#124: Riddle, mystery, enigma


Winston Churchill famously described Russia as “a riddle, wrapped in a mystery, inside an enigma”, but he also suggested that the key to the riddle might be “Russian national interest”.

It is hard to disagree with either of his conclusions.

What follows is an assessment of Russia, and the rouble, from a strictly economic and financial perspective. If nothing else, we can at least hope to reach a balanced appraisal, which shows that the Russian economy is neither a giant nor a pigmy.

In fact, Russia emerges pretty well from the SEEDS process.

We cannot hope to understand Russia if we accept the forex markets’ long-established distaste for the rouble. What FX markets think about a currency isn’t science, of course, but the simple application of market exchange rates to rouble numbers can lead to conclusions which make no sense whatsoever. On this misleading basis, it is sometimes said, for example, that Russia has an economy ‘the size of Holland’, and her defence expenditure isn’t much bigger than that of France or Britain. Neither statement is meaningful.

An intriguing point to emerge from SEEDS analysis is that the rouble deserves a lot more respect than it tends to get. Unlike America, Britain, the Euro Area or Japan, Russia hasn’t spent a decade gaming her currency through “monetary adventurism”. Neither, for that matter, has she ever adopted the Western practice of “credit adventurism”.

Russia’s private and public debt equates to just 91% of aggregate national prosperity, at a time when ratios for the Big Four range between 340% for the US dollar and 456% for the Japanese yen. Russian exposure to the banking system is small, too – total financial assets stand at 192% of prosperity, nowhere near America’s 660%, let alone Britain’s 1580%.

Like other developed economies, Russia has in recent years experienced a deterioration in prosperity per capita, but this decline has been extremely modest, and SEEDS projects little or no ongoing deterioration, which – again – is in stark contrast to America, Britain or the Euro Area.

Russia, in fact, is one of the few countries which can look ahead to the prospect of the next crash (GFC II) with comparative equanimity.

SEEDS analysis puts this equanimity into perspective. Growth in reported GDP since 2007 may have been pretty modest, at 12%, but this growth has been genuine, because Russia hasn’t emulated the Western practice of pouring debt-fuelled consumption into the system. Over the last decade, each RUB 1 of reported growth has been accompanied by only RUB 3.28 of incremental debt, a ratio lower than the United States (4.33:1), Britain (5.45:1) or the Euro Area (5.97:1), let alone Japan (13.9:1).

As you would expect, Russia’s trend ECoE (energy cost of energy) is low, estimated at 4.9% in 2017, versus a world average that is not only far higher (at 7.7%) but is also rising a lot more rapidly – by 2025, when the global ECoE is likely to have reached a growth-throttling 9.6%, Russia should still be at (or just below) 5%.

Also in 2025, the average Russian can expect prosperity to be pretty much the same as it was in 2017, a far cry from the rates of deterioration to be anticipated in Britain (-5%) or the United States (-6%). It’s worth remembering, too, that the average Russian is about 9% more prosperous now than he or she was back in 2007, again in stark contrast to America (-7%) or the United Kingdom (-9%).

On a longer perspective, Russians remain 75% more prosperous now than they were back in the dark days of 2000, and rampant inflation (which reached 72% in 1999) has been confined to the history-books.

In short, it’s easy for critics to ascribe the popularity of Mr Putin to crude nationalism or electoral chicanery – but SEEDS analysis suggests that prosperity, and economic resilience, might have rather a lot to do with it.



66 thoughts on “#124: Riddle, mystery, enigma

  1. Good to see positive news on Russia. Instead of being constantly belittled by the MSM and warmongers in Washington and Tel Aviv. Fortunately some of us can see reality much clearer and you are one of the good guys.

    • Thank you, John. My aim with this isn’t to be pro- or anti-Russia (or pro- or anti- anything, for that matter), just spell out what my numbers tell me.

    • I respect your point of view, neither agreeing nor disagreeing, but here’s what I’m getting at.

      Economics, as a technique, is in a mess. As a result, I doubt if governments in the US, UK and elsewhere even really understand their own economies – so there’s probably zero likelihood that they understand the economy of Russia!

      Only the other day I read, albeit on the BBC, that Russia spends $69bn on defence, which, of course, is total nonsense (just look at the size of Russia’s armed forces).

