The Russia Left Behind

The Russia Left Behind

I stumbled on this article today about life in some of the rural areas in the 400ish mile stretch between Moscow and St. Petersburg.    I’ve heard horror stories from a friend that lives in St. Petersburg about what life is like in some of Russia’s rural villages and this article seems to confirm it.    I think it’s kind of interesting to see what things look like in an industrialized country when fuel and capital is scarce and there’s little to no government assistance.    My friend told me that one of the big problems in the countryside is that when something breaks, it often doesn’t get fixed.   You can’t just run down to Home Depot and get whatever it is you need, even if you have the Rubles.  Apparently there’s still destruction from World War II that hasn’t been dealt with in some parts of Russia.

It’s kind of an interesting article.   With Uncle Sugar shut down right now, it got me thinking about what life would look like in some parts of the country if medicaid, disability checks, social security and agricultural subsidies stopped flowing.    Would it start to resemble some of the places in this article?

Big Trouble in Little Cyprus

 

Everything You Need To Know About the Cyprus Bank Disaster

 

People who watch the economic situation in Europe are familiar with the “PIIGS” (Portugal, Ireland, Italy, Greece and Spain) or the “peripheral countries” getting all of the fanfare for all of the EU’s problems, but EU member Cyprus has managed to slip through the cracks (for the most part) of the mainstream media’s attention.   I guess that’s understandable, considering it’s on the peripheral of the periphery, out there just south of Turkey in the Aegean.   It’s also statistically insignificant in the grand scheme of the EU’s GDP, but psychologically some kind of meltdown there can do some damage to the overall economy of the EU.

The economy of the island is based upon tourism, British ex-pats and offshore banking.   There’s a ton of money from Russia there, sitting outside the reach of the Russian government’s greedy little paws.    There also might be some offshore oil deposits, which might add an interesting twist to the story.    Banks in Cyprus have taken a beating over investing some of that capital into the Greek economy (Cyprus is mostly Greek).

The EU and Cyprus have recently agreed to a bailout plan that will cost the German taxpayers a ton of money and a levy on all bank accounts in Cyprus of 6.75% on accounts less than 100,000 Euros and 9.9% on accounts of more than 100,000 Euros.   The accounts with less than 100,000 are insured in a similar arrangement as our FDIC.      The banks closed on this news in order to avoid bank runs, as everyone naturally wants to get their money out of Cyprus.    The British government says it will reimburse British citizens and government employees (there’s a large UK military base on the island) with Cypriot accounts courtesy of the already-strained British taxpayer.

A lot of wealthy/powerful Russians stand to lose a lot of money via backdoor nationalization in this situation and they aren’t happy.   This is an interesting geopolitical wildcard here because who knows how Russia will respond to this.   On one hand, the government will be happy about all of that money potentially coming back home to Mother Russia.  On the other hand, Putin might have a lot of very powerful people insisting that they “do something”.    If things are looking like they’re going into crisis mode in the EU now, imagine what it would look like if Russia decided to shut off the gas to Europe – that would really throw them over the cliff.   I hope they tread lightly over there…

The other geopolitical factor here is Turkey, but this one might be a bit of a long shot.  The northern part of the Island is de facto Turkish with a strong Turkish military presence and Turkey is on the rise as a regional economic, political and military power.   We seem to be heading towards a multi-polar world I can see Turkey having more influence in the world in the coming years – not quite one of the big boys like the US, China, Russia or the EU, but maybe on the next tier or so down.

5-10 years ago Turkey was trying to jump through the hoops to get into the EU (under some admittedly degrading terms), but now it’s looking like both sides have lost interest in this idea and Turkey would probably be better off without being a member state.   Turkey’s role in NATO made sense during the Cold War, but no so much anymore.   Plus both Turkey and the rest of NATO have shown that they’re not 100% committed to each others’ national defense policies.   Turkey has been a thorn in the side of the US in Iraq and very reluctant militarily in Afghanistan (but good with humanitarian aid) and we haven’t been very helpful to our ally with their problems in Kurdish Iraq and we didn’t dare say a cross word to Israel when they attacked the Turkish flotilla to Palestine – I bet if Syrians attacked the Turkish ship instead of Israel, we would’ve been chomping at the bit to do something.

Oh yeah, there’s also a deep, pathological hatred between the Greeks (represented here by Cyprus who are Greeks in every sense but passports) and the Turks.  Things have gotten better between the two nations over the past few decades, but it’s still there.    Two years ago I visited the military museum in Istanbul and they had a room dedicated to the 1970 skirmish between Greece and Turkey in Cyprus.   A couple things that stood out to me was a satchel with a placard stating that it came from a “Martyred Turkish soldier in the Cyprus Peace Operation”.   There was also a display of an unassuming American army uniform but the name tag was a Greek surname.  It was just something that someone may have stumbled upon in a suburban Chicago surplus store and had absolutely no connection to anything with Cyprus.   To me this spoke volumes.    Oh, and right now the nationalist Golden Dawn party in Greece has been bringing up the Turkish boogeyman in their dialogue.   There was even a story that surfaced in the Western media earlier in the year about how the Golden Dawn put retaking Constantinople into their party platform although I think that had more to do with the media completely sensationalizing something from those guys than reality.    I’m sure many Greeks hold the romantic notion of the Ecumenical Patriarch rolling up to the Hagia Sofia in a tank to deliver the divine liturgy, but I really doubt anyone is putting that on the agenda in Greece.

I’ve gotten a little deeper with Turkey than I intended to when I started typing but long story short, I think there’s a real possibility of them doing something to assert themselves which will basically be their way of giving the EU and/or Greece the middle finger.

Back to Cyprus, this is a unique situation and I’ll be watching it to see what unfolds.   For all practical purposes there are all kinds of backdoor ways that governments can suck wealth out of the people, but this is notable because it’s so direct.   The thought of bank levies has never even crossed my mind.   Instead of dancing around the reality of the situation, it’s like they’re saying that everyone is going to take a bite of the proverbial shit sandwich.   Thinking optimistically, I guess it’s a good thing that they’re being honest.

Last time things really heated up in Europe there was a big rush into the dollar for security, so I’m wondering if gold and silver prices will go down tomorrow as presumably more European money will come our way.

I think this situation makes a good case for keeping some portion of your wealth outside the system into hard assets like land, precious metals and means of production.    It also makes a good case for keeping some physical cash on hand.   If I were in Cyprus, I’d rather grab some Euros from underneath the mattress right now than worry about standing in lines or trying to track down an ATM with cash still in it.

 

See also  The Case for Keeping A Little Extra Cash Around