Putin, The Teacher

Long, long time ago I thought that someone who tells others to do differently from what she or he does is called hypocrite. This is the definition from Webster dictionary: "a person who feigns some desirable or publicly approved attitude, esp. one whose private life, opinions, or statements belie his or her public statements". Later on, about 10 years ago, well known then "doctor" Laura said that such person, when applied to her, is called a teacher.

We've just got ourselves new economic teacher: Russian Prime Minister, nee President, Vladimir Putin. In his Davos speech he called others not to allow too much intervention into business, not to fall into protectionism, and a lot of other smart things. Other things were not that smart, for example the idea to have more reserve currencies and to make reserve currencies issuers accountable to other countries. Yeah, right. Putin is talking 3 years about making ruble a reserve currency. He just doesn't understand that you can't appoint reserve currency, it becomes such in decades, if not hundreds of years. In all history there were just a handful world reserve currencies: Roman, then Byzantine denarius, Venetian lira, English Pound, US dollar. Maybe I missed one or two. Yen and Euro both are gradually becoming reserve currencies now, but jury is still out.

But the main thing is: Russia is just set huge tariffs for imported cars. So much for talking about threat of protectionism. As for government intervention in business, Russia is a champion. Any businessman in Russia knows that whatever governments wants from him, it gets. Many give money, shares in business, even abandon businesses to government without fight. Nobody wants to follow steps of Khodorkovsky, who founded the best oil company in the country, was robbed of everything and sent to prison on fabricated charges. Niall Fergusson is absolutely right: “The idea of the Russians lecturing the West about how to run the economy is absurd,”

Of course, the best judge of economic ideas is market. And what mister market told us? Ruble fell another 3.5% against dollar today.

I missed one opportunity to short Russia using Market Vectors Russia ETF (RSX). Maybe it's not too late?

Full disclosure: at the time of publication author did not have any positions in RSX. Positions can change any time.