Tag Archives: economics

The Collapse of the Ruble

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Much is being made of the collapse of the Russian ruble since the sanctions with which we’ve answered Russia’s invasion of Ukraine went into effect. Here’s the US Dollar-Russian Ruble exchange rate over the last month (as of 6 March 2022):

For context, here is the performance of the ruble against our dollar since 30 January 2012:

The current drop is sharp, but so far, it looks a lot like the drop in the latter half of 2014—when sanctions were going in over Russia’s first invasion of Ukraine and its occupation of Donbas and Crimea, and following which the ruble more or less stabilized into a (very) slow degradation vis-à-vis our dollar.

The current round of sanctions are important, and the further devaluing of Russia’s ruble are important, but history suggests that the exchange rate will once again more or less stabilize without changing Russia’s behavior.

Concrete support for Ukraine remains critical, and that concrete action includes sharply increasing the transfer of arms—including combat aircraft and more capable anti-aircraft batteries than just (but not instead of) Stingers—transfer of offensive weapons, so that Ukraine can drive the barbarians back out of their nation; and a cessation of the Biden-Harris’ constant retreat whenever Vladimir Putin threatens war against us.

There’s Debt, and There’s Debt

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James Jay Carafano speculated on the lessons People’s Republic of China President Xi Jinping is learning from Russia President Vladimir Putin’s invasion of Ukraine. One of those lessons is the coming cost of bailing out Putin’s economy, should he win, lose, or draw in Ukraine, and should Xi choose to do a bailout.

Beijing’s buddy in Moscow is going to be an economic basket case. Even if Beijing wants to bail them out with their patent debt trap, that is going to cost a lot of money—likely more than the Chinese Communist Party can spare. Buying up Russia at fire-sale prices might be more than even Xi can manage.

Not necessarily. The People’s Republic of China and generations of the state of China before it have considered (Russian) Siberia to have been stolen from the Chinese. A few short years ago, Putin and Xi concluded an economic deal that has Russia and the PRC jointly exploiting eastern and southern Siberia’s vast resources, both on the ground (timber) and below it (ores, oil, natural gas, among others), with the vast bulk of the labor being Chinese, and with that Chinese labor (and their families) moving into Siberia to live and do the work.

One way to do the bailout, with its re-formed means of debt repayment, would be to alter the exploitation deal in the PRC’s favor. Sharply alter it.

Either There’s a Deadline, or There Isn’t

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Amazon is pushing the FTC to fish or cut bait (because this is a family blog) regarding Amazon’s proposal to acquire MGM:

Amazon recently certified to the FTC that it had provided all the information requested by antitrust investigators, according to people familiar with the matter. That certification triggered a ticking clock for the FTC that expires in mid-March, the people said. If the commission doesn’t file a legal challenge before the deadline, Amazon could be free to consummate the deal.

However.

The FTC currently has also the authority to unwind mergers and acquisitions after the fact, and to continue investigations pursuant to such post hoc disassemblies even after their nominal clock regarding the merger/acquisition has expired.

That authority means there’s no real deadline, and the government can continue to interfere with private enterprise whenever they take the notion to.

The deadline is a good one, and it should be transformed into a real one: if the FTC does not rule on the matter (itself a questionable government authority, but that’s for another discussion) by a time certain, then the merger/acquisition should go forward unfettered, and the FTC should be required to sit down and shut up. If there’s a real problem with the merger/acquisition, well, we have already on the books perfectly serviceable anti-trust tools.

There’s just no reason for Government to dither and stall on any merger/acquisition or to continue to harass after the fact.

There are Tax Cuts, and There are Tax Cuts

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Some are tiny, but useful first steps. Some are serious and useful in their own right. Georgia Republicans are proposing the latter.

The State currently has a graduated income tax with a top rate of 5.5% on income above $10,000 (except singles; they pay 5.5% on income above $7,000) and standard income tax deductions of $4,600 for single filers, $3,000 each for married filing separately, and $6,000 for married filing jointly.

The proposal, led by State House Ways & Means Chair Shaw Blackmon (R-Bonaire), envisions serious changes. It reduces and simplifies the State’s income tax rate to a single 5.25% rate regardless of income level. It increases the standard income tax deductions to $12,000 for single filers and $24,000 for married couples, a move that appears also to eliminate the marriage penalty inherent in the current deduction. [A] family of four would not pay state income tax on their first $30,000 of income compared with the present first $500 to $1,000 of income, depending on filing status.

Now that’s a tax cut that a mother can love. And fathers and singles.

That’s Nice

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JPMorgan thinks the current suite of economic sanctions against Russia could shrink its economy by 20% quarter-on-quarter and by 3.5% on the year. JPM also admits that these estimates may badly overestimate the downward movement. Also,

In conjunction and cooperation with the European Union, Japan, the UK, Canada, and others, the United States has effectively frozen financial transactions of Russian central bank assets held by Americans, a senior administration official told reporters during a briefing on Monday.
The intended effect is to cripple the Russian economy and use up the country’s “rainy day fund” as its currency, the ruble, plummets in value, the official said.

However, these sanctions carefully and deliberately leave untouched the bulk of Russia’s income—its foreign sales of oil and natural gas, with Russia our second largest source of imported oil as of last August.

The European Commission, France, Germany, Italy, United Kingdom, Canada, and the United States issued a joint statement on Saturday that “selected” Russian banks would be removed from the SWIFT financial system.

Except for the Central Bank of Russia, its central bank, and those oil and gas transactions.

Commerce Department unveiled…export controls [that] include semiconductors, computers, telecommunications, information security equipment, lasers and sensors. In addition, BIS’s [Bank of International Settlement, the bank of nations’ central banks] rule imposes stringent controls on 49 Russian military end users, which have been added to its entity list.
The European Union, Japan, Australia, United Kingdom, Canada and New Zealand announced that they would implement “substantially similar restrictions.”

Export controls aren’t export bans….

Some ladies from the South might say, “That’s nice,” regarding these economic moves, or even “Bless their hearts” regarding the persons making them.

However.

How many divisions, much less bullets, do those sanctions provide Ukraine in the here and now, as women and children are butchered by Putin’s barbarians as his invading horde begins increasingly to target apartment buildings and residential neighborhoods? How many divisions do those sanctions cause Putin to withdraw from Ukraine as his military prepares a Stalingrad-esque starvation siege of Kyiv or a Grozny-esque destruction of it, and begins its Grozny-esque burning of Kharkiv to the ground?

The economic sanctions actually are a good start, and they should continue in effect until Putin, his oligarch syndicate cronies, their deputies and assistants and lower down made men, and the members of the Duma are long gone from the Russian government and economy. But those sanctions are wholly inadequate alone. Ukraine will lie in ashes, its survivors existing in Russian serfdom, long before those sanctions take material effect.

Ukraine needs lethal weapons—antitank, antiaircraft, antimissile, along with anti-infantry and small arms—and those lethal weapons need to include, also, offensive weapons with which to drive Putin’s barbaric military out of Ukraine altogether. Ukraine needs tons of ammunition for those weapons and training in the use of many of them.

Ukraine needs food and medical supplies for Kyiv, Kharkiv, Odessa, Kherson, Mariupol, and on and on.