      Here, I’ve got no axe to grind. SEEDS produces numbers without political or commercial spin. There are websites everywhere contesting stories about Russia, the West, Syria, etc etc etc. But do a search on the Russian economy and you won’t learn much. Even the FX markets, which should be strictly profit-motivated (so not political), seem, in my humble opinion, utterly mistaken about the rouble.

      So the aim here isn’t debate about the political issues. I hope it doesn’t sound pompous if I say that “better understanding of the Russian economy and finances” is the limited ambition for this article?

  2. An unbiased Russian friend told me that Moscow at least feels very confident, and noticed a lot of new babies – generally a good economic sign. Two years ago, the propaganda machine was telling us that the Russian economy was ‘certain to collapse’…

    Putin’s moderate nationalist government has demonstrably done a lot of good, and those seeking to topple him should consider that they might be making room for something much worse, for themselves as well as Russia – there are some real crazies there, as everywhere.

    As for corruption, the same friend tells me that the everyday kind has been reduced – modest gifts of wine, perfume, luxury food are expected, rather than cold cash. Not so very different to the old system of lavish entertainment expenses in the UK – I used to enjoy those when my job consisted of taking media people to lunch!

    • Indeed so, and popular perceptions cannot entirely be divorced from history.

      Anyone who thinks Tsarist Russia was a nice place needs to read some history. My late father – who spent a lot of time in the USSR, and even had the privilege of meeting Kruschev on a number of occasions – had nothing much good to report of communism, even though he really liked Russia.

      Russia in the 1990s was a disaster, culminating in financial catastrophe.

      So what SEEDS seems to be telling us – in, I stress, an objective way – is that things probably seem pretty good in Russia, certainly by any historical perspective.

    • “I don’t want to be a capitalist”, said a young man operating the hotel lift. “I just want to live like one!

      A true story, albeit in 1970s Prague, not Moscow.

  3. A fairly simple SWOT analysis I did years ago considering population density, resource types, resource density, geography, and climate (projected) – suggested to me that Russia has a relatively strong economic potential compared to other developed nations. If I was Putin I would feel fairly smug when comparing Russia to its Western European neighbours.

    Severe mismanagement can always mess it up of course.

    • That makes sense.

      As for mismanagement, that’s not all that likely if they continue to remember the 1990s – that decade began with the West sending some of its best economists to advise Russia, and ended with default and hyperinflation…

    • Sending some of it best economists to advise Russia, was a deliberate attempt to open up Russia to the west so it could be exploited. We all saw it happen. These economists were economic “hit men”.Nothing was accidental about any of it.

  4. The Prague liftman sounds like a young Cuban reported recently in The Guardian:

    ‘I don’t ever want capitalism here: but I’d like to travel, to have some more opportunities in life, be able to buy things, and own a car!’

    Interesting, after decades of indoctrination on the island of simple-living.

    • My father had an abundant stock of wry jokes told by Russians (and others in Central Europe) about communist inefficiency. Another favourite, also from Prague:

      “I see we’ve appointed a new admiral – isn’t that crazy?”
      “Why crazy?”
      “Because we haven’t got a navy, or even a coastline – so how can we have an admiral?”
      “Why not? We’ve got a minister of justice…..”

  5. Your conclusions are, in fact, remarkably in harmony with Putin’s recent, long, national address on the state of Russia – which suggests a Russian straightforwardness which contrasts rather well with the boasting Brussels about recovery while prospects are still dismal for so many young Europeans.

    • Thank you – and, since I wasn’t aware of it or influenced by it, I take that as a good indicator on how SEEDS does its job.

  6. Tim,

    This – and there are other articles on Dacha’s makes me wonder if this doesn’t have something to do with Russia’s continued prosperity

    Click to access food-gardening-russia.pdf

    If a huge amount of Russia’s food is ‘self provisioned’ – to say nothing of course of the vast rural population doing as they do here and using home produced firewood for home heating then it must mean that ‘essentials’ are being provided for many from their own labour rather than in the cash economy.

    • That is a very interesting thought, John. I’ll look at the link with interest. From what I know of Russia (which, outside economics, isn’t all that extensive) it sounds perfectly logical.

      Russia’s population density isn’t high, and population numbers haven’t increased markedly in a long time. It’s possible, too, that Russians learned (or sustained, or revived) self-sufficiency skills during the inefficiencies of the communist era, when food supply wasn’t exactly reliable.

