expect the West to stand firm, he did not expect the oil prices to fall, and he did not understand that he could not afford the sanctions. I do not think he even understood how deeply the country was integrated into the Europe and world economy. He did not understand that economically Russia is not nearly as strong as even the USSR, he did not expect the world start crumbling. His, Putin’s world crumbling...

The world, which he considers a taiga (Siberian Forest, wilderness), where Russia is a bear, and the bear does not have to ask anyone’s permission to do whatever it pleases (from his speech at Valdai Forum in spring 2014).

And now in 2 days ruble fell 25-26%.

There are very few things made in Russia with all Russian components. And if they can hold price, and only rise insignificantly, all other things, either made abroad, or made using the components from other countries, will see steep price hikes because when Russia is buying them, they have to spend way more rubles than before.

Fruits and vegetables, corn, grains, milk and meats; it all mainly comes from Europe, so it is going to cost more.

Will it hit people? Yes, it sure will hit them and hit hard.

Gosh, this post is becoming too long. I will stop here and then write another post, because I truly believe that events in this region, along with other places, would have such a profound impact on our future, that we can’t just afford being indifferent, not understanding where we are and what we need to do or demand from our politicians. Because we already learned, that they might know nothing about what they are supposed to make life and death decisions.

Here is the link to next installment. Thank you.

Image by Paul L Dineen via Flickr.com

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Rainmaker
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Ron and Alexandra Seigel
Napa Consultants - Carpinteria, CA
Luxury Real Estate Branding, Marketing & Strategy

Jon,

This is a thought provoking post...It is a sad state of affairs, and Putin has been aggrandizing himself and bullying at the expense of the Russian people.  But then, isn't it what a dictatorship does?  A

Dec 16, 2014 08:46 AM #1
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Jon Zolsky, Daytona Beach, FL
Daytona Condo Realty, 386-405-4408 - Daytona Beach, FL
Buy Daytona condos for heavenly good prices

Alexandra, yes, it is. But it is sad that the country has turned against the whole world. they turned against the very people, who care, who can and do help.

Dec 16, 2014 08:48 AM #2
Rainer
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Christina Botteri
REeBroker - Roseville, CA

Jon - Thanks for your insight. I really appreciate you taking the time to share them with us here. 

How will Russians possibly deal with the new key interest rate hike (from 10.5 to 17% - that's a whopping 60% increase in one day)??

I remember seeing one story during the Olympics that NBC produced that showed the towns nearest to the Park. It was shocking to see the contrast between the Olympic Village and the Village of Ashtyr. (6mo later, ABC News did this story: http://abcnews.go.com/International/russian-village-abused-forgotten-olympics/story?id=22374751)

Though it is not unique, it is a study in the fleeting rewards of government largess.

I look forward to reading your next installment.

Thank you,

Christina

Dec 16, 2014 09:33 AM #3
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Jon Zolsky, Daytona Beach, FL
Daytona Condo Realty, 386-405-4408 - Daytona Beach, FL
Buy Daytona condos for heavenly good prices

Christina - 17% is an attempt to stop currency speculation. A little too late, I believe.

Thanks for the link.  Nothing really new for someone who liv3ed 40 years in the Soviet Union. At least, no surprise.

Dec 16, 2014 12:26 PM #4
Rainmaker
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Winston Heverly
Winston Realty, Inc. - Atlantis, FL
GRI, ABR, SFR, CDPE, CIAS, PA

A collapse of their economy can't be good for the global outlook. It generally leads to more wars being waged.

Dec 16, 2014 12:33 PM #5
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Jon Zolsky, Daytona Beach, FL
Daytona Condo Realty, 386-405-4408 - Daytona Beach, FL
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Winston - very true. But they are moving towards it, and do we want to be the culporit in the eyes of 140 million people. How can you even help to people who believe that you are the cause of all their troubles for 60-70 years? But this is tricky, you are right.

Dec 16, 2014 02:03 PM #6
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