November 2008


Ukranian Defense Ministry claims its armed forces relocation has nothing to do with Russia specifically, but is a process of spreading army more evenly across the country (original article in Russian). Defence Minister Yuri Ekhanurov recently stated(rus): “The recent Caucasus situation development makes every country think about its ability to deal with new challenges. It seems it is not so quiet, and Europe can still have armed conflicts”.

Touché, Monsieur Ekhanuroff. The challenges indeed makes you think. It puzzles me, however, what kind of thoughts make you reinforce your army positions along all of the borderline. Perhaps you got a tip that a full-scale assault of two-headed reptilians from Alpha Centauri is due to start the coming Tuesday straight after morning tea? What kind of threats does Ukraine fear in Europe? Moreover, what kind of threats does it think it can REALLY tackle? It seems to me Mr. Obama would be more reluctant than his predecessor  to fish you out of the pot once the soup starts boiling.

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The most probable threat Ukraine is preparing to face

Guest article by Tovarish

Once upon a time in a blissful place of forests, glades and lakes appeared a Dictator. He (of course it was a he) was greedy and evil beyond measure, and quickly made his mind to usurp the whole place where people knew no troubles. In no time did he gather everyone and proclaimed himself to be the new master of all, everpresent and evervigilant. The world was his, and nobody could object to his rule.

As he was gloating over the pathetic minions who lost their freedom to him, he was approached by his team of trusted advisors. “You are at great risk now” – said they. “We are the only people you can trust to shield you from danger of haters and rebels. You have to favour us – give us the share of your power, and we would be your trusted helpers always”. And so the Dictator did.

Next came the military of the country, and this they said: “We are many, and we have guns. We do not care for your rule or anyone else`s. But we don`t object to your presence either. Give us the share of your power, and we would serve you loyally from now on”. And so the Dictator did.

Next came the police of the country, and voiced their cliams: “Your enemies are many, and they all plot against you. We hunt them night and day, and it`s a hard job. Without us you are not safe, and for this we want to live better than the rest. Share your power with us – you have much of it as it is”. And so the Dictator did.

Next came the judges, and appealed to Dictator`s reason: “The criminals the police catch are fearless, for they know they did no wrong in plotting against you. Bars and chains do not break their spirits. We need harsher measures to punish them and make the rest fear you – and for this we need your power”. And so the Dictator gave them some.

Next came the aristocracy of the country, and complimented the Dictator: “Your Highness, we worked hard for our capital and social standing, and the same maggots who seek to overthrow you want to kill us too. Give us the share of your power, so we can keep the unwashed peasants in check”. And the Dictator reluctantly did this.

Finally came to Dictator his trusted Foreign Minister and said: “Your Highness, it is well known the rest of the world hate you, for you call yourself Dictator. In my opinion, we can prevent a war with all of them if we but do a few minor changes, for formality only. It is my suggestion that we change your official title to President, and hold elections once in a while (just to keep rebels in check, eh?). Also, there should be some sort of puppet opposition, let`s call it Parliament, where village elders would gather once in a while and debate on matters useless and uninteresting. You would still be our benevolent Dictator, but all the others would be fooled into thinking you are not, and you do not have to fear for your life no more. This would be a very wise decision”.

And so the dictator ruled the land of paradise from then on, untill one day he choked on a cherry from a jar.

Guest article by Tovarish

Prime Minister Costas Karamanlis spent his second consecutive weekend trying to convince people in the provinces that the 28-billion-euro support package for banks would benefit the real economy

Greeks are truly having a time of their lives being in EU. How else can you explain that, during the very agony of the world economy as we know it, Karamanlis spends days walking in mud in the middle of nowhere convincing locals they would have more goats as a result of some smart government move? He is talking to the same people that were offered money by EU agrarians not to grow their crops and sit all day in the sun for a few years now. During my time living there, even my schoolteacher got a couple of “suit dudes” coming up to his country house offering something on the line of 30 Euros not to grow olives on his almost dry tree in the backyard.  In a country flooded by archaic bureaucratic system, external enemies on all fronts and hundreds of unwelcome ethnic Greeks with no passports or jobs, there never seems to be a cloudy day.

