Traditional Russian Songs

Russian Music on television is interesting. It is often a mix of totally different styles, traditional songs like this mixed in with Russian Pop and yes some Russian Rap. Music in the US is way over genreized to the point that I find it unwatchable. I want variety. I think you have to admit that this is very different. 

Personal Russia Update

While the air of decay is still present in Russia, it gets less noticeable every time I come here. Things are changing, mostly in a positive direction. 

There is a new Supermarket within walking distance of my mother-in-law's apartment. It has almost everything you might want, except a wide selection of fresh vegetables. Thus I have gained a few pounds. The lack of vegetables is not the only reason. There is this one thing I have found only in Russia, and at  Russian stores in America. It is half-way between cream cheese and cottage cheese and has bits of fruit filling. Sometimes it is dipped in chocolate. Yum. 

I am still amazed by certain aspects of Russian culture. We are right now having lunch in an arcade. It has free WiFI. They have a full traditional Russian cafe menu. And a modest wedding reception is taking place--right in the arcade. The dress is beautiful, but seeing the bride amidst the video games is a good example of culture shock. I used to be in the video game industry, and this is the cleanest arcade I have ever seen. 

I have blogged before on previous trips about Russia's littering problem. It is now no worse than America's, and yes, the trains run on time. 

I think that most Americans, especially the leaders, have an obsolete understanding of Russia. Eventually this will cost them. 

Click here for an article about this. 

To Infinity and Beyond

Toy Story was recently declared to be the second best animated film ever made. (Who decides these things? It is clearly number one.) The catch-phrase of Buzz Lightyear has entered our collective conscience—“to Infinity and Beyond.” This catch-phrase is starting to make the rounds in the usual places with regard to Ben “Buzz” Bernanke, who has just announced QEIII.

What is QE? It is an abbreviation for Quantitative Easing. Wikipedia describes QE this way. 

Quantitative easing (QE) is an unconventional monetary policy used by central banks to stimulate the national economy when conventional monetary policy has become ineffective. A central bank implements quantitative easing by buying financial assets from commercial banks and other private institutions with newly created money, in order to inject a pre-determined quantity of money into the economy. This is distinguished from the more usual policy of buying or selling government bonds to keep market interest rates at a specified target value. Quantitative easing increases the excess reserves of the banks, and raises the prices of the financial assets bought, which lowers their yield. 

Financial Times of London describes the current round of Quanitative Easing this way:

It was not so much QE3 as QE∞.  [The symbol ∞ is the “infinity sign” in math.]

Why is this a big deal? Compared to the two previous QEs (it stands for “quantitative easing” and refers to a central bank buying bonds to push down their yields), this one is unlimited. While the previous two were for fixed amounts, this time the Fed will keep buying $40bn of mortgage-backed securities until the labour market has improved “substantially”. That word is to be interpreted by the Fed, allowing it to carry on for as long as it likes.  

Romney and Ryan need to be in this picture too. Buying 40 billion dollars of mortgages every year, er ... no, that should be month… will please Paul Krugman, but no one else. Gold took an immediate spike upward in price. I wish I owned more. While I have been in favor of QE, I wanted it to be a part of a package that included tax increases and budget cuts. Such a package is not even being talked about as a possibility. 

Buying mortgages is also the very worst place that the Fed could buy securities. Interest rates are low enough already in that area. Driving them lower will only distort the market even more and encourage more debt. This we do not need. 

We Americans, as a people, already put way too much of our assets into houses. Why not enjoy it now, and then sell it later for retirement? Unfortunately, the homeowner has run out of bigger fools to sell to. This constant pressure will be with us permanently. Note that since my profession over the last few decades involves buying and selling houses and residential land, and supplying contractors with hardware and lumber, I may need to adjust my personal business plan a mite.  (I will talk more about housing tomorrow.) 

Having sold my 4,000 sq. ft. house and moving into a 2,000 sq. ft. has shown me that my family does not need all that space. My daughter is a little shy on space, but we can move her into the office when she is older if we need to. Or maybe, just maybe, she can learn to cope with one closet. As long as I have room for my toys we will be fine. Actually, I got rid of most of my toys—my books—in the move. I brought ten boxes of books to California. I have ten boxes of books still in storage for a later trip. Those who have seen my former library will instantly realize what a huge reduction in books this is. I counted my books many years ago. I had 1400+ at the time. It has been actually somewhat traumatic for me to pare the collection down. This is not a joke. Well, maybe a little one. 

This chart will show you what I mean. It shows the size of the average house by country by sq. meters. To get the more expected “English” measurements multiple by 10.76. So the average house in Britain is roughly 880 sq. feet as compared to 2300 in the United States. 

