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

Weak enemies allow the dictator to flourish, despite his economic house of cards.

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August 17, 2013 - 8:05 pm
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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. Last year, foreign direct investment (FDI), already at anemic levels even for Russia, plunged by 15%. In 2008 at the start of the global economic crisis, Russia raked in $75 billion in FDI. By 2012, Putinomics had established Russia as the worst-performing major economy post-crisis: FDI had fallen by more than half to $31 billion.

For comparison, Ireland attracted that amount despite having just 3% of Russia’s population. Brazil, to which Russia is often compared, has more than doubled Russia’s FDI at present.

But even if there was reasonable cash flow, Russia could not make use of it for two profoundly worrying reasons.

One is corruption: Transparency International calls Russia the most corrupt major civilization on this planet. Because of corruption, the 2014 Olympic Games are costing Russia at least double what they should, as the Kremlin has to throw two dollars in to get one dollar’s worth of work back out.

The other is lack of innovation. Putin is squeezing the life out of Russian society, denying citizens the chance to be enterprising. Further, higher education is dismal. Russia doesn’t have a single school ranked among the world’s top 75. Professors are poorly paid, facilities are poorly funded, and research is profoundly constrained by politics, just as in Soviet times.

When American gay advocacy groups recently considered boycotting Russian goods over Putin’s homophobia, they were unable to identify a popular Russian good worth boycotting. Stolichnaya vodka was considered — but no, it’s not Russian.

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Top Rated Comments   
Wake up call! You can stop rejoicing about low Russian GDP. If the US Gov didn't cook its books and if you looked deeper you would know that US GDP is actually zero to negative. You would know that unemployment is nearly twice what the US dept of lies tells us. You should know that we don't need to worry about a Russian dictator, we have our own dictator called Obama. In fact, I admire Russia, with its 13% flat tax, where private schools can thrive without the heavy hand of government on its back. Putin is doing what he has to do to advance the well being of his people. How is Obama advancing the well being of Americans? Get over it, the cold war has been over since 1989.
1 year ago
1 year ago Link To Comment
How about we mind our own business, and stop telling the rest of the world how to run their countries?

The government we should worry about is our own, not Russia's. Rather than hyperventilate over their giving Snowden asylum, why not address Snowden's allegations, which seem to be 100% true?

The US should set an example to the rest of the world, an example of liberty. Instead we are a police state, arguably worse than Russia. Every day we are giving up a new type of freedom because of alleged "terrorism", when the real goal is to turn Americans into subjects, not citizens.
1 year ago
1 year ago Link To Comment
Why would we want to crush Putin? He should be pretty far down on the crush list. is he spying on all our phone calls, emails and credit card statements? Did he use the IRS against us in the last election? Is he stiffing our energy development? Does he support the Muslim Brotherhood and al Qaeda fellow travelers? Is he imposing a more costly less beneficial anti-Health care system on us? Does he want to help tens of millions of invaders stay in America and vote in our elections?
1 year ago
1 year ago Link To Comment
All Comments   (35)
All Comments   (35)
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Just WHY should the US want to "crush" Putin?

As "Leader" of Russia out of the USSR with his forbears Lenin, Stalin, Khruschev, Andropov, etc he is "Big Brother", THE Example for the "caring and compassionate" liberals of the Democratic PARTY of the USA to emulate.

PARTY with their Friends contrived to "Fundamentally CHANGE" the USA since THEIR "Revolution". Of the 1960s.

"Political Correctness, fancy words for abrogation of the First Amendment Rights. Then "Affirmative Action making individuals from groups selected by the PARTY and allies to have SPECIAL Rights in law. In the USA iin which a First Principle is EACH ciitizen is EQUAL Before the Law.

And from those two successes others. Some known, how many unknown? And the coup de grace in the PPACA. A Bill of MORE than 2000 pages.

WHAT CAN BE and IS contained in thoise pages enacted, whipped into law by the Speaker of the House/Congress Nancy Pelosi with " We have to pass it to know what's in it"

But counting the odds and the stupidity of Americans the "liberals" and
"democrats" publicly call "astro-turf" and "that vast right wing conspiracy" who didn't know what was really good for them did so "secretly and unknown in the night to undermine the pillars of the City".

To show their caring compassiona\te liberalism. One of their eminences Bill Maher unable to contain his contempt for his followers, audience, deemed them LIVs (low informaiton voters) despite HIS followers reputed among the "best and brightest" stamped by the licencing bodies of the elite universities as "intellectuals".

Insinuating since THEIR "revolution" their troops into policy echelons of ALL civic institiutions. Propaganda, sorry "information, entertainment and educational" to make sure the their designs were the pre-eminent if not the only ones that counted.

Especially for the members , those "Honourables" in Congress, Judiciary and Executive with the steering wheels of the machinery of government in their hands.

Moreover emulating the experience of all previous authoritarian not to say totalitarian social networks using the YOUTH to assure "The Future Belongs to Them"

"Give me a child til he is five, and he is mine for life". So from Sesame Street to graduate school of the "Elite" universities, to the Legal fraternities and finally the government itself.

