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As a half-involved, half-detached observer I have been watching the continuous rise of religious feeling in Russia over the past two decades.

I have reason to be half-involved – my own cousin has gone deeply religious. So much that she, after having earned a degree in chemistry and biology, has now done a batchelors degree in theology swiftly followed by a masters degree in the same (the atheist in me would much prefer to call these degrees the “so-called” degrees). And over the last years, I have been witnessing her deepening mistrust towards all things associated with, in her eyes, a lack of christian and godly morality. It’s put quite a strain on our relationship, and of course some areas of conversation have become a zone where both of us feel like we tread on eggshells. But this subject continues to fascinate me. Especially since her faith is a heady mix with a parallel belief in astrology, which surely is a “pagan” area – and in any case, not a science after all?

The search for god in Russia is hardly surprising – in its days, communism acted as a form of belief system, faithfully adopted by some and forced onto many other unwilling ones. The collapse of communism, the appallingly shameful and horrible information about the bloody wrongdoings of the past leaders that was finally disclosed in the wake of that collapse, and the extreme economic hardships of the nineties left a vast emptiness in the lives of many and caused them to look for alternatives to run to. Anything went in those days – all things occult flourished, astrology enjoyed (and continues to enjoy) a huge following, whole families crowded before TV screens watching some charlatans waving their hands about on prime time telly promising to “charge up”  water bottles dutifully held by viewers – waiting for all their illnesses being cured overnight.

Then, by the mid-nineties, and after decades of communist suppression, religious community leaders came out of the shadows and all churches started enjoying a revival. And it feels like it’s really taking hold of Russians by now. How much of it is a fashion thing and how much of it a true faith? It is probably a mixture – and this raises some interesting questions. Those people who only two decades ago professed to be atheists could not have been so, and certainly fear of being in trouble for being religious had a big part to play. But are they truly religious now? What makes them so sure of their faith? What makes a person look for god? How many of these people truly think and examine their position, and how many are ready to run for any sort of “shelter” as soon as things are tough?

I am also fascinated by some faith-related problems that my cousin seems to be not seeing at all. For instance, I asked her about the position of orthodox christians on catholics and protestants. Are the latter two supposed to be “deviant faiths” in the eyes of her church? Are they wrong in how they worship and will they go to hell for that? – Don’t laugh, as this is what catholics have surely been taught in the past about protestants, I have heard many references to that. Anyway, my cousin opined that the orthodox church has no agreed position on this. No agreed position!! And no view! How can a church not have a view on this major split between its key branches – apart from calling it “wrong”?

Certainly the current intention of educating younger people in the christian faith is to go out and seek like-minded faithful ones. These groups go on pilgrimages all over Russia, seeking out other people belonging to their sect and establishing contact (my cousin does not belong to mainstream russian orthodox church – they actually disapprove of one another and the followers are not welcome in each other’s places of worship). And perhaps that’s a good thing – it’s their own business how they spend their own free time provided this keeps them out of trouble? But of course they also want to convert young minds to their belief system. The view is that the current levels of morality have sunk so low – the lowest ever in the history of humankind – that there is nowhere left to go but to god. It’s interesting that most generations (since the Romans, I believe) also think that the next generation will bring about the end of the human race due to their total moral decline – so far we are still standing.

I want to finish this essay by briefly turning to the question of “why people might turn to god”. It is really difficult to comprehend why people believe – there are no facts to base one’s faith on, is one problem of many that atheists would point out. But this summer I came across a fanstastic science-fiction novel called “The Roadside Picnic” writted by Arkady and Boris Strugatsky in 1971. I was re-reading it again, and one passage struck me as so very relevant to the question that has been puzzling me for so long. Here it is:

“…Man, as opposed to animals, is a creature with an undefinable need for knowledge. But the whole problem with that is that the average man … very easily manages to overcome this need for knowledge. I don’t believe that need even exists. There is a need to understand, and you don’t need knowledge for that. The hypothesis of God, for instance, gives an incomparably absolute opportunity to understand everything and know absolutely nothing. Give man an extremely simplified system of the world and explain every phenomenon away on the basis of that system. An approach like that doesn’t require any knowledge. Just a few memorized formulas pins so-called intuition and so-called common sense.”

 

Copyright 2009 by CuriouslyInspired

 

A serious financial crisis is continuing to unfold in Russia.

