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The Crude Crash Comes To Wall Street: Counterparty Risks Rear Their Ugly Heads Again
In late 2006, default rates on lower-rate subprime private MBS began to rise considerably. Though not a very transparent market to the mainstream media-watching world, bankers knew trouble was brewing as this had not happened before in such a benign house price decline. Banks, knowing what they had on their books, what they had sold to others, and what that meant for risk, began quietly buying protection on other banks as counterparty risk became a daily worry for desks across Wall Street.
The stocks of US financials continued to rise amid "contained" and "no problem" comments from the status quo but credit spreads for the major US banks kept leaking wider even as stocks rallied... then reality dawned on stocks and the rest is history.
Today, US financial credit spreads (wider) have decoupled once again from stocks (higher) and that divergence began as oil prices started to slump.
Are banks hedging counterparty risk once more 'knowing' what loans and exposures they have to the massively levered US oil industry? Or is it different this time?
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counter party doesn't have enough money - it is simple. Do you think they want to spend so much money just to keep USA afloat for another or two months? This money will never come back, they need to pay for negative cash flow in shale oil and day after day price go up
Couple of points:
many of the shale players hedged because they believed they were taking enough risk with the geology and technology and didn't want the added layer of risk when the irr's per well were so good at the prevailing price of just a few months ago. However, if you look in the mgmt discussion section of quite a few 10qs, these hedges were often three way collars: selling a call, buying a put and selling a lower put to help finance the trade. The sold puts (ranging from $65 to $75 from what I've seen) are now all in play. The hedger will still clip a premium to spot ( the diff bw the put he bought and the one he sold), but is exposed to price volatility below the strike of that sold put. His sold call will likely expire worthless so he gets to keep that premium, too.
The counterparty is eating the difference between the put strikes and of course the call premium.
If you think US shale is likely 50% hedged in this way next year, and assume production of 5mm bbl/day, and that the damage per barrel is $20, that's $18bn the hedge providers are wearing. Counterparties will fail in spots.
Also, if oil stays here or goes lower, the irr's on shale wells in most basins are not worth pursuing, and with declines of ~275k bbl each month across the permian, bakken and eagle ford to replace, our production will fall quickly after the last gasp of hedged cash flow is spent. Also, the HY will not be enabling such robust production again anytime soon. Could bring balance back to supply demand quicker than many think.
if only oil was not remortgaged by 1 to 100 by banks=)
Some good points. But for your calcs, shale is hedged at 35% for 2015.
They know that, it's CYA to be able to later say "it is/was not MY fault!"
For the deeper thinkers it's maybe also to become more connected, so TBTF applies to them.
Jack B,
It's called socialism for the rich and creative destruction for everyone else...
To me this is the same as selling of puts. Wen one sells a put option he takes on the underwriting and the responsibility for the security if the value if that security drops and the security is put to him.
In an IRA, am excellent concept is a cash secured put where asset value is pledged hard to make good on the contract until it expires. Those funds may not be reinvested elswehere until the option expires or is exercised by the buyer. But guarantee of performance is there because asset value was pledged hard to guarantee this potential performance.
What banks are doing are naked put writint equivalent which is as risky as it gets other than naked call writing. But with naked puts, asset value is not pledged and it is not cash secyred put. The buyer is at the mercy of the underwriter to make good on performance if not guaranteed by the OCC or an equivalent oversight agency. This is insurance but it is also speculation, the banks as we know were raking in insurance premium with the understanding that as long as the casino did not work against them, they had relatively consistent source of income. This is why they are bitching like hell when there is any serious thought of taking this away from them, whenm Glass-Steagall was in effect.
