Tuesday, December 16, 2014

Shrinking ruble: Russian calmness impresses me

Thanks to the excess oil (not only) from fracking, the price dropped below $59 for the first time in a long time.

And because of this drop combined with the Russian dependence on the income from fossil fuels and because of sanctions against Russia that have almost cut the world's largest territory from loans, plus the hysteria surrounding these moves, the Russian currency dropped from 32 rubles per dollar in October 2013 to the high of 93.5 rubles per dollar earlier today. The ruble has recovered some ground since that time (to 80 now) but it may have been temporary.

The drop from some moment in Fall 2013 is by the factor of three. A crook named Michael Mann should look at the graph above if he wants to see what a real-world hockey stick graph should look like. And the graph doesn't even show the high at 93.5 today. Every day, the ruble seems to lose over 10% of the value. The half-life (in the sense of radioactivity) is about three days.

Meanwhile, in these extreme conditions, the Russian Central Bank is doing what is right – except for some interventions that always proved to be highly temporary. The last action was the increase of the interest rates from 10.5% to 17% less than one day ago.

Everyone else seems to be calm in Russia. There doesn't even seem to be any anger. I have tried to look at Russian newspapers but I wouldn't even see a single text that would blame the U.S. for this havoc. The Central Bank boss tells everyone to embrace the new financial reality while a region in Central Russia banned the word "crisis" in the public. I am just impressed by all of that.

The Russian media are not writing any complaints. At most, they inform about the exchange rate in a matter-of-fact fashion. And that's despite the fact that almost 1/2 of Russians keep their savings in rubles. In dollars or pretty much any other currency except for Hryvnia, over 1/2 of their savings were erased in a year.

Everyone in Russia seems to be calm or proud-to-be-independent or peaceful to an extent I simply cannot understand. Or is the nuclear war coming tonight, or on the day after tomorrow?

I admit (or believe) that it is more likely than not that if I were a Russian person who is co-deciding about these matters and if I had significant savings in rubles, I would have already endorsed nuking of Kiev, Brussels, and a few U.S. cities as the officially declared epicenters of the problems. Maybe, I would first order some professionals to counterfeit a trillion of dollars and try to revenge to the U.S. monetary system in a similar way. On the other hand, Sergei Lavrov repeats that NATO isn't Russia's enemy. Wow. A true saint who has to deal with hateful fascist jerks.

If you lose over 50%, it should be about 15 times more infuriating than if you lose about 3%, right? ;-)

Or would I start to support extreme proposals such as the return of Crimea to Ukraine? Probably not, especially because I wouldn't believe that it would fix things.

In August 1998, ruble underwent similar dynamics and Russia ultimately declared bankruptcy. (This time, everyone seems to assume that the Russian debt will remain OK.) It had a limited impact on the international markets but they were still detectable and unwelcome. Dow Jones Industrial Average went from 9,300 sometime in July 1998 to 7,600 in early September 1998, an 18% drop between the local extrema.

I can't believe that someone wants similar things to occur once again, just because most Russians disagree with him on the political situation and history of Ukraine or Crimea.

The 50-50 split of the Russian savers between rubles and dollars adds another dark dimension to the events. Clearly, the people who keep their savings in the U.S. dollars are traitors of some sort, and if they actively speculate on the ruble's demise, they will probably be treated as criminals pretty soon. Chaos in all of Russia could easily emerge because of that, too. Why would someone want it?

Responsible politicians in the West should do whatever they can not only to stop the insane sanctions but to undo most of the harm that has already been done. Or should we believe that the relationships between the countries are deteriorating in the runaway fashion analogous to the exponential curve of the USD/RUB relationship? Has this instability become unstoppable? If true, I demand charges of war crimes for those who began these hostilities.

Meanwhile, the "Nobel prize winner" Barack Obama plans new sanctions. A complete psychopath who deserves death penalty.


  1. Minimizing their economy dependence on US $ is probably the sanest and the most effective thing that Russians can do. In fact, they are attempting to do that for quite some time, but probably started a bit late. The deployment of missile defense against the attack from Iran in Eastern Europe was the red flag. If they started then the effects would have been more subdued today, I believe.

  2. Putin is competent. US fracking is a giant Ponzi scheme. It is much more expensive than plain drilling and has a well life of 3-5 years vs. 20+, amortized bbl cost of $30+ versus no more than ~$10 Fracking is about continuous investment frantically reimbursing prior investment. The financial house of cards is enabled by ZIRP. Zero interest means zero risk assessment in lending.

    Putin lets oil prices drop by US desperation and OPEC aggression. A mild winter could see $40/bbl. If Russia then opens its taps, US fracking collapses overnight. The $trillion scandal is an economic Tsar Bomba. Russia, that has gotten by so well on so little and with remarkable resilience, then increases the size of its meals.

  3. Ben really loved uncle Keynes
    He'd often let Ben pull the reins
    They both had great fun
    But when they were done
    Ben's coat would be covered in stains

    The Limerick King


  4. Lumo some time ago your blog was great. It saddens me to say that you should visit a psychiatrist before it is too late...

  5. There are research programs like "sociology of knowledge" and "anthropology of science" and these are more influenced by Michel Foucault than Derrida who's more influential in literary studies circles.

    Basically the idea is that the "knowledge" and the "truth" are social constructions that are "truth effects" of various "discourses". Science is human action like digging the ditch or doing medicine magic in a jungle, therefore it is interesting to study hopelessly naive "scientists" who think they are discovering "thruths" while they are just producing discourses that exlude the the Others or something like that.

    Science is a patriarchal discourse that aims to dominate feminine Mother Nature.

    Making it calculable and predictable, taming the shrew.

    Also cosmological theories are mostly ideological formations, when the economy is expanding the inflation theories are in vogue, sometimes the economical cycles produce oscillating cosmologies etc. Because there was a crisis in European culture that found every absolute foundations of thruth and value and life suspect, Einstein came up with his theory of relativism. etc.

