Weekend Economists Waiting for Godot March 7-9, 2014

[Demeter]

16. Why Russia Can’t Afford Another Cold War

http://www.nytimes.com/2014/03/08/business/why-russia-cant-afford-another-cold-war.html

... the crisis in Ukraine this week drew comparisons to Hungary in 1956 and Czechoslovakia in 1968 or that a chorus of pundits proclaimed the re-emergence of the Cold War. But there’s at least one major difference between then and now: Moscow has a stock market.

Under the autocratic grip of President Vladimir Putin, Russia may be a democracy in name only, but the gyrations of the Moscow stock exchange provided a minute-by-minute referendum on his military and diplomatic actions. On Monday, the Russian stock market index, the RTSI, fell more than 12 percent, in what a Russian official called panic selling. The plunge wiped out nearly $60 billion in asset value — more than the exorbitant cost of the Sochi Olympics. The ruble plunged on currency markets, forcing the Russian central bank to raise interest rates by one and a half percentage points to defend the currency.

Mr. Putin “seems to have stopped a potential invasion of Eastern Ukraine because the RTS index slumped by 12 percent” on Monday, said Anders Aslund, a senior fellow at the Peterson Institute for International Economics in Washington.

On Tuesday, as soon as Mr. Putin said he saw no need for further Russian military intervention, the Russian market rebounded by 6 percent. With tensions on the rise once more on Friday, the Russian market may again gyrate when it opens on Monday...

PERSONALLY, I THINK PUTIN AND HIS SUPPORTERS ARE MUCH LESS-FIXATED ON THE MARKETS THAN OBAMA, YELLEN, LEW AND ALL....