Capital outflow: In the last few weeks, foreign investors withdrew their money out of Eastern Europe, the Russian stock market has fallen over 60%, and the government has been on a spending spree trying to prop up the collapsing markets. The very small rally Russian markets have experienced in the last 5 days are rumoured to be due purely to government’s share-buying activities.

As I wrote recently, the government committed a package of $120bn (and some sources say, $200bn) to bail out struggling large Russian banks – against the backdrop of some bank runs and bankrupcies of the smaller players.

Oil price collapse: Coupled with the above, the price of oil has recently fallen back beyond the $70 per barrel, now standing at about $67. Russia needs the oil price to be above $70 to break even and balance its national budgets (compare this to $95 for Iran and and Venezuela, and $50 for Saudi Arabia. Source – NY Times).

So, as Russia makes less and less money through its oil exports and wasting ever-increasing sums of money on propping its markets, where does this leave it?

Debt overload: Predictably, not in a very good position. Russia has accumulated a lot of foreign loans and in the next couple of months, needs to roll over $47bn of them. As there are very few investors left wishing to extend their support to struggling economies, this task will be exceedingly challenging. In total, Russia has $530bn worth of foreign debts, clocked up during the recent years of massive market expansion and over-confidence. Of these, another $150bn are falling due to be refinanced in 2009.

On track for downgrading: S&P issued a warning that it might downgrade Russian government bonds reflecting the declining credit-worthiness of the state. However presently, it maintains a credit rating of BBB+, the third lowest investment grade. If Russian bonds are downgraded further, this means they will lose their investment grade status, and any further credit to the country will cost it even more.

Moody’s downgraded the Russian financial outlook from “stable” to “negative” in the last week, citing “slowing asset growth, higher inflation, the slump in equities and funds leaving the country, all of which could result in deteriorating fundamentals for banks” as reason for its decision.

Credit default swaps, which are being taken out as means of insuring investors against (in this case) Russian government bankruptcy, are reflecting this in their pricing. CDS spreads (the difference between the buy and sell quotes), which serve as a measure of risk tolerance, are widening massively, reaching a 1,123, which is higher than spreads on Iceland’s debt before it sought a rescue from the International Monetary Fund, reports the Telegraph.

Russian government heading for bankruptcy? Thus the creditworthiness of the Russian state is in itself in question. It may be that the Russian government is heading for a default on its foreign debt, as it did fairly recently in 1998 – although the situation in 1998 and 2008 is somewhat different.

 

Copyright 2008 by CuriouslyInspired

Ah, what did we expect! Lord Mendelson, only back in the Tory government for less than a month, has already – tangentally – been involved in a scandal.

Mendelson: The chap does truly have a talent for sniffing out trouble. This time, he has been invited to stay on a yacht by a Russian multi-billionaire Oleg Deripaska. What business does he have to mingle with a super-rich oligarch – someone with proven connections to Russian mobsters? I am sure the subject matter of his meetings were all totally above board… yeah right…

Bravo, Mendelson. I guess it is a new twist to his CV to befriend old mates of Russian mafia – or shall we just call it networking with a wider group of contacts?

More details on Mr Deripaska here.

George Osborne: And yes, if we call this “impaired judgement”, then the world of UK politics is currently full of clowns with impaired judgement. George Osborne, the shadow chancellor, was reported recently trying to solicit a donation of £50,000 from the same Mr Deripaska whilst staying on the same yacht in Corfu. Which he strongly denies, which must mean it is true.

It is illegal in the UK to obtain donations from members of non-UK electorate. However as “soliciting a donation” is not an offence, he is not going to be investigated for this further. Wow – now that was close, wasn’t it?

So much for David Cameron’s assertion that “character and judgement” is more important than experience if Tories come to power. Mr Osborne’s judgement was, shall we say, examined and found wanting in this matter.

Read the full story on this here.

I do despair. The current Labour government has caused a total financial fiasco and seem to have forgotten they were responsible for it. Perhaps bringing Mandy back is a smoke screen to distract the voter from their economic incompetencies – anticipating the inevitable scandals – which as we can see were not long in coming?

Tories, as their major opposition have no consistent political platform, seem to only be capable of finger-pointing and petty bickering with Labour, and are showing an embarassing lack of experience and judgement. Which only poses questions about whether they are fit to be in the hot seat.