    Black holes/bodies discourses exist to exlude minorities ...

    One of the grand ideas of Derrida was that the history of philosophy was about conviction that thruths are independent of writing and texts, and Western Philosophy is a body of writing that disses writing and extolls the living thruth that the teacher can transmit to the student.

    Plato wrote a story about a slave boy who independently discovered a theorem of Pythagoras. Derrida notes a paradox here, Plato has to come up with a literary story to argue against writing in defence of "logocentrism", the primacy of speech, presence and eternal truths against written signs.

    The ancient Greeks were discussing about students writing down notes and students following the exposition. Derrida thought that the anti note taking prejudice was "logocentric", Foucault criticized that and was of opinion that it was more of a practical matter. Like they didn't have as good pens and papers as us ...

    Foucault researched the history of medicine and psychiatry, because he thought they were epistemologically more suspect and dubious than actual hard sciences. When he was dying from AIDS ( he was a gaysexual, but he wasn't making a number about it) a student with no knowledge about Foucault's medical status asked "professeur, isn't this AIDS discourse about marginalizing minorities?" and Foucault said, no I've looked in to it, it's real ..

  6. Normally I wouldn't reply back, but even though I might have been a little rude, which is not at all like me, I will stand behind every word. In fact, I only gave a very topical rundown on this guy, so if you must, go ahead and call me whatever you please.

  7. Dear Tony, right, they're probably not that far from being self-sufficient in most respects - largely because most Russians are used to relatively modest lives. But the exchange rates etc. still cripple some of their abilities. And what are the benefits of this increasing isolation of Russia? I am confident that Putin and similar folks never wanted and still do not want any isolation from the West.

    It was hard for Reagan et al. to help the curtain to fall (and tear down this wall, Mr Gorbachev...) and some people obviously want to build it again. Why? Of course that an isolated Russia will inevitably be less similar to the West, less compatible with its interests, and more dangerous. The smaller will be the peaceful and economic abilities of Russia to influence the world, the stronger relative importance will go to the not peaceful responses and the politicians who would favor them.

    It's completely wrong. Instead, the U.S. should just pour a trillion of dollars into Russia to help it.

  8. I was (and still is to a lesser degree) a manager for 15 years, interviewed thousands from all over the world with vast backgrounds. As a manager I need my employees to be the best possible, that means I need people with solid background. In business these days there is nothing that does not touch with mathematics and science. We sell tiles, now how can the sales person explain the strength of the material and the surface hardness and the way our tiles are manufactured compared to competition without sounding like a parrot at best and pure wrong information at worst. How do I explain to this salesman how statistics of customer profiles affects his sales tactics and so on.

    When I go to buy a TV or a fridge(or anything for that matter) I am really abhorred with the amount of misinformation, the nonsense, and the triviality that are tried to push on me. That is because of disrespect for science as in "who the hell cares attitude" which they have gotten use to. They are being mediocre students graduating to be a mediocre employees.

  9. Interesting thoughts, Uncle Al. But isn't the fracking *more* resilient than classical oil towards similar shocks? Moreover, fracking is still a small part of the U.S. economy while oil is a big fraction of the Russian one, right? So I find it obvious that the collapsing price is having a far bigger impact on Russia.

  10. As a more direct reply to what you have said, I will say that Vangel rarely uses any foul language at all. Yet, he is very insulting and prone to be totally untruthful. His biggest point is, he likes to introduce topics which may be part of the issue, but then argue a totally different line.

    Once he has you "in his sights," you either have to leave, or agree with him. So, I deem all his conversations as irrelevant. As well, he only comes to blogs that he knows do not support his views, and then sows as much dissension as he can.

    So, I will stop there, for good. After re-reading my long, long, probably automatically deleted missive I just previously posted, I noticed that I did not address what you had said at all. Sorry again, my apologies, and please do fare well.

  11. I agree, of course, but following report that Obama is expected to sign Russia sanctions bill, there is little hope things will get better soon.

    At this point MSM regularly throw in the term 'invasion of Ukraine' as if it is something that is well understood and accepted by the viewers, including the 'logical' reactions that should follow. As usual, it boils down to repetitive declarations which, when heard 100 times, become truth and norm.

    Why all this?

    It beats me. At this point some conspiracy theories (even if I don't really believe them) make more sense than anything that I heard from the official sources and MSM.

  12. >I have tried to look at Russian newspapers but I wouldn't even see a single text that would blame the U.S. for this havoc.
    This is f*king hilarious Lubos. Would you mind to tell me the names of the russian newspapers, which do not blame US? I just want to see those. Because what I see( as a russian) is that every f*king one of the "proputin" newspapers absolutely clearly blames US and nobody else.

  13. In a different thread, someone told me to read


    Quite a depressive read revealing some of the Russian spleen, pessimism, and their lack of traveling abroad, among other things. (So I recalled my visits to Russia when I learned that virtually no one had ever been abroad, outside USSR. It was a big country and the central cities are far from borders but I still found it surprising.) I find all these things way too frustrating and I believe that the Russians don't deserve such things at all - not only now but throughout the history, back to the tsarist times - and every person with a heart should think how to help them, not harm them.

  14. I think we have been pushing Putin too hard; after all, he has his finger on a button that can kill us all.
    We, in the US, need to let Crimea go and understand that this is not appeasement in the Munich sense.
    It is obvious that the better Russia does, the better we will do.

  15. Production does not drive fracking investment. More exploration and more fracking are the churn. The housing bubble was not driven by mortgage payments, It was driven by loans for construction and deferred payments transformed into multiple layers of "secure" investments, then sold with great amplification. When expansion falters, everything implodes. Future fracking oil won't pay for outstanding debts. Conservation by the old and ended opportunity for the young limit fuel use expansion.