      Generally, I think it’s fair to say that data on world energy consumption and supply refers only to traded energy, because there’s no way of capturing self-supplied energy (I need to check this, but I’m pretty sure).

      It would be interesting to reflect on this topic for other countries – India, Brazil and Argentina spring to mind.

  7. Dr. Morgan
    Let me run some logic by you.

    Russia, which can’t really borrow on favorable terms in the Western money centers, is dependent on cash flow from real investments. Likewise, consumer debt has been kept under control. Therefore, it seems logical that both the Russian government, Russian businesses, and Russian families have all consumed (used energy) at rates below what would have happened if they had had easy access to debt.

    The West and Japan, (and China), on the other hand, have bought energy intensive styles of living which cannot be supported unless cash flow from existing investments increases significantly. If cash flow fails to materialize, then there will be a financial crisis and a crisis of maintaining existing styles of living.

    Russia is advantaged in three ways. First, their investments in oil and gas and nuclear may actually produce increasing cash flow over the next decade or so. By contrast, US investments in shale oil and gas will likely NOT see increasing cash flow. Second, while an increase in energy cost of energy will reduce the Russian style of living, the effect will not be nearly so great as in the West and China because they have much less debt to work off. Third, any time there is a forced retrenchment, depressions and their irrational fallout tend to happen. For example, in the US in 1933, food was literally dumped on the ground. We would expect less irrationality in Russia.

    Don Stewart

    • A lot of interesting ideas. I can certainly look at energy use per capita, a valid metric for Russia because energy use it isn’t very ‘offshored’ by importing energy-content products (food, manufactured goods etc) from abroad.

      Your logic makes sense to me. I read an interesting study recently of the extent to which US shales have always had negative free cash flow. I certainly suspect that a crash does loom, and also suspect that it could centre on fiats rather than simply banks this time.

      Russia has good “pre-GFC II” metrics, according to SEEDS. I’m likely to write up countries at the other end of the spectrum fairly soon. Irish and Canadian readers aren’t likely to enjoy those articles, but the outlook for the US and the UK looks pretty grim too. The US budget looks to me – admittedly from overseas – wholly mad. My gut feeling is that the UK economy has started falling to bits.

      Finally, did you see Nomi Prins’ views on collapse from the bottom up? ZH reported it. It seems pretty persuasive.

  8. Could we have a link to

    Finally, did you see Nomi Prins’ views on collapse from the bottom up? ZH reported it. It seems pretty persuasive.


    Also of course if and when it all goes wrong, I suggest that the Russian state would be much better placed to intervene both politically & physically than the US with its emasculated government and public sector

    • It’s interesting you should mention the ability of the state to intervene, because that’s something I’ve been looking at, for a study of the outlook for the USD, GBP, JPY and EUR if (though I think it’s ‘when’) GFC II strikes.

      I call this “acquiescence risk”. Say a crisis hits and the UK government (just for example) announces a rescue plan. This is likely to revolve around rescuing the banks (and thereby the bankers),QE on a huge scale, and, quite possibly, bail-ins. Voters would assume that austerity would follow.

      Back in 2008, the public swallowed it – but a lot has changed in politics, right across the West, since then. What if an opposing then party voted against it – and pledged itself to reverse or unpick it at the first opportunity. This opposition might propose nationalisation of the banks, and wealth taxes to counteract the asset effects of QE. Can we really see Mr Corbyn, or Mr McDonnell – or the voters – accepting another “rescue of bankers”?

      Alternatively, Ireland (say) needs a rescue, as per Greece – will Germans accept this, or will a left- or nationalist-leaning party urge German voters not to throw their money away on another EZ peripheral?

      So, if a rescue is needed, will voters go along with it? Russians would, and may not need much of a rescue anyway. But British, Italian, French, German or Spanish voters? I wouldn’t count on it!

    • I take two main points from what Nomi Prins is saying. The first is that central banks completely control what’s happening in asset markets, over-ruling the normal role of market forces. That’s true enough, though I’m not sure it’s altogether a new observation.

      Second, and really critical – so the main take-away – is that the system won’t crash from the top down, but from the bottom up. Things start to unravel, not when someone decides that X or Y bank is over-stretched, but when ordinary people can no longer keep up.