Since the derivatives are so substanital, no single party can hope to underwrite and hold the risk to all the action. They write puts or put equivalents and continue on as if the asset never will losei n value. They bet wrong in 2007 an d08 with subprime mortgages and once more in late 2014 with oil. They have no ability to make good on their commitments with the put contract written, and will try to deflect this off on the tacpayer. I have no idea why some of these put buyers are doing these deals with the same parties that detaulted or caused problems in 2008, yet they do. in their own little bubble world they have a hedge or insurance against a down move in the market. You have insurance if that counterparty has ability to pay and will pay. It is hopelessly naive to execute these derivatives deals without assurance of performance if the put contract was actually exercised and the bank was assigned on the contact. I'd want that money set aside in case I came calling for it. When I sell a cash secured put, I include this as an ROI position on the funss I need to set aside to make good on performance. The issues are happening here largely because they are not requiring the banks to pledge the assets to make good on these puts, and the counterparty risk develops because the other guy was doing the same thing abd after a while we have over 1 quadrillion in deivatives.
I would never buy a put if i had doubts that I could exercise my option when and how I want at any time and without risk od default. I likely would not even invest in the security itself if I couldn't exervise a put on someone else to get out of the position at any time and with known variables on cost and ROI. This market is way too mercurial without a strong and vibrant derivatives market.
There is a basic solution to this. Do not allow the banks to sell or underwrite naked puts or naked calls or their equiavlents in derivatives based on other units such as interest rate speculation and insurance, commodity speculation and the like. In concept, this is the same principle as the equity option market. If that bank does not pledge their resources to back up performance, they do not get to collect the insurance premium, plain and simple. That will force responsibility in these markets but damn quick. Derivatives are a crafted circumvention to state insurance regulations, and the banks do not like to be regulated. This is one case screaming for implementation of regulation for the good of the country.
The Congress had a right direction in Dodd-Frank in requiring a separate non-FDIC insured entity in the picture if the banks wanted to do these deals, which they do not have to and did not for many years. The problem is the blowback from the banks and that key regs have not been implemented. There will be huge problems with derivatives, down markets and performance on put contract equivalents until the controls are put in place so the taxpayer is not left holding the bag because the banks f*ked around trying to bolster their bottom line.
Jack Burton,
Not just a gentleman and scholar, but a fine example of what humanity should be and should aspire for.
You are a fine bloke, you mate, excellent comment. Could not agree more.
Hmmm, ok, so lets see if I get this, 550 billion in risk loans to drillers based on umm what ? $90 a barrel oil, which is not profitable at $50 ? and, umm, 550 billion worth of loans is an asset ? Not a liability ? So lever up that asset(?) x10 with derivatives for a grand total of 5.5 trillion in losses if/when it goes south ? And push off the losses to the tax payers by changing the law in the cromnibus bill. oh, lets not forget who made those loans possible with near zero money printing. What could go wrong.
i bet - it is more than 550b.
And I bet the leverage is closer to 50:1 than 10.Plus the currency hedges and IR swaps
that might trigger.
Time for a report on the SBS, Tyler ?
50:1? lol? fed officially have 78:1, mb you mean 500:1?
Don't worry S&P500 to trade 1600 by 19,June 2015 and Gold to trade 1700 by December 2015, AUD 77 any time in 2015,
The RBA wants the Aussie dollar at 75 US cents.
Caution
Unlubricated economy ahead
Check engine light is on
We unlubricated some folks.
We unlubricated some folks BEFORE penetration.
You can fix any check engine light with electrical tape.
What light?
Don't worry, the FDIC insures everything.
Insures everything, pays on five percent.
Not anymore they don't. You haven't been watching your g20 meetings.
Don't worry, they'll leave the London branch open for "special clients" for an extra week.
the fed can just do a "maiden lane" for those energy junk bonds.
Counterparty Risk Fix:
Backstop Everything.
There.
Fixed it for ya.
Just like last time.
Nothing in their playbook has changed. Nothing has changed.
The only Unaccounted Variable is The Unaccounted Variable.
I was hoping upon hope that the oil price decline was just manipulation by the Saudis. But more and more it seems the Saudis are responding to lower demand and lower growth and big problems are foreshadowed by the high yield bond decline. And this is not just about oil. Look at iron ore prices - more than cut in half since 2011. What other sectors are leveraged? It seems no me is wanting to buy much of anything.
Yeah I don't know about iron ore. All the major companies in Australia have almost doubled their production in the last two years and the extra supply coming online hasn't even finished yet.