Aaahhhhhhgrh!

 

Copyright 2008 by CuriouslyInspired

As the global credit crunch and deterioration of confidence is starting to bite Russia harder, Russian banks are experiencing panic deposit withdrawals. Add to this the rapidly falling stock markets – and you have a dangerous cocktail of financial instability.

Customers want their money back: Last week, Russian bank Globex banned depositors from taking their money after a run on its deposits sparked by crumbling confidence. It is the first bank to suffer this problem in 2008 – but undoubtedly not the last. A number of other banks also experienced an unexpected rise in people withdrawing their money and closing their accounts. Long queues of investors desperate to have their cash back are starting to form outside smaller banks. Many failed to get their money as bank operations were suspended. So this crisis is not doing anything for the average consumer who is now seriously worried about losing their hard-earned money.

In the last couple of months, three banks have been forced into mergers because of the liquidity crisis brought on by the global credit crunch. There is anecdotal evidence that banks are being bought for nominal sums, one of them quoted to have been sold for $5,000.

Bailout Russian style: The Russian government’s financial bailout package of $120bn is aimed primarily at large captive state-controlled institutions such as Vneshtorgbank (VTB – the Bank for Foreign trade) and Sberbank (the Savings bank). The government also intended to spend a portion of it on shares purchase to support the tumbling stock market, but not so much at lending activities. Overall however, there seemed to be insufficient detail and transparency about the total package which caused the market a lot of concern.

The package itself is an astronomic size of money in terms of its size relative to Russia’s GDP. For comparison, US’s $700bn bailout is around 5.5% of its GDP (US GDP is approx $14trillion), whereas Russia’s bailout is about 10% of its GDP (Russia’s GDP is approx $1.2trillion). Since the bailout has been announced in September, it has had little impact on the Russian stock market, which fell down around 60% from its high in May 2008.

The crash of Russian stock market has been the most dramatic event of all the world’s stock markets collapses in 2008.

Market correction: In itself, the Russian crash is a huge adjustment back to the shaky economic fundamentals. Russian economy is still set to grow by about 7% in 2008 according to the IMF. However, the foreign investors who were attracted by speculative expectations of high returns in Russia are all gone and the money is gone with them, making the huge market bubble go “pop” spectacularly quickly.

Financial outlook: This is tricky as there are a few moving parts. Oil is a key one, but I am not going to touch upon it today, only noting that a fall in world oil prices is causing major concern to Russia. 

From the point of view of banking, we are seeing the start of consolidation of the Russian banking sphere, and there is a fear, which the government will strongly deny, that the financial situation is pretty grim: the major concern is that widespread bank failures will spark panic. Still, the population is pretty pleased about one thing – that a bunch of super-rich Russian oligarchs will lose their ill-gotten money in the stock market crash. That’s some consolation, isn’t it?

 
Copyright 2008 by CuriouslyInspired

As the BBC reports,

Iceland has suspended trading on its stock exchange in an attempt to prevent further panic spreading throughout the country’s financial markets.

Iceland’s stock markets will be shut down at least until start of next week. The reason for this unprecedented move is to give the government some breathing space to decide what to do next, and attempt to take the panic out of financial markets by simply keeping everyone away for a while.

This leaves Iceland in “good company” with Russia, whose stock markets were shut most of Wednesday due to huge falls in share prices, and for at least an hour on Thursday. In contrast to Wednesday, Russian stock markets were temporarily closed due to massive gains. Lucky them (but will it last?)

Collapsed banks update: Iceland is in a total financial mess with all its top three banks either nationalised or in receivership. Glitnir, which the government was aiming to part-nationalise earlier, is now in the hands of liquidators, as the government realised it was in too much trouble for the state to take on. Now Kaupthing, the largest bank of the three banks most in trouble, has been nationalised in addition to others.

Cause of troubles: I wrote about the causes of Iceland’s troubles very recently. “Troubles” is a bit of an understatement. People in the capital Reykjavik have already staged one demonstration this week and there is bound to be more civil unrest to come. Iceland might not have money left to import food stuffs for starters, so the collapse of the financial sector will have a very real impact upon everyone.

