KGB Putin gets Economic Root Canal: Economic Prosperity is the Cornerstone of Power



             Vladimir Putin who until recently was riding high on the tidal wave of rising petroleum prices has fallen into the abyss of being an international pariah which has exacerbated the economic problems confronting Russian Federation.  Putin has had an amazing approval rating from Russians because he’s made the trains run on time and he’s used his petrodollars to remake the Russian Economy from the ground up.  The Russians suffered under the hapless Yeltsin who never managed to get a handle on economic policy and until recently the economy was booming and the stores had goods to sell.  Not so today.


            The ill-advised invasion of Georgia while a military success managed to arouse the suspicion of NATO, Frighten the oil markets at a time of runaway prices, unify some opposition from former client states and recreate the cold war while making Russia look like an unstable business partner.  Many people credit the machinations of Russia, for attempting to control the entire world’s oil, as key in the petroleum crisis that touched off the subprime crisis in America.  That in turn impacted the whole world but it hit the Russians particularly hard.  The Russian Stock Market has been taken off the line for days at a time because of volatility and the banking system and the currency itself has been revealed as shockingly weak.


            The Russian Federation was growing the biggest crop of millionaires and billionaires on the planet and during this time Putin could do no wrong.  Life was good and when it came time to make a play for Georgia the Russian People stood with Putin, who had changed their lives for the better in so many ways.  Now the economy is in the toilet and the newly rich are watching their dreams drain away while thinking dark thoughts about Vladimir Putin.  He scared off a lot of investment dollars that are sorely needed now and he has presided over a catastrophic drop in oil revenue that fueled Russian prosperity.  Needless to say these newly rich/ newly impoverished people are not going to stay with him forever unless he fixes the economy again.  I dare say they’ll be concerned about any further military adventures that have the potential to cut into their bottom line.  An Old World totalitarian like Putin may be sadly out of place in the global economy of the twenty-first century


            Europe looks at Russia and wants to engage diplomatically while digesting the Russian adventurism in Georgia and once again it may come to the conclusion that Russia is still not ready for membership in the community of civilized nations.  Putin tipped his hand and even the French and the Germans must realize that he intends to reconstitute the old soviet empire with all the client states of old.  There will be economic and social consequences to be paid in the years to come as a newly wary Europe tries to come to terms with Putin’s Russia.  I suspect that the Russians and the global economic crisis will be the triggers to elevate Europe, once again, into world leadership and that this elevation will annoy the Russians.  For now the world has the USA to bemoan and cry about but on every continent the realization is spreading that America is in steep decline and that her days of world domination are coming to an end.  A Europe without American to resent, and to defend them and subsidized their lobotomizing socialism, is a Europe that will be forced to make changes for the better even as the USA undergoes its own adventure into socialism.  Europe will rise quickly, its beginning now, because if it doesn’t than the Russians will be content to squeeze the economic life out of them, and they know it.


           Europe, like Russia will rise again, because nature abhors a vacuum.  In the post American world the fate of many will be determined by the ancient rivalry of Europe and the Russians.  What’s old is new again.  Consider some clips from an article on Reuters:


UPDATE 3-Crisis will not sink Russian economy – Putin

“They allow us to preserve macroeconomic stability and therefore they will help us prevent a surge in inflation and a sharp change in the rouble rate,” he said.

Thu Nov 20, 2008 9:39am EST

By Gleb Bryanski and Denis Dyomkin

MOSCOW, Nov 20 (Reuters) – Prime Minister Vladimir Putin assured Russians on Thursday he would guide them through the global financial crisis without the economic convulsions of the past, but acknowledged there would be pain.

Putin unveiled a $20 billion economic stimulus package and help for people hurt in the slowdown as he set out a long-term response to a crisis that has cut more than 70 percent from the value of Russian markets since May and hammered the rouble.

The crisis has dented confidence in the Russian economy and raised the prospect that popular discontent could, for the first time, seriously undermine the ruling double act of Putin and his protege, President Dmitry Medvedev.

“We will do everything, everything in our power … so that the collapses of the past years should never be repeated in our country. We will do everything in our power to defend the deposits of our citizens in banks,” he said.


The fiscal stimulus package will include a cut in profit tax, which accounts for 8.5 percent of budget revenues, to 20 percent from 24 now, and a new depreciation mechanism that will allow firms to reduce the profit tax further.

The announcement came as official data for October industrial output growth was revised downwards, to 0.6 percent year-on-year from the 1.6 percent released earlier, in new evidence of an economic slowdown.

Finance Minister Alexei Kudrin said Russia could next year have its first budget deficit in a decade but the deficit would be covered by transferring cash from a rainy day fund, not from borrowing. He said the 2009 deficit may equal 1 percent of GDP.

Putin said he believed Russia’s large gold and foreign exchange reserves and the funds it had accumulated during years of high oil prices put it in good stead to weather the crisis.

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