Russian Roulette

by digby

Last night as I was reading all the econ blogs screaming “wtf,” I came across the news that the Russian stock market had been forced to close for a couple of days due to its own volatility. The markets are all global, so they never operate in complete isolation anymore, but this seemed rather newsworthy to this admittedly naive layperson. So it was with interest that I read this about the Russian market in the New Republic this morning:

There’s a saying oft heard in Russian schoolyards: “Go ahead and spit at me. Fill your mouth with shit and spit at me.” It may be an indelicate way of suggesting that one should cut off one’s nose to spite one’s face, but it provides some insight into why Russia’s economy, which grew by eight percent last year, has suddenly melted. The failures on Wall Street linked arms with falling oil prices to wallop a Russian market that, due to a combination of internal factors, had been sliding all summer. On Tuesday afternoon, trading on Russia’s two exchanges, the RTS and MICEX, was shut down after they plummeted 12 and 18 percent, respectively. Wednesday morning, weary Russian brokers gingerly tried their luck again, but after six and three percent downturns, the exchanges will remain shuttered till Friday.

A double digit loss is a devastating shock for any market, but Russia’s stock market has lost over half its value since the start of the year. In the first part of the year, investors were already jittery about the Kremlin’s meddling in the business world. And then things got really bad in August. Remember August? That was when Russia could not resist using Georgia’s attack on South Ossetia to retaliate with such force that the West could only marvel at Russia’s lack of discretion. When Putin responded to Western criticism, he was so defiant that Leonid Radzihovski, a columnist for the liberal online political journal Ezhednevny Zhurnal, characterized his government’s diplomatic position as: “If America wants it so much, let it come and make up with us.”

The whole world is in turmoil due to a variety of factors, not the least of which is that some major powers are currently being run by a bunch of macho jackasses. This is a big problem that is easily solved by voting — for intelligent, thoughtful, modern leadership that recognizes that the world is too complicated and too interdependent to be run by chest beating and schoolyard demonstrations of “strength.” The stakes are awfully high. Let’s hope the US, at least, wises up this time.

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