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By Paul Goble* for “Window on Eurasia”:
August 14 – Vladislav Zhukovsky, an economist known for predicting disasters in the Russian economy and for then turning out to be right, says that the situation is more dire than almost anyone imagines because oil is heading to 25 US dollars a barrel, the ruble to 125 to the US dollar, and inflation to 30 percent.
He attracted widespread attention earlier this week for an appearance on RBK, but the analyst for the Rikom Group gave more detailed answers to the URA.ru news agency. If he is even partially correct, Russia faces not a “black Monday” or a “black September” but a “black” and bleak future (pda.ura.ru/articles/1036265585).
Indeed, Zhukovsky argues, the combination of falling oil prices, the collapse of the ruble exchange rate, and rising inflation means that Russia is entering what might be described as “a perfect storm,” one with the capacity to destroy much of the country’s economy this year and next.
And this situation is made worse by the fact that many at the top of the Russian economic pyramid are behaving as they did in 1998, betting on an ever weaker ruble by buying hard currency and then planning to get back into the Russian market later at fire sale prices and thus improving their position but not the country’s.
These people, Zhukovsky says, “have their families, portfolios and property abroad. They are interested in having the situation in Russia be as bad as possible and the ruble to fall as far as possible so that they will be able to sell their apartments there and buy them here on the cheap.”
In 1998, at the time of default, the Russian stock market fell 80 percent, the ruble fell 84 percent, “and all our bureaucrats … took the money they had and converted it into hard currency. “When the market collapsed, they bought shares at three cents on the dollar. The very same thing is happening now.”
Moreover, Zhukovsky adds, after the coming collapse “the American, European or Chinese investors will come.” They too will take advantage of the low prices just as they did in 1992 and 1993
Unless the government changes course, the ruble has no prospects even at the current price of oil, and oil prices are going to continue to fall, the economist says. Eleven of Russia’s 14 oil processing firms are now operating at a deficit; and consequently, “what we see today is just the quiet before a very strong storm.”
Russian officials are in denial about all of this, and their projections are not predictions of the usual kind: they are issued only to convince people that things will somehow turn out all right. The numbers don’t lie, but officials do. None of their predictions about the ruble exchange rate, prices for oil and inflation have ever been confirmed by events.
The Russian economy has not reached its bottom, he says; indeed, it doesn’t have one “because the economy has no limit given that it is in a state of disintegration and is constructed on crude oligarchic raw materials capital.” Thus the ruble could fall to 75 to the dollar by the end of the year and more than 125 per dollar sometime in 2016.................
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