Typical Russian Apartment BlockWhile I was not able to find the figures for house size in Russia, it has to be smaller than Britain. In Russia each room has to serve multiple functions. When we go to Russia to visit family, the dining room becomes my computer room and a bedroom. The living room becomes a bedroom at night. The convertible beds are actually much more comfortable than the hide-a-beds we use in America—they have to be as they are used every night. Yes, there is a little work to prepare the bed at night, and a little work to make it a living room again in the morning, but this is minor. While my mother-in-law's kitchen is as small as the average American walk-in closet, it is adequate and we even eat there. The main issue is the lack of closet space, but if you are like me, you have enough clothes to last for years. I might need to buy socks, but that is about it. 

If you want some comparisons between life in Russia and America, click here.

Why am I going on and on about Russian housing? To make a point that you can downsize and not affect your lifestyle very much. Would you rather have a 2500 sq. ft. house that you lose to the bank, or a 1500 sq. ft. house you can keep? Those kinds of times are coming as a permanent reality to all of us. Be prepared. 

Ben “Buzz” Bernanke thinks that he is some sort of superhero. When Buzz Lightyear thought this he got into trouble. Ben is no different. He is just a toy of the banksters. The “powers that be" think they can kick the can down the road with QE, but the fact that this QE episode has no terminus should tell us that they do not expect a recovery any time soon. I fear it is permanent, so be prepared. 

The Good Crisis

In the short run the crisis in Europe may be good for America and the value of the dollar. Why could this counter-intuitive result occur? While it is more tradition than reality, the US Dollar is perceived as a safe haven for troubled times. 

In Russia for example a lot of people keep their savings in dollars. On my first trip to that country several years ago, there were men who stood outside banks whose sole job was to exchange dollars for rubles, and visa versa, at a slightly better rate than you could get inside the bank. The government cracked down on these entrepreneurs and they are gone now.

But the desire to not rely on the ruble is deep seated. Oddly enough to compensate for this the rate you get for timed deposits in Russia is about 5%. This is highly competitive. If I was a currency speculator, the ruble would be on my short list of potential investments. 5% is pretty good in our current artificially low rate. Last time I checked the ruble was up versus the dollar. 

For a period the Euro was preferred to the dollar in Russia. But with the current troubles in Europe I bet this has changed and the dollar is riding high again. 

What I am saying is those that are predicting the demise of the dollar are premature by several years. As the old saving goes, in the land of the blind, the one-eyed man is king. America is that one eyed-man. But be careful as Obama has a sharp pointy stick. 

This video below disagrees with my suggestion that austerity is needed. I guess from Krugman's perspective I am an austerian, a play on words for the Austrian School of economics. 

What this video forgets is that government only has three sources of revenue. It can tax, driving money out of the economy. It can borrow, crowding out other borrowers. Or it can print money, potentially and eventually leading to inflation. None of these are good. Budget cutting needs to be a part of a total package. 

A Young Paul KrugmanKrugman is at least honest about what he wants: he wants inflation, he wants money printing. He wants to have his cake and eat it too. 

As Krugman's guru once famously said:

In the long run we are all dead. (Lord Maynard Keynes)

He was right about this. It is one of the few things he was correct about. Keynes is dead and we live in his long run. 

In the short run I expect the dollar to go up in value. But this cannot last. At some point if current trends continue investors will refuse to buy new government debt or roll over maturing debt. When this happens it will not be pretty. 

The Past and Future President

The past and future president of Russia, Vladimir Vladimirovich Putin, recently said:

"They are living beyond their means and shifting a part of the weight of their problems to the world economy," Putin told the pro-Kremlin youth group Nashi while touring its lakeside summer camp some five hours drive north of Moscow.

"They are living like parasites off the global economy and their monopoly of the dollar," Putin said at the open-air meeting with admiring young Russians.

  

It is hard to disagree that America is abusing her reserve currency status. One reason that we are not experiencing inflation is that we are exporting it to other countries, especially China. China, Japan, and yes even Russia have large investments in American Treasury Bills. Finance ministers around the world are not sleeping well.

   

Last year at Davos, a economic meeting of various big wigs and elites, Putin said this:

   

In the 20th century, the Soviet Union made the state's role absolute. In the long run, this made the Soviet economy totally uncompetitive. This lesson cost us dearly. I am sure nobody wants to see it repeated.

Nor should we turn a blind eye to the fact that the spirit of free enterprise, including the principle of personal responsibility of businesspeople, investors and shareholders for their decisions, is being eroded in the last few months. There is no reason to believe that we can achieve better results by shifting responsibility onto the state.

   

And one more point: anti-crisis measures should not escalate into financial populism and a refusal to implement responsible macroeconomic policies. The unjustified swelling of the budgetary deficit and the accumulation of public debts are just as destructive as adventurous stock-jobbing.

    

We live in a world I thought we would never see. A world where the past and future president of Russia under-stands economics better than the present and future president of America. I think we have to agree that not only is Putin more econo-mically correct, but he also looks better without a shirt.