Maybe we've become so technologically proficient at mining and drilling that our supply will now forever outstrip our demand.
Google earth North Dakota and check out the pools of Texas tea. It's a brand new Eden! Gee, wonder why no animals? Companies will go bankrupt and leave Eden to the suckers.
It looks like it's back to the cold ND winters of old...
If fracking and tar sands were an environmental nightmare to begin with, wait until oil goes below cost of production and the bankrupt companies walk away from their mess.
Wait until oil is exposed to be ubiquitous as klebsiella.
Fuck yeah.
It's the Come Line like in Craps. Balls or Sense?
Saudies killing shale oil, which is a good thing. Fuck Cheney. To make it happen sub $35 oil for 6 months. ND is about to go bust.
(Dick chewing on big cigar)
"Boys, we found a new field. We gotta have those guys and equipment up in shale country!"
"What can we do to assist, effendi?"
"Crash the price for about 6 mos. We'll get their stuff cheap!"
Non-oil debt avoidance looks seriously bad on BlackRock's high yield HYT fund decline of 9% from 11.75 to 10.90 in 9 days, until you look at the 10 year chart, showing that the bottom is down another 60% at 5:
http://bigcharts.marketwatch.com/quickchart/quickchart.asp?symb=hyt&insttype=&freq=2&show=&time=13
More like Crimnibus.
Sometimes what goes around comes around. I gave out a 1964D silver dime to a little girl for a present today. I have rolls of silver dimes that I have not even opened yet. I decided to carefully open a roll of 1955P dimes. The first coin I saw was blue. Perfection in toning in every way. Knock you on your ass sort of perfection. Not many coins ever get toned like that. I refused to touch it even with my cotton gloves. That is just not a coin you normally see and I have went through many tens of thousands of coins. I have even tried to tone coins myself and failed. It is an uncirculated coin with such a low mintage. Clean blue silver is always worth heavy coin.
Fuck yes, that coin is really worth something. I gave a good coin and I got one in return.
Sometimes, good chickens come home to roost, or something.
Solution: Russia nukes Saudi Oil Fields.
"We created a giant Oil Bubble, men! Run! It's gonna blow!"
Elizabeth Warren says the TBTF banks should have been broken up
https://www.youtube.com/watch?v=DJpTxONxvoo
Suicide by nail gun or impalement?
Mark this post and thank me later when it happens..........BOKF is the next FED and DSL. BOKF will be $5 or less in a year from now.
how about cullen?
Tweet from Jim Rickards last Thursday, pretty much sums everything up :-
Math class: $9T EM debt+$5.4T energy debt=$14.4T. A 20% mark-down (due to oil price, strong USD)=$2.9T losses=2x Subprime in '07.
I wonder what Vlad is thinking here, looks like Russia could actually come out on top??? No Russian Banks have lent to these US companies. negliable debt, been buying Gold hand over fist...stocks on a PE of 2/3 could the Ruble and Russia bacome a safe haven?
"Woohoo, gas is cheap!"
Olpec plunges into chaos, ISIS takes Saudi Arabia, minutes away from the Suez Canal...
Coming back to the other face of the Oil price crisis : the financial fiesta side.
All those of you who consider the Cherokee Lady in the Senate to be a front for Obama's cowtowing to the Oligarchs of Banksta world read this :
http://www.nakedcapitalism.com/2014/12/elizabeth-warren-remarks-citigrou...
Her frontal attack on this derivative swap scam now being packaged in the Omnibus bum legislation is as explicit as can be. It hits out at both CITI and its crony friends in Congress.
She is totally committed to fighting the banks, way beyond anybody else in Congress.
Tea drinkers and false noses of neo-con Repugs, who love helping the Oil/Finance lobbies under the rug, please take note!
Hands up!
Don't default!
Hands up - don't mug me.
We are all being 'legally' mugged. - again
It is no concidence that congress passes a new spending bill over the weekend including a new bail out measure for the Banksters.
This ship is going down and the Banksters know it. Crude oil is the canary in the coal mine.
What this says about congress is that they are so completely bought out and crooked that they don't ever care anymore what the American people think.