  16. Uncle Al, apologies, I don't see how your comments could be true.

    If the expenses for a fracking barrel are much lower than the current price plus minus some noise, then getting a sufficiently high and representative amount of oil in this way should be enough for profitability, right? Why do you think that the field depends on the exponential growth?

  17. As you say, the frackers are kept alive by cheap credit and high oil prices. Oil collapses, they collapse, a large section of the junk bond market defaults. I have no idea if any of that is being used as collateral, but I'd be surprised if not.

    Secondly, the OPEC nations that demand USD are - essentially - fiscal extensions of the US government. They demand USD, spend some of it, and buy USTs with the remainder. What happens when consumers pay less oil 'tax'? The same thing whenever a government gets less tax - it has to spend less or raise the money somewhere else. Well, guess what - they just passed the CRomnibus. So they aren't cutting back on spending. But if OPEC are buying fewer USTs, what happens to yields? Oh yeah, they go up.

    Now if oil stays down, expect QE to restart. That's unless you think they're going to let interest rates rise.

  18. You are just off-base here. The housing bubble was driven by wishful thinking as are all such speculative bubbles.
    Oil producers have about 140 years of hard lessons in this subject and, overall, are better at avoiding wishful thinking than any other set of investors on the planet.
    Wishful thinking in hydrocarbon recovery does sometimes occur, of course, and Chesapeake (in natural gas) is a recent example but it absolutely is not endemic to the industry as a whole. Wishful thinking is human; we all do it, but capitalism is working pretty well in the energy industry. Corrections are made without systemic damage. That will continue.

  19. It can be argued both ways, Luboš.

    The day ZIRP is ended and finance connects to reality, 1929's collapse of margin detonates again. The financial structure of the Housing bubble is revealed, and implodes again. $1+ trillion credit card debt at ~19%. $1.3 trillion student loan debt at 5 - 7% but no income. It is a pencil vertically balanced on its sharp end. As for fracking, there are apparently no timely collected investment statistics. If it costs $10 million/frack and there are a mere 100,000 fracked wells, that is another $trillion. It could be $5 trillion. Now, outlaw fossil fuels, last picture. Who pays for it all When That Day Comes?


  20. If you are interested in buying an upgraded 1938 BMW motorcycle with side-car (Ural, assuming you go over to RU to buy, I doubt of the Pardubice dealer is discounting much), this would be a great time to buy, also if you are looking for a cheap Crimean holiday next spring, this is just a thing.

  21. Now that you mention it, this might be a very good idea. Only this morning I was looking at this Ural on the local classified ads website: http://www.donedeal.ie/motorbikes-for-sale/dnepr-ural-650cc-sidecar-outfit/8275001

  22. It is a good cycle for fieldwork in Ukraine or any place where the roads are very very very bad (same in MExico where I used to work). But the Ural for normal use should have the upgraded electronics on the ignition and also modifications to carbs for better performance...it is not a speed cycle, but good off-raoder, it worked for the Germans!

  23. 4 years ago I enjoyed reading these 2 articles about Russia by an American who majored in "Soviet Studies" at Westpoint (and subsequently traveled a lot in Russia). Some of the points he made are interesting in light of the recent events. For example:

    "Economically, the Russians realize they are overly dependent on oil and gas revenue. Perhaps they are concerned about a drop in prices or demand. More likely they want to be able to use energy supplies as a weapon without crushing their economy. If they are clever, and we know they are, then they are worried that unconventional gas extraction techniques will reduce their leverage if they don’t act quickly.".



  24. I don't know of you can watch RT on your cable television. But the official Russian stand is that the west is trying to change the Russian "system". They claim(I think Putin) that this is the official policy of the west regardless of the situation in Ukraine. They claim the US does not want "multi-Polar world".

  25. On a closely related note, WSJ reports (in its less alarmist fashion) some aspects about how this situation is influencing actual business dynamics and debt repayment also inside RU:


  26. I think the price of oil is highly political if not totally. the recent drop does not make sense at all looking at it from a market standpoint. The shale oil is only 3.5 M barrel, world output is near 80. The official Gulf countries(mainly Saudi) reason is to fight Shale oil, but the real plan (a good guess) is to put pressure on Russia and Iran.

  27. Yes, the majority of petroleum reserves are largely controlled by governments

  28. Im curious...what do you consider basics? for me basics means the ability to add and subtract signed numbers, to manipulate fractions, and to be able to understand phenomena in our world that are expressed as ratios, a familiarity and facility with compound interest would be helpful, since almost everyone in the United States does at some point in their life find themselves confronted with this.
    Most of the kids i taught in an undergraduate setting could not claim mastery in these areas.

  29. Meanwhile, in these extreme conditions, the Russian Central Bank is doing what is right – except for some interventions that always proved to be highly temporary. The last action was the increase of the interest rates from 10.5% to 17% less than one day ago.

    How does the central bank know what the rate should be? Wouldn't it have been better to let the markets set the rate in the first place? Let consumers and producers figure out what they should use as money and what price to charge borrowers when they ask for loans.

    Responsible politicians in the West should do whatever they can not only to stop the insane sanctions but to undo most of the harm that has already been done. Or should we believe that the relationships between the countries are deteriorating in the runaway fashion analogous to the exponential curve of the USD/RUB relationship? Has this instability become unstoppable? If true, I demand charges of war crimes for those who began these hostilities.

    How may responsible politicians do you know my friend? The best way to prevent them from doing something stupid is to limit their power by cutting off their funding via the printing press. Look at the US. When you add up the budget for the Pentagon, the DoE budget for the nuclear arsenal, the $50 billion for the drone programs run by the CIA, the DHS budget, VA, the State budget that goes to military aid, the NSA budget, and the costs of the interest paid to fight previous wars we are looking at a sum that is about equal to the total revenue that comes in from personal income tax. Do you really think that the military industrial complex would get such large budgets if American taxpayers had to fork over the money to pay for all the programs? Note that the same is true for all of the welfare programs as well. If the government could not use newly printed dollars to pay environmental groups to sue the EPA so that it would have to pass laws to kill coal power generation do you really think that the average taxpayer would allow it? Or the subsidies for ethanol, sugar production, subsidies for electric vehicles, or subsidies for unreliable solar or wind power?

