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On Economics Putin Is on the Defensive. Spending Personal Political Capital

Does not seem as resolute and with as clear vision on the economic side side of things as he does on the political side

Generally, Putin was clearly defensive when asked questions about the Central Bank and the Government. Especially in contrast to the absolutely magnificent way he handled the questions about the Ukraine, even when asked by a very hostile Ukrainian journalist.

Again, as I so often say this, I am not a mind-reader or a prophet. I cannot tell you what Putin thinks or what he will do. But I think that many years of studying the man give me a pretty decent gut feeling about him and that gut feeling tells me that while he has a clear and strong vision on international politics in general, and especially about the Ukraine, he lacks such a vision for economic problems.

<figcaption>So is Putin a genius chess player?</figcaption>
So is Putin a genius chess player?

For the Ukraine his position is crystal clear:

"Crimea is ours forever, we will not let you crush the Donbass, we want a untied Ukraine in which the rights of all people and regions are respected and you will have to negotiate with the Novorussians who have a right of self determination" (which leaves open the possibility that while Russia might "prefer" a united Ukraine, the Novorussians have the right to decide otherwise).

Clear, direct and, I would argue, perfectly reasonable. In contrast, in economic I get a sense of faith-based politics:

"market forces will correct the current artificial situation and within 2 years the crisis will be over".

The problem with that is that the very same Putin ALSO says that the West is completely manipulating the markets and not allowing them to act. So what he is really saying is this:

"the Empire does not have the means to artificially skew the markets for more than two years". 

Oh really?  I am not so sure of that at all. In my book the Empire has been skewing the markets for many years already (I would argue since 1971).

Bottom line, what I hear from Putin is "more of the same" and since I don't like what I have seen so far, I can only add "only worse".

Still, the situation is not necessarily hopeless.

While I think that Putin's economic policies are wrong and while I believe that the Russian Central Bank is very much part of the problem and not the solution, this is not a black and white binary kind of choice: playing by the wrong rules or on the wrong field does not necessarily mean that you will lose, only that you have made the wrong initial choice. 

For one thing, you can make the argument that the Ruble is a much more credible currency then the Dollar.

Second, I do agree that market forces are resisting the US distortion and that the integration of China and Russia will inevitably contribute to help the Russian economy.

Third, the EU is already in recession and if that get's worse, and it will, this will start pulling down many US banks who are heavily linked to the EU market.

Fourth, in objective terms, Russia is sitting on a tangible fortune of natural resources and she has full access to the gigantic Chinese market. In these conditions, it is going to be awfully hard for the West to "isolate" Russia.

So, objectively, Putin is right about one thing: even if it does get worse before it gets better, it will inevitably get better.

So is Putin a genius chess player? That is not quite how I would put it.

He definitely has a record of absolutely brilliant moves, but right now he is clearly struggling. I am like everybody else, I would like him to pull yet another brilliant "chess move" and stick it to the Empire but I don't see how we could do that, at least not in this point in time.

What I saw today is a Putin clearly on the defensive who had to invest a lot of his personal capital of popularity and trust.  He honestly admitted that things might get worse and that there is no quick fix to the current crisis. 

He did commit to a time frame of 2 years which is both very shot and very long. It is plenty enough time to lose his popularity and very little time to turn around such a huge country like Russia.

The most poignant moment of the entire 3 hours came when Putin explained what was at stake today.  He said:

"You know, at the Valdai [International Discussion] Club I gave an example of our most recognisable symbol. It is a bear protecting his taiga.
You see, if we continue the analogy, sometimes I think that maybe it would be best if our bear just sat still. Maybe he should stop chasing pigs and boars around the taiga but start picking berries and eating honey. Maybe then he will be left alone.
But no, he won’t be! Because someone will always try to chain him up.
As soon as he’s chained they will tear out his teeth and claws. In this analogy, I am referring to the power of nuclear deterrence.
As soon as – God forbid – it happens and they no longer need the bear, the taiga will be taken over (...) And then, when all the teeth and claws are torn out, the bear will be of no use at all.
Perhaps they’ll stuff it and that’s all. So, it is not about Crimea but about us protecting our independence, our sovereignty and our right to exist. That is what we should all realize."

Amazing words which fully confirm one of the most important facts of the current situation: the Empire and Russia are at war, a war in which either the Russian Bear will be "stuffed and that's all" or the Empire will crumble. This is an existential war for both sides, for the Empire and the Russian Civilizational Realm - one of them will defeat the other.

This is not the first time that Putin explains this, but this time I felt an urgency in his voice which I have not heard before. He was both warning the Russian people and asking for their support for him personally.

My guess is that he will get it, I just don't know for how long.

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