We are so done I can't even think about it.
Sad days for Amerika. We are at the lowest point in our nation's history.
“Where you’re at, now,” Tyler says, “you can’t even imagine what the bottom will be like.”
What about me when I was short Oil and the FED turned on the money spicket.
Nobody gave a damn when I was on the other side of the trade!!
Is this the main reason that Citigroup and other TBTF banks are/have gutted Dodd-Frank on holding derivatives/swaps and god only knows what other risks? Are they so worried about losses that they are looking to government for protection? They get the profits and we get their debts with another bailout.
Who wouldda thought the Arabs would be first to fall off the money train. Supply and demand ragheads! Don't ever forget it. Tie it all up with derivatives then dump it like a stinky turd. Wal mart perfected this to small busisness all over America. The good news is we'll have cheap oil for a while and the shale gas ain't going nowhere. Stand off now between bankers and Big Oil. Till Obola intervenes that is.
Weak Ruble Keeps Russians at Home Many Cancel Plans for Winter Trips Abroad Due to Currency’s Dramatic Slide
MOSCOW— Viktor Lander, a 35-year-old copywriter, usually heads to Europe with his wife for the New Year holidays. This winter, with his rubles buying fewer than two-thirds as many euros as they did 12 months ago, they are staying home in Moscow.
“When the rate started to rise rapidly at the start of October, we just stopped even thinking about going anywhere,” Mr. Lander said.
The ruble’s plunge against the euro and the dollar is upending the lives of many in Russia’s middle class, which in recent years has gotten used to vacations abroad and Western products from gadgets to food.
Booming oil prices helped Russia’s middle class grow to 60% of the population in 2010 from 30% a decade earlier, according to the World Bank.
Now, the plunging oil price and sanctions imposed on Russia by the West because of its intervention in Ukraine have sent the ruble plummeting, leaving many of those who at one time could afford the latest smartphones, furniture from IKEA and cheese from France facing a new reality.
A mid-November survey by the FOM pollster found 45% of Russians say the weak ruble has had a significant impact on their lives. The ruble has slipped further since the survey, touching record lows of nearly 58 to the dollar on Friday compared with just over 32 at the start of the year.
Still, President Vladimir Putin ’s approval rating remains sky-high at 74%, according to Levada-Center. His popularity spiked this spring amid an outpouring of patriotism when Russia annexed Ukraine’s Crimea.
The slide in the ruble has been most keenly felt by urban dwellers, who are most likely to have savings, buy foreign products and spend time abroad. Poorer people—Mr. Putin’s key support base—are less affected as they usually have no savings and their spending is mostly in rubles.
“Polls show that people sense that things are getting worse, but the propaganda is holding them a bit,” said Yevgeny Gontmakher, an economist at a Moscow think tank.
Russian state-controlled media blame the crisis on external factors like the Western sanctions, echoing Mr. Putin’s claims that the U.S. is trying to weaken Russia and reinforcing his call for patriotism.
Officials and analysts say things will get worse early next year. The Economy Ministry forecasts that real disposable income will fall 2.8% in 2015, the first fall in Mr. Putin’s 15 years as Russia’s leader.
In Moscow, the drop has already started. According to the city’s statistics bureau, real disposable income fell by 5.3% in the first nine months of the year, and by 9.1% in October from the same period in 2013.
People who have taken out foreign-currency mortgages protested the ruble’s slide outside the offices of Russia’s central bank Friday. Zuma PressOnly 12% of employers are considering raising salaries in the near future, half as many as last year, according to a survey by the recruitment website SuperJob. Many retailers have held prices low so as not to scare away customers, but say they will have to raise prices early next year.
Among the sectors hardest hit already is tourism, which normally enjoys a bumper start to the year when Russians take vacations for the New Year and Orthodox Christmas on Jan. 7.
“Everything has collapsed,” said Irina Tyurina, spokeswoman for the Tourism Industry Union. She said bookings were down by more than half, forcing many tourist companies to cancel charter flights and sell off vacation packages at a loss to recoup at least some cash.
