Russia's Role in the Bush Legacy?

Roughly a month ago I mentioned that I thought Bush, Bernanke et al would in the future be seen as briliant financial minds. I did not want to finish my comments until I had done a bit more research. I am more convinced of my position today than I was when I made the statement. Two months ago I began my first lessons in the Russian Language. There is a great Internet site livemocha.com that allows a user to not only study a language but interface with native speakers in the country of question. So in the last several months I have not only begun to learn the language, but I have had the chance to understand the minds and thoughts of Russians from across the Russia Federation. I will take the time to state here, the individuals I have met have by enlarge been a joy to speak with.

In addition to speaking to Russian nationals, I took time each day to read articles from russiatoday.com. It is a great source of information. I encourage the reader to review the articles on the site. With that said let me say, my work experience does include time working in the topic of Information Warfare. When I read the articles on the Russiatoday.com site I get a very different image of Russia than what the articles say. When I combine the information in the articles with the information I collected from Russian Nationals, I am convinced Bush will be judged well in the future.

Enough beating around the Bush, you say. OK so here are the facts. Roughly 2 years ago it was well known that China was the single largest holder of US Treasury Bonds. It was even speculated by some that China could use these bonds to destablize the US economy. As we move forward from 2 years back we saw the US dollar begin to loose tremendous value. As the dollar lost value, oil prices soared. China did begin to liquidate their Treasury holdings as the dollar fell. They converted those holdings into ownership of Sub prime mortgages and Investment firms within the US. The more the dollar fell the more the price of oil climbed. The news media without question accepted the "Green" theory that world oil demand was outpacing world oil production. Uninformed speculators drove the oil prices higher and the dollar continued to fall. China diversified their trillion dollar holdings into more mortgages and more US investments. Meanwhile Russia began to fill their financial coffers with profits. At some point it appears the US was defeated economically by these powers. Here comes the trick. China was one of (if not the) largest loosers in the sub prime failure. The properties did not disappear, but rather the paper representations of money disappeared as did the US dollars held by China. The stock market plunged and so did the paper money representations held by the Chinese.

But what about Russia? Under the peaking oil prices, the Russian government re-nationalized much of the Russian Oil production. For several months the Russian government benefited from $100+ per barrel oil. So much was the benefit, that the government put over 500 billion USD equivalent into reserves. As the market fell and people ran to the security of T-bonds the dollar re-emerged in strength. Today oil prices hit $44 per barrel. In efforts to stablize the Ruble, Russia has spent more than 50 percent of the reserve funds. Even after spending 50 percent of the reserves the Ruble has lost tremendous value against the dollar and Euro in the last 6 months.

Now go read the articles in Russiatoday.com. Are Americans hurting? Yes, but there is one final piece in this puzzle. Russian people not living in Moscow make a fraction compared to American workers. I spoke with software developer in Moscow. In our conversation we realized his salary in the high tech industry was roughly the same as a farm laborer in the US. Now get this, an iphone in Russia is three times the price as an iphone in America. The ability to endure unemployment and weak economies is clearly favored by Americans.

Ultimately, yes the US economy is not great. HOWEVER, Russia, China and the middle east have lost volumes more. Where did they lose it? Back to the people that had paid them for product.

I will attempt to speak more to this tomorrow, while I watch Football.