The Russian Collapse?

Almost all of the world’s financial systems are getting a good workout and examination during the current crisis.  In some ways, this is a good thing, just like taking your car into the shop every 10-25k miles for a good going-over by a mechanic with a reassuring thing up on the wall somewhere.

In most cases, the parts of the machine that were not working (and oh, goodness, weren’t there just a great number of these in unregulated America?) fall apart or become obvious very quickly on close inspection.  In most parts of the world, things were basically working together, but the strain of the crisis has everyone worried if the seals will hold, or the engine blow a rod.  That’s pretty normal, and my guess is that many countries will work out improved regulatory systems for the long haul that will have shown this downturn to be an opportunity, taken as part of the economic system growing up.

Then there’s Russia.  (I could add Venezuela, but why bother?)

In the middle of building the world’s largest kleptocracy, Mr. Putin ran into a problem: the lights went off!  Here he was, blowing up civilians in apartment buildings in order to get “elected” (picked),  then destroying the opposition, eliminating the justice system, destroying all vestige of early democracy, de-clawing the Communist Party (even they hate him today), nationalizing all resource companies, intimidating all critics via a direct system of assassination (even in London and Vienna), and carefully orchestrating  a life-in-office gig while working on re-constituting the old Soviet Union, when suddenly – oil prices dropped!

Having personally destroyed the market economy, and removed all traces of democracy, there aren’t a lot of places to turn for help now; oops.  The system, instead of being diverse and robust, is a monoculture with no life to it.  And, wouldn’t you know, he has blown his reserves on trying to save the ruble, while people like me were warning investors for the last couple of years to get as far from Moscow as they could (too bad BP didn’t listen).

Now, he’s all alone with his puppet, Medvedev.  Except, it turns out, Medvedev has started saying not-nice things about how their economic problems are his fault.  What?  AND, firing governors that Putin / Stalin himself had personally installed, after removing citizens’ rights to elect them. 

Although I do think oil prices will climb somewhat, I don’t think this will save Putin or his current ideation of Russia.  It’s going to be Back to the Drawing Boards, boys, but a lot of people related to Russia will get hurt on the way.  Russia seems, to me, on the verge of collapse. 

And you can add in the $500B in commercial paper outstanding that almost none of those non-capitalist companies can pay. 

Russia needs to Reboot.