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Papas Fritas writes:
"James B. Stewart writes in the NYT that there's one major difference between now and the last time Russia invaded a neighbor (Czechoslovakia in 1968): Now Moscow has a stock market that provides a minute-by-minute referendum on Putin's military and diplomatic actions.
On Monday, the Russian stock market index (RTSI) fell more than 12 percent, in what a Russian official called panic selling and 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. 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. Russia is far more exposed to market fluctuations than many countries, since the Russian government owns a majority stake in a number of the country's largest companies and many Russian companies and banks are fully integrated into the global financial system.
The old Soviet Union, in stark contrast, was all but impervious to foreign economic or business pressure, thanks in part to an ideological commitment to self-sufficiency. By contrast, today "Russia is too weak and vulnerable economically to go to war," says Anders Aslund. "The Kremlin's fundamental mistake has been to ignore its economic weakness and dependence on Europe." Almost half of Russia's exports go to Europe, and three-quarters of its total exports consist of oil and gas. The energy boom is over, and Europe can turn the tables on Russia after its prior gas supply cuts in 2006 and 2009 replacing this gas with liquefied natural gas, gas from Norway and shale gas.
If the European Union sanctioned Russia's gas supply to Europe, Russia would lose $100 billion or one-fifth of its export revenues, and the Russian economy would be in rampant crisis. Other penalties might include asset freezes and the billionaire Russian elite who are pretty much synonymous with Mr. Putin's friends and allies are the ones who are being severely affected by visa bans, which were imposed by President Obama on Thursday. "The recent events were completely irrational, angering the West for no reason," says one Russian economist. "This is what is most scary, especially for businesses. Instead of reforming the stagnating economy, Putin scared everybody for no reason and with no gain in sight. So it is hard to predict his next actions. But I think a real Cold War is unlikely.""
(Score: 3, Insightful) by Anonymous Coward on Sunday March 09 2014, @02:04AM
So, why didn't those same pundits talk about those US stock markets that "provides a minute-by-minute referendum on Bush/Obama/etc's military and diplomatic actions" whenever the Dow drops?
Or pretty much every other stock markets and their indexes in the world?
Prejudice much?
(Score: 2) by romanr on Sunday March 09 2014, @02:30AM
It has to be reaction to something. If the US stocks go down because of some economic data then it is not a referendum about the policy of the president.
(Score: 5, Interesting) by smellotron on Sunday March 09 2014, @06:13AM
When the President make major decisions or statements about foreign policy, the markets do provide such a referendum;, I've watched turmoil in the markets during some speeches by Obama. But you are missing one critical step here: the Russian administration is apparently directly invested in its own stock market, much more than the US administration. Supposedly, that provides an economic incentive for Russian policy to favor stability. I don't believe that the incentive is relevant (global politics > equity investment), but it is truly different from the situation in the US.
Also, the Dow is just a price-weighted combination of 30 stocks, and not the 30 biggest companies (AAPL is now huge but their stock price is so high it would "mess up" the price-weighted combiation algorithm... lame). You should be looking at the S&P 500 index if you want to see the market's referendum in real-time.
(Score: 4, Informative) by linsane on Sunday March 09 2014, @09:11AM
Well, lets see, the Russian stock market / currency tanked by more than 10%.
Based on info from the WSJ http://online.wsj.com/mdc/public/page/2_3024-djia_ alltime.html [wsj.com] aside from a couple of times around 1930 (which were widely covered but before my time) the next bunch were in Oct 2008, at which point there was also quite a lot of ongoing coverage about problems to do with the economy.
I have not done any currency conversions but as a non US / non Russian the impression I get is that the US gets more international coverage of ups and downs and has more pundits trying to explain it on a daily basis than Russia, most likely due to its more widespread, diverse and open approach to news reporting.
0.02 RUB