War of words with the UK: Gordon Brown and the Iceland’s PM Geir Haarde are engaged in a bitter battle of words at present. The UK has large investments in Iceland accumulated over the period of the Icelandic financial market boom. Now that the bubble has collapsed and banks have gone bust, Gordon Brown wants some guarantees that Iceland will honour UK savers’ deposits in collapsed Icelandic banks, as UK taxpayers will otherwise have to foot the bill in addition to bailing out British banks. Usually Iceland would have offered a guarantee of $28,400 per account but this has not been forthcoming in this case for the UK investors. The UK Government froze Iceland’s top bank Landsbanki’s financial assets in the UK. Icesave, the online savings bank with 300,000 UK customers, is a subsiduary of Landsbanki.

Geir Haarde is retaliating by saying, as Bloomberg reported today, that

the U.K. government is to blame for triggering the crisis when it used anti-terrorism laws to seize the assets of Icelandic banks in the U.K.

Iceland is also extremely unhappy that none of its usual Western partners have been forthcoming to lend it any money to help in its current crisis. It has had to look to other partners, including Russia and the IMF (International Monetary fund), to obtain money.

The row between the two PM’s is not serving to calm the panicked markets. The UK share prices is in freefall today and the pound is also falling against many key currencies.

Icelandic Currency collapsing: Iceland’s currency, the krona, was pegged to the euro before the crisis hit, at a rate of 131 krona per euro. Now that the government has stopped attempts to support the falling currency and formally abandoned the peg as unsustainable, trading conditions before markets shut down indicate that the currency is now worth about 255 krona per euro. That is a 91% drop in the value of the krona over the course of less than 2 weeks.

Bankruptcy: What is happening is pretty unprecedented for this country: Iceland is now facing bankruptcy. It is not in a position to repay the debts its banks have clocked up.

 

Copyright 2008 by CuriouslyInspired

The main Russian stock exchanges have been shut down for large parts of Tuesday, as the BBC reports. Yesterday Russian stocks lost around 20% on the RTS and Micex exchanges. Newest legislation passed by the Russian government now dictates that if stock market changes during the day by more than 5%, or by over 10% at market open, trading will be suspended. There used to be a higher threshold of suspending trading.

A Russian Bailout: The Russian president has now annouced that Russia is going to offer a bailout package of $36bn to the largest banks of the country. Unsurprisingly, the largest banks are in trouble.

Why is this necessary? There is rife speculation about why Russia needs to close its stockmarkets during volatile periods. Some see it as typical heavy-handed intervention and meddling – a sign that an incompetent government does not trust its own stock markets to sort itself out. I might have held this view myself 2 weeks ago when this first started happening. However today we see that stock markets around the globe cannot be relied upon due to the totality of the global meltdown. So perhaps the Russians’ response is not so outlandish after all.

Another view was that the Russian government was going to use the markets downtime to find money to buy up troubled firms after the exchanges’ reopening. Critical as one might have been of this intent before, we now see that governments across the world are nationalising all matter of banks in a hurry.

A likely intent is to try and calm investors’ panic. It’s not likely to work with bad news coming out left right and centre at the moment.

Total meltdown: The RTS index has slid by 65% from its high in May 08. This has been the largest fall amongst all of the world’s stockmarkets. This has demonstrated amply that the Russian stock market was just one huge bubble waiting to burst – the economy is in disarray. Some analysts say that Russian “internal factors” (war with Georgia, government’s short-termism and incompetence, falling production of gas, underinvestment into industries to name but a few) are at least 50% to blame for the current collapse.

Carried away: The Russian crisis has been coming for a long time. And same as with all other investors around the globe, no-one expected that the good times would actually end. The point I want to make is that with Russia, the economy was always less sound compared to… well, almost everyone else. And arguably, Russians got carried away with their illusory wealth more than the rest of the world did. Which will make their landing down to earth possibly even harder.

 

Copyright 2008 by CuriouslyInspired.

Financial markets shut down in Russia: In another heavy-handed intervention of the Putin / Medvedev government on the market on Wednesday 17th September, trading in Russia was totally shut down on the country’s two main stock exchanges, RTS and the Moscow Interbank Currency Exchange (MICEX). This comes as the result of steep falls this week of over 8%. The greatest decline happened on Tuesday and amounted to 11-16%, with a further fall of about 3-6% during the first hours of Wednesday before closure.