Tatiana Samoilova, who owns a travel agency, said she’s filled with dread when she checks the ruble rate. “We aren’t intending to close, but we’re just surviving at the moment,” she said.
Even regular clients—including three gold-mining companies from the Siberian town of Magadan that usually send employees abroad as a bonus—have canceled trips, she said.
Many vacationers are switching to domestic destinations instead, including Moscow, St. Petersburg and Sochi, which hosted the Winter Olympics early this year, Ms. Tyurina said.
Others are downgrading their plans. Ms. Samoilova said people who used to travel to Paris, for example, are switching to Warsaw or Prague instead.
Architect Phil Sevostianov, 25 years old, is still going skiing in France, but has chosen a less-exclusive resort that is 20% cheaper than last year. Evgenia Milova, a fashion writer, is going to stay with friends in Europe. “Without free accommodation we couldn’t afford [the trip] given the current rate,” she said.
For those who stay at home, the picture is also gloomy.
The central bank says inflation will hit 10% by the end of the year. Russia responded to Western sanctions by placing an embargo on some food imports in August, sending prices higher.
Vladimir Rusanov, a spokesman for superstore operator X5 Retail Group NV, said that the price for fish and other products that can no longer be imported is up by as much as 30%.
Azbuka Vkusa, a premium food store, has replaced Italian mozzarella with Russian or Belarusian versions. “I can’t say people are buying less. The price for the Belarusian is cheaper than the Italian one,” said Andrei Golubkov, a spokesman. “The quality—that is a different matter.”
As the ruble’s dive steepened in the past few weeks, sales of big-ticket imported items from electronics to cars have held steady or even risen as people snapped up goods before prices rise. Many retailers—from wine merchants to electronics stores—are selling stock at the rate they bought it, but plan to raise prices in the new year.
After double-digit plunges in September and October, car sales slipped just 1.1% in November, according to the Association of European Businesses. Some foreign brands such as Toyota, Mercedes-Benz and Lexus even increased sales.
In the tourism business, prices almost immediately reflect the exchange rate. Several firms have been forced to close in recent weeks, in some cases leaving tourists stranded.
Alexei Korchkov gives tours of New York to Russians, but is thinking of closing his business as he doesn’t have a single client for December. This time last year he was fully booked through to the end of January.
“I loved this work, but now I’ll be looking for a boring office job,” he said.
It is very simple, 0bama and the communists have done exactly what Khrushchev said they would do - 'bury America'.
When communists infiltrated our schools and government they essentially gained control of our politics and society as a whole. 0bama is the first communist in chief and is doing exactly what his mentors have taught him.
If all your mentors are communists - so are you.
Good thing the Cromnibus bill passed. At least the banksters are safe. And thank you for voting Republican.
Nothing Is True and Everything Is Possible: The Surreal Heart of the New Russia
Peter Pomerantsev (New York: Public Affairs, 2014)
This is the strangest book of note I have ever read. And that’s as it should be, since the subject is Russia, the strangest country of note I have ever visited.
Peter Pomerantsev has written the most bitter indictment of a nation’s politics and society going wrong since William Shirer’s 1941 Berlin Diary. Pomerantsev has also written a calm and incisive report on the current state of affairs in Russia. Yet it reads like a comedy of manners, a dark and grotesque comedy of manners, a State Department white paper co-authored by Evelyn Waugh and Franz Kafka. And not only that, but Nothing Is True is a bildungsroman, too.
Russia today is not as strong as the Soviet Union once was, but Vladimir Putin has used energy and financial leverage, along with propaganda, to snatch power from the jaws of weakness.Pomerantsev was born in the Soviet Union, though barely. His parents emigrated to England in 1978, when he was ten months old. He speaks Russian. He thought he was Russian. After college he went to Russia. And he spent nine years there discovering that, on points of honor and decency, he’s an English gentleman after all.
Pomerantsev becomes a reality TV producer in a place where, as his title and subtitle indicate, there isn’t any reality. Or, at least, everyone wishes there weren’t.