      The system has put the ‘ordinary’ or ‘average’ person on a treadmill, where one day he or she can simply no longer earn enough to pay for housing, essentials and keeping up the payments on credit.

      This seems to me profoundly true. It’s one reason why I put so much emphasis on prosperity. According to SEEDS, the ‘average’ person in most developed economies is now a great deal less prosperous than he or she was, say, ten years ago. That profoundly affects their ability to keep up.

      By measuring the debt burden (and the broader vulnerability of total banking system assets) against prosperity (rather than against GDP), we can see where the cracks are starting to show.

  9. Hello Tim, thanks for the new article – I’m wondering if you’ve seen any impact on Russian prosperity from their move away from the dollar. In 2014 as I understand it Russian began exporting gas in Roubles/Euro’s. More recently they have begun using the yuan in oil trade.

    • I can’t say I’ve discerned that, though it might take time to show up.

      For the US, the “petro-prop” is utterly critical to the ability to go on issuing dollar debt. Moves to price commodities (and especially oil) are thus a grave challenge to the US system. If you can buy oil in, say, EUR or RMB, you no longer need to go into the FX market to buy USD before you can purchase oil. So a huge USD buying prop would fall away.

      Based on 2017 numbers, the market value of the USD was at a 78% premium to its value based on simple pricing parity. Moreover, the recent budget suggests an accelerating need to issue USD paper.

  10. The bail-outs of 2008 were perhaps largely accepted as the deposit insurance schemes were seen to hold good (except in Cyprus). Property valuations also recovered quite rapidly, which reassured the public.

    For them not to do so – for bail-ins to be resorted to, for property to truly crash – would change everything politically.

  11. As you are no doubt aware, the British seem to have tried to establish some form of ‘dacha system’ after the trauma of the 1930’s.

    I live in a terraced village house, built in 1949 by the local authority: all the workers’ houses here have huge gardens, both front and back, and it seems that the intention was to ensure that those who might be vulnerable to unemployment – and at risk of malnutrition – would have ample room to grow their own fruit and vegetables, and keep rabbits, hens, a pig,etc.

    These gardens are very much larger than the long narrow gardens of the old 2-up 2-downs built for workers in the 19th-century. And even more spacious than the decent gardens which the local, generous, landowner provided for his tenants in the now-listed 18th-century thatched cottages in the neighbouring village.

    The development here was exceptionally well-planned, around a new village green.

    Travelling around Britain, I’ve seen many such post-war developments, but have found very little in print on the subject. I wonder when it stopped: the later 1950’s I assume?

    One could say that forethought was last exercised in Britain some 70 years ago……

    • You can trace this movement through the late 1920s until the late 1950s, with artistic as well as practical dimensions. But to get a full grasp of it one needs social history.

      Before the age of industry, self sufficiency was the norm, with wages – even where they existed – being used only for things that could not be produced at home. This didn’t suit even agrarian employers, let alone industry. Pre-industry, Mondays were seldom worked, being known as “Saint Monday”, and workers who had made enough money for the week would often go home (or to the pub) as early as Thursday. Worst of all, self-sufficiency in food enabled workers to be – in the contemporary idiom – “saucy” towards employers. The aim was dependency of the worker on the employer. Various attempts have been made to turn the clock back on this, notably between 1945 and 1960. Local authority properties (“council houses”) often had gardens of 1/4 to 1/2 acre in that period.

      I could recommend the essay “Time, work discipline and industrial capitalism”, or the magisterial book The Making of the English Working Class, both by E.P. Thompson, who I had the privilege of meeting in my Cambridge days.

      But I actually recommend How to be idle, by Tom Hodgkinson. Though light-hearted in places, after a first chapter poking fun at the likes of Kellogg (the corn flakes man, “a puritanical health-nut who never had sex (he preferred enemas)”) and others, it settles down to a thorough examination of the working condition.

  12. ‘Collapse from the bottom up’ makes one think of the later Roman Empire, where the emperors found it necessary to compel workers by law to remain in trades and occupations which, in a declining economy, were no longer financially viable.

    One supposes that there must come a time when no amount of 3-for2 deals, ‘bargain’ mobile contracts, sub-prime car loans and ceaseless ‘seasonal’ sales (my inbox is full of them, and for high-end retailers, too) can hold back the effects of the steadily rising tide of relative impoverishment.

