The Flinchum File

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The Russian Rat

A rat is a small animal but can be vicious when cornered.  Russia is a large nation but can also be vicious when cornered.  That’s why I’ve so been worried about Russia’s ability to be rational over the past year.  However, the latest economic data from that country is a little better than expected.  Their GDP actually had a positive growth rate in Q4 of last year — not much, only 0.4% but still positive.  Of course, it is expected to be slightly negative in Q1 of this year, before falling even further.

Their economy went into free-fall last year when it was battered both by the fall in the price of its primary export (oil) and the impact of economic sanctions due to its actions in the Ukraine.  Their currency, the ruble, collapsed 50% against the dollar in just six months.  This caused two big problems for the Russian people.  First, their central bank raised interest rates from 8% last October to 17% in December, a catastrophic increase.  Second, the weak ruble drove up the price of their imports, igniting an inflationary outburst over 16%.  Yes, you read that correctly – 16%!

While the ruble has recovered somewhat this year, it is still badly devalued.  The worst is not yet over, especially for the Russian people.  We should not expect Putin to become any more rational in the near future.  He hasn’t backed into the corner yet . . . but is getting closer.

I hate to sound like an old Cold-War-warrior, but Putin is still the most dangerous man on the planet!  It may be hard to believe, but he is a greater threat than even Iran or Isis.