Pomerantsev, however, is all too believable in the bad news he brings us from Russia. His reporter’s straightforward and unlimited curiosity, his willingness to plow and harrow the widest fields for facts, and his exacting descriptive details give him credibility. Plus, what he tells us is so incredible. As reporters say, “You just can’t make these things up.”
In Russia, “corrupt” is not an adjective. Corrupt is a noun, a proper noun, the word for the name and nature of the place.
Corrupt crony capitalism is familiar everywhere. But in Russia the corruption is so pervasive that even the cronies have to pay bribes, not just to the higher-ups but to the lower-downs.
Pomerantsev visits a TV studio owned by Kremlin-connected moguls. It’s in a shabby warehouse on the wrong side of town. There’s no sign or address on the metal door. Inside is a dirty little room with a drunk guard.
Pomerantsev goes down a dark corridor and up two flights of dingy stairs to another unmarked metal door. Behind that is a modern, well-lit, busy Western-style production facility. But there’s an inconspicuous door here as well, with a secret code pad. And behind thatis a more modern, better-lit, even busier production facility with an even less conspicuous door with an even more secret code leading to the real offices of the moguls, where the real business accounts are kept.
All this is to foil the tax police. Who come anyway. One of the moguls tells Pomerantsev that “the tax police were much happier taking bribes than going to the trouble of stealing money that had been paid in the orthodox fashion.”
Pomerantsev tells the story of Yana Yakovleva, a businesswoman who imported chemicals to make cleaning supplies. She spent seven months in prison because chemicals to make cleaning supplies were suddenly declared “an illegal narcotic substance.”
Usually this kind of abrupt, arbitrary arrest has to do with competitors bribing legislators in order to abscond with someone’s business. Usually the solution is to bribe judges.
But Yana had gotten tangled in the Kremlin machinations of political figures so crooked that they can’t get a bribe straight.
Viktor Cherkesov, head of the FDCS, the Federal Drug Control Service, was attempting to take over Russia’s chemical industry as part of his power struggle with Nikolai Patrushev, head of the FSB, the Federal Security Service, successor agency to the KGB. Vladimir Putin encouraged Cherkesov. Vladimir Putin encouraged Patrushev.
The FDSC uncovered FSB corruption in Chinese customs duty rake-offs. The FSB uncovered FDSC corruption in chemical company seizures. The FDCS arrested FSB generals on the Chinese border. The FSB arrested FDCS generals at Moscow’s Domodedovo airport.
And Yana doesn’t get out of jail until Cherkesov and Patrushev have destroyed each other and Putin is rid of both potential rivals.
It’s an interesting moral atmosphere in Russia.
In Russia, small town girls go to the big city and get ruined, but that’s what they’re trying to do. Really trying. They go to school for it.
If a girl with potential studies hard, “she earns the basic Moscow mistress rate: the apartment, $4,000 a month, a car, and a weeklong holiday in Turkey or Egypt twice a year.”
In return, she’s available to her “sponsor,” as he’s called, any time, any day.
Nice girls, of course, don’t do this. They go to the big city and become supermodels. Like Ruslana did. She was an ethnic Russian from Almaty, Kazakhstan. Ruslana was “discovered” at sixteen, world-famous at nineteen, and two days before her twenty-first birthday she jumped off a roof in New York. Pomerantsev gives us (although, in a way, he almost doesn’t need to) the heart-breaking particulars in between.
Pomerantsev himself is not immune to the corruption.
Pomerantsev gets a Russian drivers license. “I would never pass . . . if I didn’t pay the bribe (this month $500, but about to jump to $1,000 if I didn’t hurry).” He scores eighteen out of twenty on his written test, enough to pass. Then realizes all the other license applicants had also scored eighteen out of twenty. “Everyone in the room had paid for the right result.”
He takes his road test in an instructor’s car with two sets of controls. Pomerantsev does not, in fact, know how to drive. “I couldn’t get the pedals right and kept on stalling. The traffic cop smiled . . . ‘Put your hands on the wheel and pretend to drive.’”
The corruption doesn’t poison the state, it feeds it. Pomerantsev recounts the ordeals of dodging the draft in Russia. And it must be dodged.
