Sunday, October 05, 2008

Spoke to people in Yerevan.

Apparently, on Russian TV they are predicting the fall of the USA. Putin even has recommended that the Russian Ruble become the global currency of choice instead of the USD. There are quite a few posts on LiveJournal about the takeover of the US interests in the world by Russia.

But not so fast! A quick look at the numbers shows a different picture. While our market indices are down year-to-date, the Russian index is down, too. The S&P 500 is down about 26% YTD. RTS, the Russian index, is down about 50% YTD. Of course, RTS has had a fenomenal growth since 1998 (up about 1,200% since 1998 compared to the dismal 9% rise in S&P 500 during the same period). But the collapse of RTS this year continues despite a $200 billion injection by the Russian government. Our market collapse continues despite a $700 billion injection by our government.

So, is Russia going to take over the US? Since the communists came to power in that country, their dream was to catch up and surpass America. They've been trying to do that for the last 90 years. I don't think they will be able to do it in the next 90 years either. While Russia has grown prosperous since 1998, the country still remains an economy with underdeveloped technologies and industry. Its main engine remains the export of raw materials. That's not a formula for growth.

The US is not an industrial nation either but we have the technologies and knowledge. What's more dominant, an economy based on knowledge or raw materials? At this point in time, I think knowledge is still superior.

Above is the year-to-date comparison of the S&P 500 and RTS in percentage change.


Ani said...

There are a couple of American words for this opinion--the nice one is "hooey."

Here are links to a couple of NYTimes articles I put up on Khosq a month ago.

The Europeans and Americans who had been investing in Russia have been fleeing at an astonishing rate, because after their "help" in modernizing Russia's economy, Putin's been snatching everything possible back into the central government's monopolistic grip. And that was happening before the Georgia conflict, after which the Russian market dropped so severely it had to close for a day.

nazarian said...

:) Every 'hngamyak' they said:

Հեսա հասնում ենք Ամերիկային ու առաջ անցնում:

Haik said...

Russians found a better way, they just shut down their stock exchange.

This story reminds me of the SS and RK Armenicum "venture".

Ani said...

Russian stock market today--down 19.1%. Not that anybody else is doing great, but that figure isn't pretty.

Haik said...

What's the difference between Russian and USSR economies?
Only increase of consumerism and competition for buying better quality and more products.
The Russian economy is still based on sale of natural resources. It is not manufacturing anything of value.
If the global economy goes down the Russian economy will of course follow. However there is one big difference, if in some countries the economic stagnation will cause changes for better in politics -move towards democracy and socialism this can't be said to Russia. It is a militaristic-autocratic country in the same spirit as it was during the period of Ivan the Terrible.
Russia will stay as it is for some time.

Haik said...

US Public Debt clock:

nazarian said...

10.2 trillion dollars as of October, 2008. That's a lot of money...

But, as Cheney said, the budget deficit doesn't matter. So we are in good hands (NOT!). So much debt is not sustainable over long run. It just puts the burden of today's expenditures on the future generations.

Ani said...

Hey, this sounds like a fun conference to attend right now, huh?


On October 9-15 Armenian Premier Tigran Sargsyan will make an official visit to the U.S.A. to take part in the annual World Bank and International Monetary Fund congress to be held in Washington D.C.

According to the information of the RA government press service, members of the delegation headed by Armenian Premier include RA Economy Minister Nerses Yeritsyan, RA Finance Minister Tigran Davtyan, RA presidential adviser on economic issues Vahram Nersisyants, head of RA presidential administration David Sargsyan, head of the RA Central Bank Artur Javadyan, RA Deputy Foreign Minister Arman Kirakosyan, Armenian Ambassador to the U.S. Tatul Margaryan and other officials.

Haik said...

If you know any TellyTubies producers please alert them. T. Sargssyan will give them lots of new ideas for their upcoming programmes.
But anyhow should be very entertaining.
It's like listening Svejk live.

Ani said...

Haik, don't laugh, they're already listening. You're gonna love this story:

Road Less Traveled Offers Shelter From U.S. Mess

Commentary by William Pesek

Oct. 6 (Bloomberg) -- In times of trouble, investors often race to U.S. Treasuries. Alisher Djumanov suggests a far less obvious destination: Central Asia.

Kazakhstan, Kyrgyzstan, Mongolia, Tajikistan, Turkmenistan and Uzbekistan don't tend to come to mind when searching for safety. Nor do Armenia, Azerbaijan and Georgia in the Caucasus region. Yet there's increasing merit to taking the road less traveled, literally and figuratively.

``Amid global market volatility and sell-offs, frontier markets generally, and in Eurasia in particular, are holding their ground well,'' Djumanov, managing partner at Singapore- based Eurasia Capital Management, told me recently in Ulaanbaatar, Mongolia. ``This Eurasia region isn't for everyone, but those who come won't regret it.''

nazarian said...

Are we going to see flight of capital from the West to the underdeveloped economies of the former USSR republics? As the investors look for better returns, and the unknown risk, it may happen. If someone convinces that the risks are low and there is a potential for good returns, we may see another bubble building up.

The problem is that when they realize the risks associated with these economies, you may end up with what's happening in Russia now.