    The Russians might do an end run around the sanctions by creating an alternative payment system that can be used by Russian banks and by making deals with other nations that have issues with Western aggression. But I think that they know that time is on their side. We are already at a point where the price for oil, gas, and coal, is pushing marginal producers to close down production. If anything, I see this as a huge positive because it should shatter the illusion of shale as a viable source of economic oil and gas production. In more than a decade of looking I have yet to find a single primary shale producer that can produce at an economic profit even at $100 oil because the total energy required to produce a barrel of oil was not low enough to provide a positive return for the shale producers. Many of the seniors had already written off billions at the higher energy price levels. Now that we have seen prices collapse most of the smaller player will follow suit and as depletion and a decline in drill permits changes the overall picture the liquidity created bubble will become clear even to the most naive of energy optimists. While that will cause ruin for many it is better that we discover the problem sooner than later.

  30. Russia has the advantage of having an informed populace who understand the stakes, what is happening on the global stage, and can endure hardship like no other culture on the planet, unlike the US whose general populace are ignorant, fat, have no understanding of geo-political politics, and have no concept of true hardship (like being slaughtered by the millions).

    The unknown factor is if NATO will create a situation which forces Putin to go to war, which is the only out for the West.

  31. Vladimir Arnold had a rather different view on the state of mathematics teaching in France:


  32. With such a low government debt, this collapse is, I guess, not a normal collapse. I think it is manipulated.

  33. http://itar-tass.com/en/russia/767336

    Chechen leader Ramzan Kadyrov wants to quit his high post to go to help militias in Donbas
    What influence may Russia have on Mr. Kadyrov?

  34. Well the sanctions don't help but even if they stop today, the financial meltdown could not be stopped. I firmly believe that Russia is badly mismanaged, they have done nothing in the boom years to make the economy less fragile. They behaved as if the nice weather should never end. They missed the opportunity to make some reforms, de-bureacratise the country and tackle the corruption. They spent too much on weapons and showing off (Sochi olympics, most expensive ever by order of magnitude) and let a lot of money to be siphoned off the country. Now, also the Ukrainian adventure was above the real ability of Russia - even if we put aside who is "right" and who is "wrong"there, and I believe I have it the other way around compared to you, even if we drop the concept of right or wrong, Russia (or maybe just Putin, who knows) did not think enough moves ahead in the game. The West or rather USA is holding Russia by the balls via the price of oil... they are cozy with the Saudis and it is a fact - is there no "strategist" in Russia to notice that? Is it smart to challenge someone who holds me by the balls? The USA plays chess (with many more pieces on the board), while Russia plays poker, has bluffed and lost. Even in the old times of politburo, I am sure they would not have done this mistake.

  35. Oil will go to $50 before we get news of US producers shutting down. That will happen in the next month or so. After that happens, OPEC will cut production by 0.5 MBD by February. Oil prices will start to climb, and will reach $80 by June. Fed rate hike 0.25 in August. Now is the time to place your bets on energy plays.

  36. In the US, Cynthia, oil production decisions (shutting down etc.) are made continuously, many times per day. It is not a one-time event that happens when things get bad enough. In many parts of the world such production decisions are made by or are heavily influence by government bureaucrats. This gives us a big advantage because governments, by their very nature, cannot act quickly enough to keep up with market changes.
    I’m not sure that you understand the fact that successful businesses have to be agile and they have to be highly creative. This, contrary to your previously voiced opinion, cannot ever be automated.
    If you want to play in the energy game you will need a lot of smarts and a lot of luck. I have never had either the smarts or the luck to do it.

  37. Fracking is bound to continue because of its flexibility. No other energy producing activity can match its ability to follow the changing markets without the risk of major losses or huge and idle investments.

  38. It is not just a game. Worsening relations between two nuclear superpowers are not in interest of anybody who wants to see his kids and grandchildren, etc. grow up.

    If even Kissinger doesn't like it, I am inclined to trust him on that more than the new generation of neolibcons.

  39. When it comes to investing money I am a miser, never played the stock market.
    Now, listening to many analysts and government officials I get the feeling they don't know what the hell is going on. But deciphering faint signals it is clear that there is something wrong with the supply and demand. You know sort of haggling among the concerned parties. Then part of the haggling the Saudis will do a favor for the US for an unknown return. That is my guess, but who knows what goes behind closed doors.

  40. I am a regular subscriber to Stratfor and have found it to be insightful and blessedly free of political bias. This particular view of Russia is consistent with everything I have learned about that country over the last sixty years.

    Ever since the days of Peter the Great, Russians have been remarkably pessimistic by American standards. They generally expect the worst and history has, again and again, given them abundant reason for their dour outlook on life.

    America, meaning the US, protected as it is by two great oceans, has been overly optimistic by Russian standards. They may be more realistic; that American optimism seems to be declining but it still persists. We’ll see what the future holds for both countries but Friedman is right. We desperately need to understand each other’s fears.

  41. A problem is that you don't have professional mathematicians, physicists, or engineers creating the curriculum--you have education graduates who rename things and really don't have a clue what a student
    has to know to eventually become a professional or competent in mathematics. They don't know what is important.

  42. Obama is not a psychopath, Lubos; he is just blowing with the political winds. You can fault him for a lack of leadership and I will agree with you. We must have a good relationship with Russia; the sanctions are stupid and destructive for all.
    Incidentally, I admire Lavrov as much as you do.

