THE BLACK KETTLE

Proverbs 21:30

Russia’s Economy in Steep Decline, Yet U.S. Passes on Chance to Crush Putin

Kim Zigfeld

The Russian economy has recorded its sixth straight quarter of declining economic growth. A year and half ago, Russian GDP growth was above 5%; now it’s barely above 1%, and the worst appears yet to come.

Ironically, as second quarter 2013 performance results came out last week, the truly frightening news for Russia was how well the country’s stock market was doing. It shrugged off news of the sixth straight quarterly decline, and it shrugged off the fact that the Q2 growth of 1.2% was more than a third less then the Kremlin had predicted. The only way the Russian market could ignore news this bad? By already being dead.

Pavel Demeshchik, a dealer at ING Bank in Moscow, told the Wall Street Journal: “The market is thin, volumes are low. All went to dacha after lunch on Friday.” The market doesn’t care how bad the news is because hardly anyone is trading.

At the start of the year, the Kremlin rosily predicted 3.6% growth for 2013 — the same level Russia had in the first half of 2011. By April, the Kremlin was already backing away from that prediction, cutting the forecast by a third to 2.4%.

The Russian economy is spiraling helplessly into recession even though the price of crude oil, its lifeblood, remains strong. The reason is simple: Putin’s draconian neo-Soviet policies are choking off foreign investment and causing domestic capital to flee at an alarming rate. There simply is no money available for building factories and creating jobs.

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August 18, 2013 - Posted by | Uncategorized

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