    But just what is the tipping point which will create mass redundancies and loan defaults? Intuition makes one sense that it is quite near……..

    • Indeed so, and energy costs have been cited in the Roman instance, by – if memory serves – Thomas Homer Dixon.

      As far as I can see, we’re at the end of an era driven by materialism funded on credit. The basic idea is that we can produce things ever cheaper (in the Far East), and sell ever more of them to Western consumers, even though real wages are weak. Debt has been used to span this chasm. That’s a big reason for the promotion of deregulation in the financial sector. The US, followed by the UK, have gone further down this road that most.

      The British economy, it seems to me, has now started crumbling, whilst the US faces some kind of credit implosion which cannot be kept indefinitely at bay by cheap money.

      This is why Ms Prins’ comments seem so apt to me – disintegration from the bottom up makes sense when you look at (a) broadening hardship, and (b) the inability of ordinary people to take on ever more credit, indefinitely. So I really think she is on to something with this.

  13. ‘Collapse from the bottom up’ is possible, and some historians think that was a crucial attribute of the Great Depression (that wealth was so poorly distributed – sound familiar?).
    Nonetheless, I suspect an oil price spike will trigger GFC II. Likely next year 2019 – but a couple more stupid sanctions could get it there this year.
    Yes, I subscribe to Charles Hall’s recession analysis. Politics can always manage the threats of conflict, inequality and exceptional economic metrics – but not the reality of paying too much for oil energy.
    “It’s the physics!”, I can hear Peter Cook shouting like a madman.
    Re Russia: is it the only nation that is potentially self-sufficient in all vital resources? It need only increase its crude refining capacity.

    • I think you may well be right about oil prices, and I, too, have inked-in 2019 for that. As for GFC II, I still have a leaning towards this autumn, given the pace at which things are deteriorating. The surge in oil prices no doubt triggered GFC I, but I wonder whether, with GFC II, sheer financial folly alone might be enough…..

      As ever, one hears contradictory reports about shales, but ultimately it’s a cash-burn industry, characterised by massive rates of production decline. I suspect US shale peaks in 2019, and no later than 2021.

      Charles Hall’s point is irrefutable.

  14. The Utopian Socialism which gave English workers their own plot of a 1/4 acre died from the indifference of the workers themselves: with cars and supermarkets, and TV to watch, the plots fell into disuse and were grassed and paved over.

    At least that was the case in this village, which one assumes is typical of the whole.

    In fact, this garden was the very last one in use for its original purpose, and, as such, was ridiculed as ‘the worst garden in the village’.

    I have to say, my Russian friend does not have particularly fond memories of dacha life, however fond of potatoes……

  15. Hello Tim,

    This might interest you:


    The requirement to reduce emissions to avoid potentially dangerous climate change implies a dilemma for societies heavily dependent on fossil fuels. Reducing emissions will necessitate the transition from relatively high EROI dispatchable fossil fuels to a combination of relatively low EROI intermittent renewables and geographically limited non-intermittent renewables. As renewable capacity requires energy to construct there is an initial fossil fuel cost to creating new renewable capacity. An insufficiently rapid transition to renewables will imply a scenario in which it is impossible to avoid either transgressing emissions ceilings or facing energy shortages; we term this the energy-emissions trap. In this paper, we construct a mathematical model, termed EETRAP, that builds the EROI metric and the energy characteristics of renewable generation into a macroeconomic framework. EETRAP is used for simulation analysis to test how differing assumptions about the EROI of intermittent renewables will affect the time-path of renewable investment necessary to escape the energy-emissions trap. For all runs of the model, the renewable investment rate by 2050 is significantly larger than the current energy investment rate. For declining intermittent renewable EROI, the renewable investment rate crowds out other forms of investment leading to a declining economic growth rate.

    • Thanks. At first glance, it looks like the aims of EETRAP are along the same lines as SEEDS, i.e., to bring energy investment costs into economic measurement. I can assure you that this is no easy task!