  43. While I am not a huge fan of the Russian economy it looks to me as if it is not terrible in comparison to the US economy, which is one event away from an absolute collapse because of the massive leverage in the financial system. Now that taxpayers are on the hook for derivative losses we could be looking at even more volatility and gambling until the $300 trillion or so in derivatives have to be settled. While the contracts are supposedly hedged and the net exposure is small that only assumes no counterparty failures. That is unlikely and it is very possible that the US has to go through the type of crisis that Russia went through in the 1990s. With 1 in 15 people on food stamps and a massive welfare program that is running out of funds the consumption economy of the US is going to run out of steam, particularly if capital spending collapses as energy prices go down and the shale sector is exposed.

  44. You may be right but I doubt that the shale sector comes back intact. It was unable to generate positive cash flows when oil was $100. It won't generate positive cash flows at $80.

  45. You are kidding, right? Shale producers have yet to generate positive cash flows more than a decade after the supposed shale revolution began. While the core areas are very prolific and economic the average well is a destroyer of capital.

    Note that ENCANA, BHP, Royal Dutch, BG Group Plc, Noble Energy, Exco Resources, Quicksilver Resources, and other companies were writing off assets BEFORE the collapse in prices. Why would you expect better results with more of their better wells depleted and the new, marginal wells being much less productive?

    I would be looking at coal companies that have enough cash to ride out the political risks for another year or two.

  46. Lubos,

    You are very solid on high energy physics and your last post on monetary policy was excellent. But, you are a crackpot on most other subjects, including international relations, and politics.

    What the US should do is now step on Putin's throat and use additional sanctions to try to topple his regime. If it were me, I'd also station a significant number of US troops in Ukraine, and both tactical and strategic nuclear weapons.

    If it starts a new cold war, good. It is one the failing Russian economy and society cannot hope to win, and they will waste resources competing with us while China grows ever more powerful relative to them, right on their border.

    Unlike the timid Obama, I have no qualms about humiliating Putin and getting rid of him entirely.

  47. No, we don't need good relations with Russia. If Russia was smart and had honest, competent leadership, they would see that they need the US far more than the US will ever need them. Russia's population is shrinking and their economy lacks diversification and is run by incompetent crooks, who've nationalized large chunks of some industries there.

    The problems Russia has are entirely of its own doing, with their over-emphasis on resource extraction and clumsy, bull-in-a-china shop foreign policy.

    Part of the reason Putin invaded Crimea was to divert attention from the humiliation of his man being chased out of leadership there. Instead of walking away from the poker table and cutting his losses, he decided to double down, and now the US contribution to the global oil supply and well-deserved sanctions have sunk his economic base.

  48. I'd like to see you hang a door in a wall that is not plumb

  49. This may surprise you, but I also think that we should stop cranking up sanctions. Russia is in enough trouble due to internal structural issues, and pissing off a wounded bear is pretty stupid.

  50. This is an orchestrated attack on Russia by the West and everyone knows it. Well, Russia isn't so isolated, China is all prepped and ready to step in and fill the vacuum. Obama thinks he's so clever colluding with the Saudis, but all he's done is alienate a mostly benevolent Russia and drove it into the arms of China. Now we have all of the Eurasian continent as potential future enemies.

    Way to go, O'Bozo. So much for all of your bongo drums and Kumbaya drivel. Vlad should take this personally, and go after you with a bloody meat cleaver!

  51. This is unprecedented. You may not like the other presidents or puppets but Reagan, Carter, Bush, Clinton, JFK or Bush 2 would never have let this spin out of control.

    If there are still any adults left in the room, they oughta tell Obama to back off sanctions and deescalate things. The current situation will end badly for everyone and the Russian people will despise the West even more than they do already. Back off and go have some talks about mutual good will, economic cooperation and such. End the economic war.

  52. The claim "we don't need good relations with Russia" only shows that you are evil and suffer from myopia.

    But claims like "problems of Russia are of its own doing" are just stunning lies. About 1/2 of this currency crisis was caused totally deliberately by absolutely indefensible anti-Russia sanctions invented by sociopaths in Washington DC.

  53. https://www.youtube.com/watch?v=E8_GVfPuw4M

  54. Dear Qsatheory, how can the prices differ from the "right ones" so much for months?

    Don't you believe that well-below-the-right prices of oil imply elevated consumption that should rather quickly deplete the surplus, inventories, and return the price higher?

  55. I disagree...rthey know whats important...the very stuff they had difficulty mastering and teaching...

  56. You are absolutely right but Obama is mainly compromising with our Congress and that is where the problems really lie. Congress does reflect the body politic in our country; you cannot deny that.
    Obama can challenge Congress on some things but he has limited powers and cannot challenge them on everything.
    The basic problem is ignorance of the American people.
    That is not a new phenomenon; is it?

  57. I am so worried. We have such a crooks as leaders in the west, directly heading for disaster. Not only crooks, but plain liars. Take Timmermans, a fellow countryman, who lied in the UN about 'Russian thugs', and that earned him a high position in Brussels. It is really to puke.

    The good leaders are out, or without any necessary power, like Vaclav Klaus, Ron Paul in the US, and Nigel Farage on the correct side of the spectrum. The latter is rising, but not fast enough to turn things around. Farage has already said quite some time ago that the Western policy towards Ukraine is stupid. The western press is strongly in the hands of the wrong people. That makes it very difficult, because the crowd is sleeping. They have no clue of what is happening. I also do hope that Marine Le Pen wins the French elections. She has a much better relationship with the Russians, who recently lend her money for the election campaign. This would lead to tensions within the western block, and that could be crucial. I really hope Le Pen and Farage win the elections.

  58. Gene,

    Stratfor kindly extended an invitation to "Send us your thoughts on this report."

    So I did:"The United States spent the past century blocking the unification of Europe under a single, hostile power."