There’s the “most desperate and most expensive remedy: the bribe to the military command.” Or a week every year pretending to be sick or injured. “Annually the hospitals fill up with pimply youths simulating illness.” But you have to pick the right disease or disability “because the ailments that can get you off change all the time.” Alternatively, you can stay in college until you’re too old for the draft. “Russian males take on endless master’s degree programs until their late twenties.” Not a good student? There are schools for that as well as for mistresses. “Dozens of new universities that have opened . . . to service the need to avoid the draft.” You can even spend a month in a psychiatric clinic. “But you will also have a certificate of mental illness hanging over you for the rest of your career.”
Thus a state that is calculated to make its citizens crazy. And Pomerantsev is clear about the calculation.
He presents the case of Vladislav Surkov. He has been deputy head of the presidential administration, deputy prime minister, and assistant to the president on foreign affairs. He is known as the “Kremlin demiurge” and the “political technologist of all of Rus.”
Surkov dresses in jeans and a leather jacket. “He is an aesthete who pens essays on modern art, an aficionado of gangsta rap who keeps a photo of Tupac on his desk next to that of the president.”
Surkov also seems to be the author of an anonymous novel Almost Zero. He as much as admits he is in a preface he wrote for the book, calling the work “a satire of contemporary Russia whose hero, Egor, is a corrupt PR man.”
Pomerantsev says, “‘Everything is PR’ has become the favorite phrase of the new Russia.”
Among that everything is PR used to promote cults. “As the Soviet Union sank,” says Pomerantsev, “so sects had bubbled to the surface. Indeed it was the Kremlin that had given them an impetus.”
This was in 1989, when a hypnotherapist named Anatoly Kashpirovsky, “with 1970s porn star looks,” appeared on a Kremlin-controlled TV network and intoned to viewers, “Close your eyes. You can cure cancer or alcoholism or any ailment with the power of thought.” Millions attempted to do so.
A former postman named Vissarion is convinced he’s Christ and has a colony called “The Abode of Dawn City” on the Mongolian border inhabited by “minor bohemians, actors, rock musicians, painters.”
“The Golden Way” guru Boris Zolotov conducts “experiments in which his followers would penetrate to the new level of conscious: sweating orgies where the old, ugly, young, and beautiful rub and kiss and caress each other in a communal bliss.”
The Night Wolves are a motorcycle gang with five thousand members devoted to religious patriotism who ride “through Moscow on Harleys with icons of Mary the Mother of God and Stalin.”
Poor Ruslana the supermodel was involved in something called “The Rose of the World” run by “life trainers” who lock crowds of people who don’t have a life in a room and train them to pronounce “inner monologues.”
Insanity pervades the culture.
Well, now that I think about it . . .
Anyway, this brings us to the frightening question posed by Pomerantsev’s book, a question he only implicitly asks.
What do we do about a gigantic, depraved, immoral, lunatic country armed with nuclear warheads?
We may not have to do much is the fortunate answer.
The Russians are crazy but they aren’t stupid. This is a country where chess is a spectator sport. The Russians aren’t going to make a Queen Pawn opening with their nukes that traps the queen’s bishop behind the knight. Or, to put it in American terms, they aren’t going to throw a Hail Mary on fourth-and-impossible from their own five-yard line.
Russia is a demographic disaster. Nicholas Eberstadt, who holds the Henry Wendt Chair in Political Economy at the American Enterprise Institute, has been studying Russia for decades. His research indicates that that the birth rate per Russian woman is twenty percent below replacement level.
In the first ten years after the collapse of the USSR, Russian population fell by about six and a half million. It is rebounding slightly now but only because of high birth rates in Muslim ethnic regions like Chechnya and Dagestan and immigration from former Soviet republics in Central Asia. These are not places Russia wants its Russians to come from.
Russia’s mortality rate is horrific. According 2012 World Health Organization statistics, a fifteen-year-old Russian male has a life expectancy that’s three years less than a fifteen-year-old Haitian boy’s.
The life expectancy of a fifteen-year old Russian female is sixty-one, three years less than in Cambodia.
Russians die from cardiovascular disease and from accidents, murder, and suicide. They smoke, they drink, they despair.