The main shares that fell sharply were those of the financial sectior – Sberbank (the country’s largest savings bank) and Vneshtorgbank (bank for Foreign trade). Apparently Gasprombank (the bank of the country’rs gas giant) shares are also in trouble having fallen sharply.

There is a regulation in Russia relating to trading markets which dictates that a fall of over 8% necessitates the closure of exchanges until the situation stabilises.

The slump is the second largest crash on the Russian stock market since 1998, the year of huge economic turmoil. Russia’s main exchange indices has fallen by over 50% since May 08.

Trading is only expected to fully resume on Friday 19th September. Trading on MICEX is restarting today but only in limited areas (incl Repos). RTS remains fully closed today.

A question on Gasprombank: What I find quite amusing is the debacle of Gasprombank. How can a bank which is sitting on top of the country’s largest gas producer get into such dire straits as to have its share price nosedive rapidly? My sources indicate that this is due to total lack of any sensible internal bank management. It’s a virtual goldmine but they don’t know how to run it properly.

Hardly unexpected: This crisis has been coming for a while but with Russians stubbornly denying that it might ever happen to them again. The links of the Russian market to the rest of the world economy are not to be underestimated and global ripple effects of the credit crunch are felt throughout.

The other 2 factors contributing to the current collapse in share prices are – the war in Georgia; and the fall in world oil prices.

Additionally, the Russian government has also generated conditions for their own credit crunch through an unchecked consumer lending in the last few years. Credit was freely available for all matter of purchases with no credit checks and only with some basic proof of income.

My prediction: This is going to get much worse shortly. Russia stands to suffer from the properly bubble bursting at any time soon. At the moment the ongoing building boom is unsustainable and is nothing short of a speculative pyramid scheme in property, with easy-come-easy-go money being invested in the housing market on an anticipation of an further unchecked rise in housing prices. These houses and flats are actually standing empty right across Moscow.

Banks which have been riding on a wave of relative economic prosperity in the past 5 years will start defaulting like they did in 1998 as the shocking state of their bad loan portfolio will emerge, and the credit crunch will set in preventing them from obtaining rescue loans from other institutions.

This might get quite nasty. I get no pleasure in forecasting this as the ones who will really suffer are the average Russian consumers. The rich ones have got their money stashed away in Switzerland long ago and won’t care less.

I could not help noticing during my recent trips to Russia just how xenofobic some Russians continue to be.

Xenofobia in the past: In my experience, a fair amount of Russians have always been anti-semitic. This is constantly reflected in the day-to-day life and in Russian humour which can be quite cutting to Jewish people. Other minorities also get mocked. The amount of “Tatars”, “Chukchis” and “Armenians” jokes in the past used to be quite prolific. It might still be but I have not been following this closely. I’ll be surprised if this has changed.

Xenofobia lives on: However from what I have observed is that many are increasingly anti-semitic and now also strongly anti-“Southern nations”. The latter is a catch-all category for all ex-USSR republics of the far South, such as Azerbaijan, Uzbekistan, Armenia, Tadjikistan, etc. These days, a very large number of migrant workers come to work in Russia.

The unadulterated anti-Semitism seen today is explained by some as follows: “the Jews sold Mother Russia <to the West, to the Devil – delete as appropriate>”. Jews are blamed for having illegally acquired, for currently owning, and for “irresponsibly squandering” the whole country’s riches. When confronted to back up such strong claims, I have only heard one reply in return – just look at the oligarchs’s surnames, they are all Jewish-sounding. Read the rest of this entry »

It appears that the two countries are at it again. Russia is responding to this summer’s US-Poland deal for creating a missile defense shield in Europe by warning that it will take “appropriate action” in turn. Which means it wants to continue showing the West the favourite Russian response of “we are big, we are strong and we take no sh*t“. Stick warheads everywhere. Hmm.

We’ve been here before. Where has all the good work at reducing the stock of nuclear warheads of both countries in the past 20 years gone?

But can Russia sustain this now? According to Gazeta.ru on the 26th August, Russia does not really have the internal resources to support a fully-blown cold war anymore.

Also, due to capitalism well and truly taking hold in Russia, the government has lost its ability to squeeze every last drop out of its country to support the cold war and “achieve the highest degree of authoritarianism” without the whole economy going to pot as the result: Link

But they can always try, and knowing Putin try he might!

Do I find this inspiring? No. Perhaps I should call myself today CuriouslyVeryUneasy.

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