  16. These days, I am much more of a Russophile than I am an Anglophile.
    I just find the Russians so much more trustworthy than the English.
    Yes, they have their criminals there, but it’s not like the UK is run by Mother Theresa and the Sisters of Mercy, is it ?
    I have had faith in the Russians and in the Russian Economy for several years now.
    In fact back in 2014, I deposited £25K with a Russian bank on a Term Deposit.
    Well I was getting Zilch % here in the UK, I had enough in Eur, I did not want to go into US$, so why not ? If the worst comes to it, then I will move to Russia for a year or so and try to find a nice Russian girl to help me spend my Roubles.
    Of course , this was pre-Maidan and I have since taken a hefty hit on the x-rate, but I’ve been getting about 8-10%pa interst, so I think I have came out evens if I were now to repatriate into £.
    I am not inclined to do that yet, in fact I am contemplating adding another £10K-£15K to my Rouble deposits.
    I am looking forward to perusing the Seeds data on Russia, I am sure it will be encouraging. ( cf the basket case which is the UK ). You mention Ireland and Greece as being economies to watch, and although the Seeds data on these countries does look dire, their economies are relatively speaking, quite small. I still see the UK as being the Boulder which will dislodge, and bring the whole dam system crashing down. In fact I am expecting the UK economy to implode at any moment now, we really do have Nero fiddling whilst Rome burns ! It is impossible to imagine what kind of Shinanigan’s that the UK government will get up to next, ( – anything apparently, to avoid any serious negotiating on Brexit ! )
    As a small investment for the future, I am learning a bit of Russian on-line to help me with my asylum application there. I have a feeling that I might soon need it.

    • Thanks. The SEEDS data on Russia may be along as early as later today.

      Ireland is a small economy, but debt is EUR 1 trillion and financial system assets about EUR 4.8 trillion – I’m not sure “small” is a word German taxpayers would apply to either of those numbers!

      Good luck with learning Russian – my father did it, but I failed…

      The term I would use for the UK economy is ‘crumbling’, and it’s painful to watch. It ties in which Nomi Prins’ observation about trouble from the bottom-up. Growing numbers can’t get by, use of food banks is shaming, so is the impossibility for so many of finding secure housing (that they cannot be ejected from without good cause), consumer credit levels are worrying, and the number of children in poverty has, reportedly, climbed sharply over a decade.

  17. With Dr Morgans kind permission, may I highlight the excellent work Dr North has done analysing the inept leadership of our senior politicians regarding Brexit.
    Mrs May’s decision to dismiss the EEA option and leave the single market looks to be a very bad one.
    Perhaps when this smouldering fire of incompetence flares up it could be the spark that ignites GFC II. ?

    His daily accounts of the incompetence of senior politicians aided by a media that seems to obsess over personality politics at the expense of factual analysis.
    If the circus surrounding Brexit is anything to go by, GFC II when it happens will take the media, the politicians by complete surprise.

    • Thanks Ken

      Fine to mention that, but I think comments on Russia would be more welcome here, as this article has endeavoured to use SEEDS to present a reasoned assessment of the Russian economy.

      Brexit will no doubt crop up when SEEDS turns its focus to the UK!

  18. I currently live in Moscow as an ordinary Muscovite – with two small, bi-lingual children in ordinary local state schools – which gives me a fairly good insight into ordinary life in Russia. Live here on alternate three monthly basis. Have to say that my impressions completely agree your SEEDS analysis and that of many commentators. Ordinary Russians seem modestly prosperous, lots of small children, clean streets and almost no street crime. (LOTS of police always visible everywhere.)
    Some negatives of course; very small apartments, 60 square metres is usual for family of four; high GINI Index at 41.2 (CIA Handbook quotes 45.0 for USA and 32.4 for UK), failure to create an industrial “mittelstand”; failure to create a prosperous family farm / village & rural sector.
    But some major positives; self sufficient in both energy and food; high quality, well-educated and homogeneous population with resulting high social cohesion, vitally important in times of crisis.
    Incidentally, my Russian wife dug up potatoes as an unpaid student “volunteer” during the 1980s – work or lose your place at university. Snowflake hell! For a good description of collapse in Russia see:


    Possibly not wholly like future life in in ten years in UK, as we won’t have dachas as fallback but we will probably have hugely more ethnic based crime, gangs and semi-insurrection.

    • The strength of Russia is it doesn’t do political correctness. It sees no reason to turn it’s face away from the factual to the politically correct truth as we have done in the West. It can face the future seeing the world how it really is…rather than how it would be in a fairytale. In my view, attempts to follow the doctrine of ‘equality’ , ‘fairness’ and ‘all must have prizes’ , in monetary and social policy, have brought us to the brink of disaster in the West.
      Of course this poses a problem for the MSM and political elites so in their eyes Russia can do no right. Mrs May is the 3rd truly politically correct Conservative leader and she looks set to be the biggest failure to date.