    The rest of the article is fine (as far as I can tell given that I'm no geopolitical analyst) but this statement is one hell of a howler — WTF does the US think the EU is if not "a single, hostile power"?

    But it is precisely that!

    It has no democratic legitimacy. There is no European demos. It is run by an unelected commission. Elections to this commission, however, would confer no legitimacy anyway (since there is no demos to legitimise them). This commission is the sole proposer of legislation. The EU's so-called (sham) parliament cannot propose legislation but only reject it, and can only do that up to a point.

    The EU is out to destroy the nation states of Europe. It is doing so by a gradual accretion of powers, taking them away from individual states and thus hollowing out their political institutions to leave mere shell operations in their place — enough to fool a dumb and disinterested public anyway.

    The political class in member states trots happily along with this. The bribes for this treachery are huge.

    We in Britain were never consulted about any of this and we have been lied to all the way down the line.

    That's it in a nutshell. I hate the EU with a vengeance. I hope* Putin nukes Brussels and Strasbourg as there seems little hope for Europe while the EU is allowed to continue to exist. I'd very much prefer a peaceful solution but I no longer think that's possible — at every turn the EU apparatchiks and their traitorous henchmen back at home have done everything in their power to further their "Cosa Nostra". I have given up believing reason will prevail.

    My primary drive here is to see Britain out of this hell. Next up is decent intentions towards and wishes for the other nation states of Europe. Destruction of the EU 'projet' is the best possible—indeed the only—route to salvaging our future wellbeing. So it is necessary, but of course not sufficient — we'll need to build well on that destruction.

    I have deliberately kept this note as brief as I can.

    * I cannot make my mind up about whether I'm serious on this or not.

    Kind regards,
    John ArcherIt was fucking difficult holding back on the anti-EU invective but I thought I did remarkably well for a change.

  59. Brussels, USA - someone else is always found to blame.
    Yes, Lubos, lower oil prices and sanctions helped in the ongoing crushing of the ruble by setting the stage.
    But the proximate cause is different: the russian central bank printed 625 BILLION rubles and gave it to Rosneft. With regards from Putin, almost certainly:

    Really, Lubos, your fixation on Russia is irrational - little different from the left's dogmas.
    Putin is a KGB (these days, FSB) thug who along with his buddies, when the USSR was crumbling, hid billions in western banks, profiting from banking secrecy.
    Then he used this money to gain power in Russia; and, after he acquired said power, consistently worked to rob the russian people of their wealth and freedoms.
    These days, the russians are little more than serfs; and 110 people - Putin's comrades in theft and murder - own 35% of the russian wealth.
    You can read Putin's Kleptocracy by Karen Dawisha for a more detailed - and heavily supported by proofs - recent russian history.

    I suspect you are so enamoured with Putin because you were hurt deeply - personally and professionally - by the West's left cultists and their thought crime system.

    They are, indeed, a very serious problem of democracies. I recommend reading How Democracies Perish by Jean-Francois Revel, Branko M. Lazic on its origin and dymamics.
    But siding with a dictatorship because of it is not the answer.

  60. I found this take on the falling rubble very persuasive.


    From the start of 2015 there will be another way to buy rubbles via the Eurasian Economic Union.

    Is the drop in the rubble a way to force the postponement of alternative forex markets? We will see.

  61. Dear Gene, I think that at least at this level, the phenomena are new.

    Lots of people would naturally do irresponsible things, possibly threatening the survival of their country. And that may be true even for the generic representatives in the Congress.

    But I think that the hostilities have never been allowed to spin out of control in this exponential way - not even in the darkest times of Russia, and we've surely been in the brightest days in recent 15 years.

    And I think that this has to have something to do with the leader. Whether he's weak or easily manipulated by some people or not sufficiently connected to the U.S. history or something like that, I don't know.

    During Hitler's times, one would also have lawmakers and the public on the "right" side, right? It doesn't imply that Hitler had nothing to do with those circumstances.

  62. Sorry Lubos but what is happening in Russia now is 100% their doing.
    What is NOT their doing is the timing but somebody who went to Russia in a regular way for business like me KNEW that a similar crisis simply had to happen one day.
    I could provide many numbers but will give only one which deserves to be deeply pondered.
    It is the budgetary break even price of hydrocarbons.
    This number gives the MINIMUM price of hydrocarbons that is necessary for a country to have a balanced budget.
    This number for Russia is 101 $/bbl.
    And they are in good company with totally f...ed up economies like Irak (101), Venezuela (117), Nigeria (123) ... etc
    This number for sensibly lead oil exporting countries like for ex. Norway is 40.
    It can be only incompetence that Russia 30 years after the fall of communism is still managed economically like Irak or Nigeria.
    What sense does it make to invest dozens of billions in pipes to just pump more gaz and oil to China (which is of course happy !) when the industrial facilities are still using technology coming from Stalin's era ?
    Or to develop artic oil&gaz fields where for example the single Stokman field demands 45 billions $ investment ?
    And I won't even mention infrastructure - when it rains you have to slalom between water ponds on roadwalks in Moscow and if you want to drive with your car to Brjansk, you better take along a shovel in case you sink in a mud hole.
    Electricity, train, highway and telephone networks are a horror.
    Yes, the Russian economy "grew" at a quite satisfactory pace 10 years ago but if you look at the numbers carefully you realize that it only grew at the same pace that oil and gaz prices grew. This is not only unsustainable, it is totally stupid.
    With the barrel at 50, Russian economy will crash down by 5% next year and I don't dare to extrapolate in 2016-2017 - this is a depression of incredible proportions.
    And, most importantly, one has to realize that this will happen REGARDLESS whether there are or are not any US&EU "sanctions".
    It makes me sad because countries like Russia and Argentina that I know well and like much have an incredible cultural and ressource potential which could get them to the top 10 of world's richest and performing economies and yet they are reeling at the edge of hell only because they are unable to implement reasonable, sustainable, long term economical policies.
    My sadness is even increased by the fact that I share with these cultures history and traditions so they belong (also) to the set of "my" people in a broad sense.
    I could never understand why the people in such countries are unable to elect some competent and professional leaders who set them on a winning economic trajectory which is in front of their eyes.
    I have nothing against Putin's national policies and I even like some parts of them but clearly he has not more economical ability and vision than a Chavez or this corrupted crazywoman Kirchner.