Russia’s great wealth is based on extraction of oil and gas. Even so, the value of Russia’s exports in 2013 barely exceeded Belgium’s. And energy prices are falling.
The likelihood of the economy being transformed from extractive to knowledge-based is slim in a country rife with slogans like “How can you believe in anything?” and “Everything is PR.”
“Long-term economic progress,” says Eberstadt, “depends on improving productivity through new knowledge . . . Patent awards and application provide a crude but telling picture . . . Consider applications under the Patent Cooperation Treaty . . . Russia comes in No. 21—after Austria—racking up less that 0.6 percent of the world’s total. The population of Russia is more than fifteen times that of Austria. Russia’s ‘yield’ of patents per university graduate is vastly lower than Austria’s—thirty-five times lower. By this particular metric Russia is only fractionally better placed than Gabon.”
So what we need to do is this. Start with a little bit of George Kennan’s Containment Policy. Leaven that with a large dose of Reagan Doctrine, arming the dickens out of Ukraine, Georgia, Latvia, Lithuania, Estonia, and any other sane polity feeling pressure from the Evil Post-Empire. Mix these with the black humor of Peter Pomerantsev’s Nothing Is True and Everything Is Possible. And sit back and watch the Putin regime rot.
gimme short version
thats a real nice peice of propaganda ya got there ...have you ever been out of your fucking house and traveled this country(ussa) have you been to the cities watch the teevee etc etc the us is has become the land of degradation and filth . not saying russia is any better but you flag waiving brain dead fuckers need a serious dose of reallity ...get off the "awesome" band wagon that either country is any better nor are it's sheep.
obummer is not your destroyer and putin is not your saviour only you are either .... until the sheep take over the ranch this all goes to the proverbial HELL NO ONE WINS got it so stop picking sides there are none same coin we the fucking sheep are the only other coin in the market and someone dropped it in the ditch of history long ago. I like metaphors ...can you understand them? they're designed to make a point to dumb asses, so if ya don't get it then all hope is lost...carry on waive another flag (don't care who's colors are on it you still loose)
Bob, pull your head out of your ass (it'll make a "thunk" sound when you've done it right).
I've traveled from sea to shining sea and border to border in these United States. I've also lived and worked in Russia, have a wife who is Russian and have since traveled to Russia - including far eastern Russia - numerous times.
Likewise, the author of the book this review is about has also lived and worked in Russia. You may not like the sad truths he illuminates, but he knows what he's talking about.
After you've got your head out and cleaned the gunk off, maybe we can talk.
If you refuse to pull your head out of your ass, you'll just have to endure the lessons I post (whether under this or another user name).
Oil has a long way to go before finding a bottom. But in the short-term it should find some temporary support soon...
http://www.globaldeflationnews.com/oil-light-sweet-crudeelliott-wave-upd...
One of my kids e-mailed me and mentioned a web site called 'zero hedge' and how it puts the world into perspective - especially the comments section where some smart 'old' people debate each story and rate their comments.
How do you respond to that other than "awesome dude"
Did have a laugh at her remark about some dickhead called 'American patriot' that was a "douche-bag incapable of reason"
From the mouths of babes... :)
+1 great story cart00ne. seems like the kids have made an easy and efficient adjustment to fight club. you ought to be tickled that it happened as quickly as it did. he he heee. There's a lot of smart fuckers on ZH and the articles bring out the best in all of the perspectives. sharp, hard, terse, some defaulting to some inevitable demise and reset, some asserting analyses of production (in the case of oil), and others still underlining for ever and a day the importance of sound currency and "End the Fucking Fed". I love it all. Because on any given day, I will agree with all of it, or, perhaps none of it. Its simply more important that whatever the observation - it is usually a conscious one, buttressed by frustration in search of a better understanding - and a better world - that the status quo is no longer acceptable, or even sustainable. A shred of sanity in an insane world. If ZH were to stop, I would have to seriously consider taking up the torch as I am sure others would as well - because whenever I can't figure out what the fuck is going on, (and I'm a pretty sharp guy), this is where I come. cheers