Why, on the less sunny side of Greece we have a whole island network of  tourist industry that might just be breathing its last. With consumers in Europe saving their money in their pillows rather than in their holiday plan, a lot of places might not see tourists wobbling towards the beach in the next swimming season. Of course, Greek government does not have to address this problem – it is well known that 90% of people employed in the tourist industry are seasonal workers, and disappear into thin air once summer is over, creating no poverty, despair or votes for the opposing party.

Costas Karamanlis

Kostas Jabba Karamanlis the Hutt, as the world knows him

Guest Article By Tovarish

Politicians keep telling us that, despite the situation being grim, they have the means to deal with the crisis and save our country’s economy from a long and deep recession. Even when thousands of people lose their jobs daily, they still come on television and tell us that “it will be alright”. The sad and simple truth is that politicians will pretty much say whatever it takes just to gain some public support. In fact, many of the economies hit worst by the current crisis are fairly limited in their ability to deal with it.

Briefly what is happening

In general, the prescribed medicine until now has been to pour money into the economy and cut taxes in order to stimulate consumption and investment. But money does not just come from thin air, it is either printed, thus creating inflation, or is borrowed. In general, central banks or governments try to avoid printing money, because if this leads to rampant inflation it would just worsen the situation. So in most cases, the only way to deal with economic crisis is to run a government deficit, which means cutting taxes in order to stimulate your internal market, while injecting money into the economy and praying that all this would actually work.

Moreover, as the world is highly interconnected nowadays, exporting countries which rely on Western markets for their products suddenly face a drop in demand. As their economies are threatened, the only solution is to try to move from the external market towards the internal market. But again this has its limitation if, for example, you are an oil exporting country, it is unlikely your internal market will be able to compansate for the loss of demand abroad. If you are like China, exporting manufactured goods, then there should not be any major obstacles for turning towards the internal market, provided you can stimulate your internal consumption.

The key elements

Taking this into consideration, by using some broad macroeconomic indicators you can predict which country is better prepared than others to deal with the crisis. In other words: who would be hit worse. Bear in mind, that this is just a broad picture: government leadership, structure of the economy, exporting partners and many other factors can also affect the evolution of events.

Public Debt – this is the debt gathered by the government. Chances are that the bigger this is, the greater is the difficulty of the government to run a deficit. Simply because when you have a lot of debts that you keep stacking, creditors know it is unlikely you will pay them, so they will be reluctant to lend you more money.

External Debt – this is the debt of the entire country to creditors outside it. The bigger this is,  the harder it is once again for the countrys` government and private sector to receive new loans.

Unemployment – The proportion of workers without a job and actively seeking one. In the current situation, if you have a high unemployment rate it probably means you already have some very big issues and the current crisis will probably matter little on top of the problems you already have.

Exports – The amount of good and services you sell to other countries. In the current situation, the more export orientated you are, the bigger the impact on your economy of the fall in the global demand for goods and services. However, in most situations you will be able to revert to your internal market, but this will not be without its costs.

Reserves of Foreign Exchange and Gold – the amount of foreign money and gold you have at your disposal. This money can be used for various means: in exchange for your own currency in case you need it to stimulate your own economy, pay external debts or lend it to other countries so that they can buy your products.

Stock of domestic credit – is the total amount of credit owned by non-banking institutions. Usually not a big deal, but in the current situation, the bigger this,  the larger the number of defaults. This will probably apply better to the states which were worse hit by the financial crisis.

GDP (exchange rate) – the value of all final goods and services produced within a nation in a given year. This value is calculated in the domestic currency and then transformed into USD at the official exchange rate.

GDP (PPP) – the value of all final goods and services produced within a nation in a given year. This value is calculated by evaluating the internal goods and transactions at their value in USA and thus directly in USD.

Building a rating

Putting the above elements together is not an easy task and requires some intuition. The result is by no means a strong predictor. Rather, it is an indicator of which countries will experience more difficulties than others.

The formula: R= [%Public Debt + ExternalDebt as % of GDP + (Exports as % of GDP)/2 – ForeignReserves as % of ExternalDebt – (ForeignReserves as % Exports)/2 + Domestic Credit as % of GDP]

The higher the rating, the less likely the country can deal successfully with the crisis. A world average is computed weighted by the countries economic power (GDP at PPP). And then, based on this average a score can be given.