    • London,and some other cities of the UK, could, I think, do with some Russian or Spanish-style policing right now.

      Already we see gangs fighting for the control of the streets in the nastier parts of London: in Camden (as reported by The Guardian) they are, apparently, Somalis v. Ugandans (with some Irish drug dealers mixed in),

      All intensified after the local police station was closed in cost-cutting measures.

      The race wars of Britain’s future will be between these immigrant groups over the control of crime turfs, just as much as between the true Brits and other races.

    • Gavin

      Very many thanks for your observations. The aim with SEEDS is to provide insights into the economy which are more useful than those of failing conventional econometrics. So it is very welcome to know that SEEDS fits with what you observe ‘on the spot’, so to speak.

      Obviously, I’m going to have to take a look at the UK economy, now that the completion of SEEDS enables me to do so with the benefits of the system. The figures look more like ‘continuing deterioration’ rather than ‘sudden crisis’, though there are three factors suggesting risk of the latter –

      (a) the bottom-up thesis, where hardship at or near the bottom crashes the system

      (b) the sheer scale of exposure to banking, which could make it hard to “dodge a bullet” in GFC II, as was (just by a whisker) achieved in GFC I

      (c) a currency crisis, if – as I suspect might now be happening – investors start to harbour misgivings about GBP and the UK economy

      On the nearer agenda, though, are:

      – SEEDS stats on Russia

      – FX assessment of the USD, GBP, EUR and JPY

      – Ireland

    • Ken

      There’s an interesting dimension to the PC approach to equality – it concerns itself with almost every imaginable form of inequality, but never includes inequalities of income or wealth within the ‘equality’ brief.

      Oversight, coincidence – or intent?

    • Gavin
      Would you sell up in the UK, move to Moscow permanently and buy a property there with the proceeds? I would be interested to know if you have confidence in the rule of law/property rights existing in Russia so as to be able to consider the former?

  19. I simply want to repeat John Doyles’ remarks:

    “Good to see positive news on Russia. Instead of being constantly belittled by the MSM and warmongers in Washington and Tel Aviv. Fortunately some of us can see reality much clearer and you are one of the good guys.” (However, I don’t need the expression ‘warmongers’)

    Thank you, Dr. Tim, to position Russia in a SEED-perspective! Good news, not fake news.

    • Thank you Niels

      I can’t emphasise too strongly my commitment to objectivity, so my aim isn’t to be either ‘nice’ or ‘nasty’ about Russia, or about any other country.

      As things stand, conventional economic interpretation is failing us, because of developments not hitherto envisaged in the canon of economics. This is doubly worrying where Russia is concerned, because misunderstandings are extensive, and those in politics (and opinion-formers) are likely to make selective choices from available information which, in itself, is of dubious value.

      So I hope that what you take away from this is a good and balanced assessment of the economy and financials of Russia.

  20. Thank you for the SEEDS analysis of Russia. Would it be possible to focus on economies on the collapse periphery, such as Turkey, Egypt, Venezuela, Mexico and the current country of global focus, Iran?

    • i can do most of those, but don’t have coverage of all – here’s the state of play:

      – Mexico is already on SEEDS full coverage (as, for that matter, is Brazil)

      – Turkey and Iran (plus Indonesia) are in the process of being added, so could be completed in a matter of days (workload permitting)

      – I’ve no current plans for adding Egypt or Venezuela, but think I could get most of the necessary data.

      Of course, China and India are already covered amongst emerging economies, as are S Africa and Saudi

  21. Here’s an interesting synopsis of what’s happening in emerging market currencies:


    A currency crisis almost automatically becomes a debt crisis. It can have further ramifications where the country has a sizeable banking system, as indicated by the scale of financial assets.

    Turkey’s financial assets are about 1030% of GDP, and Argentina about 430%.

    Media coverage seems in general to link EM currency weakness to USD strength. Frankly, though, the numbers don’t add up for this to be the explanation.

    I think it might be a case of capital flight out of a string of EM economies.

    Clearly I must at least consider accelerating the extending of SEEDS coverage of EM economies.