  63. You ask, "why now"? I ask that too, Lubos, but why all the hurry? Why did this suddenly go nuclear in a few days? Perhaps this might suggest part of the reason, or at least a lead into why this mad rush to eliminate the ruble and the Russian economy right now.

    "The Eurasian Economic Union comes into force on January 1, 2015. Most likely at the same time the Russian ruble and foreign exchange markets will change drastically, and the Russian economy will take a distance to the dollar and the euro. Now the West is doing its best to weaken the ruble and thus destabilize the Russian economy and the political system before the end of the year."


    As this suggests, once this union becomes fact, there will be a changed market and all things there will reset. The West is in a hurry to slay Russia before this Eurasian Union is fact.

  64. I am not sure how you understood my post, but the price is determined by many factors like economic conditions, speculations, local political jolts and so on, with moderate variations. However, once in a while a direct intervention happens usually by KSA on behalf of uncle SAM, then the price might skyrocket or nosedive.

  65. Sorry Luboš but I disagree with you. Yes, short term rates are set by central banks these days but that does not mean that the banks know what they are doing or that they are doing the right things. Actually, by subverting the market they are preventing corrections that need to be made so that healthy growth can take place. Bailing out companies that are insolvent because they made bad decisions may seem to be a good idea but it isn't. By keeping them alive the bankers are harming their healthier competitors and are keeping marginal capital invested in areas where real demand cannot justify it.

    I know that you are a brilliant guy because you could not do what you do without having the intellectual horsepower. But all that intellect is insufficient when it comes to economic planning because without the correct price signals that come from a free market there is no way to make sound judgments. In a world where corporations can borrow at 3% foolish schemes like alternative energy or shale gas in non core areas of shale formation makes sense for management groups that can make huge profits and extract a great deal of income for as long as the game continues. But when reality intervenes all those investments will have to be written off.

    As my previous posting about Mises' master builder story pointed out, it is better to write off malinvestments as soon as possible because the longer that we wait the bigger the problem becomes. We saw this in the housing market when cheap loans stimulated speculative demand and resulted in far too many units being built in the wrong places. We saw this during the dot_._com mania when money was thrown at charlatans who told investors that they did not get "IT" whatever IT was and that what matters are eyeballs that could be monetized later, not sound economics dealing with actual demand.

    I suggest that when you talk about nobody losing much through inflation you are not thinking of the saver, the ordinary worker, and the fixed income retirees, who are being destroyed by it. You my friend need to do a lot of reading before you can figure out just how dynamic and complex an economy can be and how it is impossible to guide it by pulling the interest rate levers. I have already cited material, including a speech by Klaus, that should lead you to the right literature. The problem that you have is that you have been looking at those who think that the economy can be modelled effectively and bought into their rhetoric. But they are even worse than the IPCC modellers that you rightfully attack for being arrogant and incompetent.

  66. https://www.youtube.com/watch?v=0FHEeG_uq5Y

  67. My dear, dear RAF, you are an abusive troll just like your hero Vangel. As well, you are making threats.

    In any case, you are impotent, and largely irrelevant, both to me, and this rather interesting group.

    If you do not want my replies, then stop filling my inbox with your troll filth!

    Whether it matters or not, your posts are flagged. Please flag mine, then the moderator will be more likely to be interested. If I am banned, I lose nothing. If Vangel stays, the good, decent posters will be in a constant state of misery. The same goes for yourself. So, you are the one that has something to lose, not I.

    I wish I had found this group earlier, it is extremely interesting, yet you and the Vangles of this world, turn everything you touch into crap.

    By the way, using You-Tube is not an argument at all. It is just a display of off-topic troll childishness.

  68. Actually, you have made four childishly useless wastes of bandwidth. As well, I can honestly say I have not looked at any of them.

    If you do not want any replies, which I have tried to refrain from doing, quit trolling, and quit filling my inbox with your infantile trash.

    What I said about Vangel, is merely the tiny tip of a very big iceberg. I did not know that this group was moderated, but I am happy to see it is. If all blogs were, you would never even see me post.

    But, to make this short, get in a hard disagreement with Vangel, and see what comes from it.

  69. One final post, if you will just refrain from sending multiple cartoons to my inbox. I have several questions.

    Have you actually read all my posts?
    Do you know how my problem with Vangel started? Hint: He is hated by the regular posters on at least three blogs. And an extra hint, I am not hated
    Have you experienced his abusive, continuing bombardment of repetitive twist, spin, lie, change topic, and carpet bomb posts until the opposition gives up?

    I don't care how you answer the questions, Vangel is now your problem!

  70. Dear Russell, you just posted three almost identical comments including this one, with nothing else than very lame low-brow personal attacks, and no content.

    Because that's how I would summarize your previous 10 blog posts on this blog as well, I banned you.

    Readers should notice this and appreciate it because you may be closer to my opinions than Vangel, although I couldn't have really told, but I still think that your behavior has been unfixably disruptive and intellectually vacuous and worthless which is why deserve to be blacklisted. Sorry.

  71. Lubos - Thank you! Christmas has come early and I am delighted with my presents. I am also very pleased to have played even a small, yet most enjoyable, part in this.

  72. https://www.youtube.com/watch?v=usfiAsWR4qU

  73. Lubos - I would also like to thank you for allowing me to debut this new form of conceptual Art here. I suspect that it may become a significant part of my oeuvre, and history will record that it began on TRF!!!