The results

Unfortunately, there is not enough information to make this formula work for all countries, but there is still enough for 117. Here are the countries ranked by their crisis vulnerability (the higher the score the worse isthe situation for that country):

results2

Countries with scores above 60 are in a very bad situation. 40-60 - pretty bad, but probably a good crisis plan will get them ashore. 20-40 should not be very badly affected but this will depend on leadership. Below 20, some difficulties but generally the crisis will consolidate their position.

And the score of the biggest 20 economies in the world based on their PPP GDP.

Rank Country Vulnerability Score GDP PPP (real valure) (millions of USD)
16 European Union 45.67 14,546,184.50
24 United States 40.54 13,780,000.00
117 China (PRC) 0 7,099,000.00
18 Japan 43.33 4,272,000.00
111 India 17.26 2,966,000.00
13 Germany 47.5 2,807,000.00
4 United Kingdom 62.57 2,130,000.00
110 Russia 17.35 2,097,000.00
12 France 49.07 2,075,000.00
77 Brazil 27.48 1,849,000.00
20 Italy 42.9 1,800,000.00
15 Spain 45.68 1,361,000.00
81 Mexico 26.91 1,353,000.00
19 Canada 43.09 1,271,000.00
83 South Korea 26.75 1,206,000.00
62 Turkey 29.71 853,900.00
71 Indonesia 28.45 843,700.00
23 Australia 40.64 773,000.00
115 Iran 7.08 762,900.00
90 Taiwan 25.71 698,600.00
3 Netherlands 62.58 645,500.00

What does this tell us?

The highest ranked country is Zimbabwe. This may seem weird for some, but given that they currently have an inflation rate of over 230million % (yes, that is correct, 230 million) and that they rely heavily on loans from outside the country, this comes at no surprise.

However, other countries on top of the list are well developed countries. This is because they have a substational Public Debt as well as an External Debt which is sometimes 4 times the size of their GDP, their low foreign currency reserves also means they are somewhat limited in they ways they can help themselves. However, given their good economic performance until now it is likely they can still manage to deal with the situation, but the impact of the crisis will still lay heavily on them.

US has ranked quite well. This is because their External Debt is not very big in comparison with their GDP. Also they can probably rank even better (lower) because although officially they have low reserves of foreign currency they have the power to print dollars which is still a very powerful international currency.

On the other side of the big countries is Russia and China. Both countries have low public debts, low external debts and high reserves of foreign currency. For China the situation is still difficult because they rely heavily on exports, but this can be offset by the high level of foreign currency reserves. They can lend this money to other countries which in turn buy Chinese products with or exchange the money for Chinese currency and help their own economy. For Russia the situation is not that good, especially because they are primarily a gas and oil exporter and they just cannot replace foreign demand with internal one, they will have some difficulties but probably not a crisis.

MOSCOW – RUSSIA is giving one US$1 billion (S$1.53 billion) to the International Monetary Fund to help countries overcome the global financial crisis, Prime Minister Vladimir Putin said on Thursday.

Let me get this straight – so now we here, in the liberal free-loving West, are beginning to accept blood money from Russia? We all know that those funds come primarily from selling Chechen babies to be trained in death camps of tolerance in Siberia. How can we accept this money in time of need from RUSSIA? After all, everyone knows Communism has failed, this country should not even exist anymore.

As a concerned citizen, I cannot understand why we have to take money from the people who caused the crisis in the first place. Everyone knows the primary source of our excessive borrowings (that led us all into this mess) are 1) China`s profits from selling the “Free Tibet” T-shirts and 2) Russia`s oil money (primarily found under some loose floorboards in Khodorkovsky`s summer condo). It is all their fault and in fact they should be bringing over their goods for free as an apology for all the mora they have done to us.

And now we are just meant to owe them money? I understand being fully dependent on USA, but Russia? They are not real people anyway, right? I mean, they are on the WRONG side of Europe. And we have absolutely nothing in common with them except for oil and gas trade, as well as considerable amount of history (those stories of the dead people you slept throught in school). I say these tendencies are wrong, and we should stop the cancer before it spreads. Make your contribution to the crisis – turn your gas off and let those Russians beg us, not otherwise.

All your base belong to us!

All your base belong to us!

Guest article by Tovarish