    • Rhymes with the Asian financial crisis… only much broader…

      I recall being in Jakarta at the time of that… almost no cars on the roads.. beggars on every corner…

      Worth watching The Year of Living Dangerously to get an idea ….

  22. Could SEEDS also be used to test Gail Tverberg’s hypothesis that the oil price is both too low for producers and too high for consumers? What would the model predict for net oil producing and net consuming countries if oil price reaches $100 or drops to $50?

    • I am a great admirer of her work, and I wholly agree that oil prices can be both too high for consumers but too low for producers. Indeed, as ECoEs rise and prosperity decreases, this is a logical outcome. Energy gets costlier, prosperity diminishes.

      However, I do have reservations about her view on this. If prices are too high, what do consumers do? Shiver in cold homes; walk to work; or pay up, with less to spend on other things? Way back in (I think) 2002, when prices went from $20 to $40, I heard the “can’t pay, won’t pay” line from colleagues. Now, as then, I’m not sure what consumers do instead. In the event, consumers paid up – and economies suffered, culminating in GFC I.

      SEEDS can be used to compare prices with trend costs, and I will look into this.

  23. Would you sell up and move to Moscow permanently and buy a property?
    In the current phase of collapse – pre GFC II – most countries still have the rule of law and behave normally. But after GFC II – the death spiral phase – most countries are more likely to believe that desperate circumstances require desperate measures and take actions such as:
    Confiscation of bank deposits
    Confiscation of physical gold
    Confiscation of “foreign” owned property
    Confiscation of “foreign” owned businesses
    Expulsion of “foreign” minorities
    Laws won’t matter because they can and will be be changed at a stroke – by all countries – as and when each emerges.
    And as prosperity shrinks, the definition of who is “us” (good guys) and who is “them” ( bad guys) will shrink too.

    • I was going to say that these are issues that I’ve thought about – but it’s truer to say that they’re things I try not to think about.

      Confiscation of bank deposits, at least in part, is what “bail-ins” mean, and there are circumstances in which this might be an inescapable part of any plan to preserve the status quo. Some experts actually favour this, arguing that a depositor is an investor and not, as I see it, a customer. This sits alongside the banning of cash, which would have to happen if the advocates of negative nominal rates ever got their way.

      There’s a precedent for the banning of private ownership of physical gold, and I think we can assume that cryptos wouldn’t be tolerated either. Fiat currencies need “seigneurage” – if alternatives are permitted, this creates both a rivalry and a benchmark of value, neitherof which are tolerable.

      If the above happened, it would amount to a breakdown of any remaining equity in how people are treated – and it’s hard to see how law can prevail if all equity, and with it consent, are lost.

      So let’s hope it doesn’t come to that.

      Finally, I really wish people in authority knew what SEEDS is telling us…….

    • ‘So let’s hope it doesn’t come to that.’

      Just as a stone will fall to the ground if I hold it above my head and release it… so it will come to that… there is no way it cannot come to that…. it is a certainty…. 100%.

      Enjoy the time that remains … ‘that’ is going to be horrific

    • Gold confiscation in 1933 was implemented under a gold standard with the aim of increasing reserves so as to inflate the money supply. Under our present system, the central banks can do this without the need for expanding gold reserves.

      Under this Executive Order, widespread door-to-door confiscations were never attempted, and it is not hard to see why given how inefficient this would be. How would the authorities know who owns physical gold or where it is kept? How long would agents have to search a property for before giving up? Imagine the resources required versus the payoff.

      This logic applies even more so today, as the majority of the public own almost no physical gold – it is mostly held by private institutions and wealthy individuals.

      In terms of effectiveness, raiding private vaults and/or safety deposit boxes would be much more effective, but would the government target the wealth of the 1% in such a way, as it is essentially biting the hand that feeds them.

      If the government does want to target widespread bullion ownership, would it not be most likely to ban private sales and implement trading licenses with a hefty tax on the sale?

    • I agree. Where “seigneurage” is concerned, the likelier target today is cryptos.

      In 1933, penalties were pretty severe if the Order was flouted; so subsequent selling might have been made a bit tricky.

      Essentially, though, holders had to sell gold to the government at $21, and shortly after could buy it back at $28. So yes, it was a rebasing exercise (though those affected might have had another word for being deprived of $7 per oz….)

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