  74. Hi, sorry for a late answer, have a sick kid, and not enough free time.

    This are the problems of the competition: http://maso.mff.cuni.cz/doc/14podzim/maso_14_podzim_priklady.pdf, these are results http://maso.mff.cuni.cz/index.php?clanok=archiv&id=14podzim/vysledky.php, and the students, that use Hejny method and were even able to win once, are from Open gate school.

    As for Klokan, my information is not transferable, I have it from friends, who do a survey of alternative methods of teaching math in Czech schools for possible implementation in Slovakia. And Klokan itself doesn't publish statistics. But I googled a little bit, to give you more tangible data. Klokan publishes a table of winners: http://matematickyklokan.net/vysledky/2014/vysledky2014.pdf. I checked only schools with 2 or more pupils in the list of winners: in the cathegory of 3rd graders, pupils from FZS Fingerova and ZS Neratovice use Hejny method (and were able to achieve full score), in the cathegory of 5th graders, there are winners again from FZS Fingerova, ZS Neratovice, and also from ZS Chrjukinova.

    As for Pythagorian theorem: I think, you're translation of the excerpt is quite appropriate, so even people, who don't speak Czech and read this discussion (if there are any left) can judge for themselves your claims. As for me: I agree Hejny's answer is vague, distracted, but what it doesn't is to claim, that he would postpone learning Pythagorean theorem till college. He just said that he showed the re-derivation to his pedagogy students, and they liked it, and would have liked to learn it THIS way at elementary school. How could have they said that, if the method wasn't appropriate for elementary school students?

    I'll humor you a little more. I don't know, what Hejny meant, when he said, that experiences of Pythagoras and modern children are different. I can imagine a lot of things, he might have meant. But one thing in particular, which is specific to math, is a symbolic language. Modern people think about math in symbolic language, Pythagoras didn't. I'm quite sure, he thought about math in words, almost everyday language. And it's almost impossible for people today to do that. I'm not a genius, but I think I'm pretty good at math, but when I tried to read Euclid's Elements it was terrible, it was just continuous text, and I tended to rewrite it in symbolic language to properly understand it.

  75. Dear Dano, wishing a speedy recovery to your kid.

    I was only interested in problems of math contests relevant to the discussion - problems for which you may show me the table of result with the identification of the Hejny contestants.

    The Klokan winners are numerous - it's really a degenerate table where a hundred of people has the maximum score. I wanted some table with scores that almost systematically decrease. But maybe one may still get some information from that.

    In the 3rd graders, there are 6+2=8 from about 110 people with the full score which would mean that the Hejny method - 10% of schools - is slightly underrepresented if your list of the Hejny method schools is complete.

    Among the 5th graders, I see 1+1+1=3 among 120 children from the schools that you labeled as Hejny method schools which, in my opinion, pretty much proves that by the 5th grade, the Hejny-method-educated kids are already made impotent or uncompetitive in mathematics.

    A catastrophe. Just imagine how the percentage would drop by the high school.

  76. Hi, thanks for your wish.

    I'll specify, what I already wrote in my previous post about Klokan: in the 3rd graders category, I checked only schools with 2 or more pupils in the list - so its actually 8 Hejny method pupils out of 44. The list for 5th graders was so fragmented, that I just checked 5 schools, that I know use Hejny method, and 3 of them had a pupil in the list.

    But anyway, even if the list of Hejny method pupils, I gave you, was complete, you couldn't draw conclusions, that you did. The distribution of pupils by points was probably very well populated in higher points (near max), so you can't judge almost anything from one point of the distribution (in this case max score) about percentage of good students from any particular group. I'd think a physicist like yourself should know that ;)

    The only point of the data, I gave you, is to rebut your claim (and numerous modifications thereof) in the blogpost: "It seems very clear that this is a method not to teach almost any mathematics". Because there is no way, you have a method, which doesn't teach almost any math and in particular wrongs the smart kids (as you claimed elsewhere), and still ends up producing all these pupils, who reach max scores in Klokan, or beat students from math classes of GJKeplera or GCHDoplera, ....

  77. Dano, maybe you wanted to avoid releasing any data that would show that the method leads to extremely bad results - but you still *did* manage to release them.

    Because you said that you could locate all the schools with at least 2 students in the list - you actually enumerated a school with 1 student as well - it follows that you must have the full list of the Hejny method schools.

    By now, I find it almost guaranteed that you have tried to find additional students who learned with the method and you failed. There aren't any.

    So the decrease of the number of kids in this top group is catastrophic - it is three-fold.

    I may *always* draw conclusions about one "data point" - in this case one value of score (it is not really a data point) - if the statistics (the number of kids) is sufficient for drawing statistically significant conclusions. If you don't get this point, it's probably because you have learned "mathematics" and "statistics" by the Hejny method, too.

    In fact, the number of kids who are in the top group is clearly the most important quantity that mathematics teaching should struggle to increase because they are the people who are most likely to use mathematics in their life and create values with it.

    Whether one tortures a kid at the opposite end so that it learns 1/2 instead of 1/3 of the multiplication table won't matter much.

  78. This is what I get from discussing a crackpot. I was called a liar. Now I'm being accused of withholding data.

    No, I didn't try to avoid releasing any unfavorable data.
    No, I don't have a list of Hejny method schools.
    I didn't try to check any other students/schools, than the ones
    mentioned in my previous post (and you would know, how I got that one
    student, if you read it properly).

    But the facts, that your
    blogpost is full of false statements about Hejny method, and you didn't
    offer support for any of your bold statements within, go unmentioned.

    if you don't correct the erroneous claims about Hejny method in your
    blogpost, you're simply a crackpot. And I don't plan on discussing with
    one anymore.

  79. Yes. Teach math and dead Greeks. So saith Archimedes. (Let it be done; let it be written...oops, that was the Egyptians.)