Bloomberg News today reports that people inside of Vladimir Putin's inner circle are getting nervous about the economic costs of his territorial ambitions.
As the Russian president plots his next move on Ukraine, investors are giving his inner circle pause for thought. Since Putin annexed Crimea in March in the teeth of international outrage, Russian stocks have become the most volatile since 2009. Swings in the ruble against the euro are now the most extreme on record while expectations for fluctuations in the currency against its emerging-market peers are at the highest in two years.
The article points out that the Russian economy is on the verge of a recession, that the country is too dependent on natural resources for economic development, and that Putin is very, very sorry. Really.
“Putin very clearly got the signal that sanctions had sent,” Vadim Bit-Avragim, who helps oversee about $4.1 billion at Kapital Asset Management LLC in Moscow, said by phone last week. “He realized that it’s better not to aggravate the rest of the world and turn the country into a pariah and lead it to isolation. This won’t benefit him at all.”
Getting past the fact that I don't trust any capitalist who spells capital with a "K," I don't think that we should trust anybody interviewed over the telephone from Moscow.
Putin = KGB.
It wasn't too long ago that investment bankers were getting blown up in the cars are going down in the streets of Leningrad. Not coincidentally, Putin was first deputy mayor in Leningrad.
Prior to the outbreak of the Civil War in the United States, some theorized that the economic consequences would be too severe for the North to actually go to war. Prior to the outbreak of World War II, some theorized that the economic consequences of a war between Britain, Germany, France and Russia would be too severe for any of those countries to go to war with each other. Prior to the outbreak of World War II, some theorized that Hitler would realize the inordinate cost to Germany of this territorial ambitions.
Don't count on the stock market or capital flows to bail out the world for a lack of resolve.
Because make no mistake, it's largely a matter of Putin's resolve to do these things that's more important than anything else.
If he wants to go through with this, he will go through with it, and damn the economic consequences. They'll be short-lived anyways.
That's how dictators see it.
My suspicion is that stories like this from Blooomberg are mean to satisfy the people here at home that something is being done about Putin's aggression, when in fact Obama's acting as a Ways and Means committee for Russian aggression.
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