Or as Obama is reported to have said in open mike comments to his Russian host during his presidential visit in 2007? "After the election I can be more flexible".

To play out the endgame?



They call tlhemselves caring and compassionate liberals and democrats. But their actions displaly control freakery consistent with their beloved moded of Mars/Leninis as practiced n the erstwhile Soviet Union which was merely a modern versions of Russia's Imperialism ruled by Tsars/Csars with the Marxist/Leninists the New Csars. And with allies in propaganda - informationa when earnest CHANGE began for the successful nation at odds with that USSR. So at odds that for more than a half century it spent treasury and blood to assure ite pre-eminence. And as a side show protected "The Free World" so they could spend their treasury in bribing the citizens to keep them in power, their vaunted Welfare States. Also based on the ideology on which this same Putin's Russia out of USSR and Their Revolution - openly Marxist/Leniinist - of early 20th century.l.
1 year ago
1 year ago Link To Comment
Actually I am not completely certain the president or his czars recognize that Russia is in decline. It is embarrassing that someone like Putin can make the leader of the free world look weak and petty but this administration does not seem to notice. Back in the day our leader would be considered completely egocentric. http://coldwarwarrior.com/
1 year ago
1 year ago Link To Comment
my neighbor's mother makes $64 hourly on the laptop. She has been out of work for five months but last month her payment was $15080 just working on the laptop for a few hours. Go to this web site and read more go to this site home tab for more detail--->>> WWW.JOBS31.COM
1 year ago
1 year ago Link To Comment
If one's enemy is committing economic suicide, why should one interfere???

Besides, we are not doing any better and we are deluding ourselves in the process. The world is unwinding from BIG FRAUD and will continue until trust is restored in govt and that will require many of the Anti-Americans within our govts from local to national be sent home or to prison...
1 year ago
1 year ago Link To Comment
Russian government debt to GDP: 8.4%
US government debt to GDP: 102%

Yeah, it surely makes our GDP look like it is growing when we borrow money to inflate the GDP. Despite all that, and despite the fact that their GDP growth is happening in absence of population growth (which, in the US, means, "immigrants" -every immigrant creates "economic growth" whether or not he's on welfare) Russian economic growth is still higher than US economic growth.

Ziggy is a mindless Putin-hater. She's failed to draw any evidence of Putin's alleged mismanagement of the economy. The fact that Putin "only matched Yeltsin's best single year 6.5% growth rate 5 times" kind of indicates he's doing a decent job. In fact, he beat it 5 times, and kept it close to that his whole time in office. Which is why the GDP/capita in Russia has gone from $4.2k a year to $17.7k/yr under Putin. Can we have some of that lousy 6% growth rates here, please? A positive current accounts balance would also be a pleasant change. Come to think of it, throwing some of our home-grown oligarchs in jail wouldn't be bad either.
1 year ago
1 year ago Link To Comment
Wake up call! You can stop rejoicing about low Russian GDP. If the US Gov didn't cook its books and if you looked deeper you would know that US GDP is actually zero to negative. You would know that unemployment is nearly twice what the US dept of lies tells us. You should know that we don't need to worry about a Russian dictator, we have our own dictator called Obama. In fact, I admire Russia, with its 13% flat tax, where private schools can thrive without the heavy hand of government on its back. Putin is doing what he has to do to advance the well being of his people. How is Obama advancing the well being of Americans? Get over it, the cold war has been over since 1989.
1 year ago
1 year ago Link To Comment
Never should have chased the Jews out of the country. The Jews are like an orchard. If you fertilize and water them and give them micro nutrients they will yield delicious fruit. Ok, not the best analogy, but you know what I mean.
1 year ago
1 year ago Link To Comment
What do you have against Khodorkovsky, Nemtsov or Kasparov?
1 year ago
1 year ago Link To Comment
Sometimes the Kremlin is the best of admittedly bad choices.

Why would people invest in the US, especially when asset values are still inflated?

Feel free to substitute Russia for the US, in the last paragraph.

Is anyone with me in concluding that situations can be less politicized when objective truth is applied more often?
1 year ago
1 year ago Link To Comment
One can do business with the Russians; They have a fairly good record
of performing on their actual contractual promises, One just has to take care
in drafting the contract, and watch them closely, to encourage compliance.
Putin may prefer to have greater arbitrary control over a smaller, simpler,
poorer economy, in which case the US goal is to convince him that power
earned and maintained by growing a larger, more complex, wealthier
economy is more of a challenge, and will leave him with more of a legacy;
Reinforce any success he has in moving toward a high-tech 21st century
economy and society, one in which a larger and larger fraction of the people
are too valuable to oppress, or attempt to coerce into cooperation.
1 year ago
1 year ago Link To Comment
Tell me about Sergei Magnitsky, and what happened to him.
1 year ago
1 year ago Link To Comment
He crossed Putin and was murdered for it. That is the way the internal game
is played within Russia. What does that have to do with attempts by the US
to do business with Russia rather than end up at war with Russia ?
1 year ago
1 year ago Link To Comment
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