I hope we close the oil loophole soon.

This is not going to be easy for the West (Europe/Germany notably), though we should do our best to convince anyone with spare capacity (SA? US frackers?) to add to the supply... but it'd be worth it.

The US is far from perfect (Iraq, cough, cough) but this is something else. No one has so blatantly tried to conquer a country in a long while. Saddam and the invasion of Kuwait is really the only thing that springs to mind. That too was met by unanimous world condemnation. For the same reason. Down with the Tamerlanes of this world!

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I agree with the conclusion that Putin is fucked. I had a look at OECD's Trade in Value database. An indicator that says a lot about that is the foreign value added shares of Russian final domestic demand (private and public consumption + investments). Foreign industries account for large shares of that in Computers & Electronics, Machinery and Transport equipment. In case you're interested I wrote a post about it hre with links to the OECD database. https://gubbdjavel.com/2022/03/03/putins-mistakes/

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Excellent article Noah.

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A Russian colleague I know, who managed to escape, says he feels that the corporate sanctions (like Visa and Mastercard) are just fucking up his life as an expat. He totally opposes the war, but feels unpersoned and almost like he wished he stayed home.

I urge policy makers to consider that Russian refugees are likely to be opposed to the war and need to continue to work and live, and we should in general be supporting them.

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I don't know why people are celebrating this. We end up with nothing but a militarily weakened and paranoid Russia with 140m angry impoverished citizens and 6000 nukes pointed at the west.

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Fabulous post. A couple of small additions:

1. The difference between the Ruble and Monopoly Money?

On Friday, Monopoly Money will be worth something.

The Ruble is dead and with the cutoff from foreign currency, including Russian owned but inaccessible foreign currency, the internal workings of the Russian economy is fried.

2. Russia's economy is 25% SMALLER than Italy's. Let that sink in.

It is a gas station with coal and a chip on its shoulder.

Even if oil goes to $200/bbl -- which I think it will -- they are still a little, tiny country with no real shock absorbers to deal with a united West stabbing them with progressively bigger pins.

3. Every financial malady you can identify is happening simultaneously -- Ruble is for shit down 86%, sovereign debt is in default and selling for $0.10/USD, credit - swap wholesale defaults, credit is equal to Cuba's, cannot access foreign reserves, no Visa/Mastercard/ApplePay/GooglePay/ATMs, run on the banks, exploding interest rates, and no goodwill anywhere in the financial world.

Take a breath -- every decent company leaving enmasse (with their jobs).

This is a wholesale disruption of gargantuan proportions that touches every aspect of the economy. This makes the NYC bond default seem like a spring day.

4. Russia has no friends. There are some folks who would like to steal assets, make great buys, but friends? Nope. Allies? Nope.

They have no friends because they are engaged in a medieval siege of a modern foreign capital wherein they are slaughtering children, women, and old people whilst using armaments that are war crimes.

Recovering from this uncivilized behavior is not like recovering from a sunburn you got in the Hamptons.

No, Russia is being disconnected from the civilized world because they have engaged in uncivilized behavior and it will work.

Not only that, but with Netflix pulling out, nobody is going to be distracted binge watching Yellowstone.



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Awesome analysis!!! Two things I’d like to know though is

1. What could we do to hurt Russia further(you had mentioned this in your tweet but didn’t really see it here unless I missed something) and

2. What are some hypothetical timelines for many of these consequences? Kind of conjecture, but I’m interested in seeing how long this can play out.

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As a friendly amendment, I'd note a fourth purpose for sanctions: making an example of Russia so other nations know not to wage aggressive war.

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Your statement that "The only thing worse than going back to the 90s would be going back to the early 80s" reveals a shocking lack of understanding about Russia's recent economic history. The country went through an almost unprecedented decline in peacetime life expectancy through the nineties, as Yeltsin took a flawed but functional centrally planned economy and sold it off for scraps to gangsters.

By the mid nineties, Russian life expectancy had declined almost 8 years from its peak in 86. It was near the end of the 2000s before life expectancy even past its 1980 level.

I know "Soviet = bad" is axiomatic for liberals, but come on. If you're going to give Russian economic analysis, do a little research at least. https://data.worldbank.org/indicator/SP.DYN.LE00.MA.IN?end=2000&locations=RU&start=1980

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I guess I'm a bit dubious about all of these predictions. I'm going to bookmark this post and come back in "a matter of weeks" and see which one of the quite specific predictions pan out. I feel like in general experts overreact when their niche is thrust into the spotlight. The state won't be able to pay anyone in a matter of weeks? Most private companies in all of Russia won't be able to make payroll? I'm dubious.

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And of course, there's a fourth purpose for the sanctions: to serve as a warning to Beijing about the consequences of invading Taiwan.

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“Russians are being asked to go back to the economic isolation, shortages, and hardship of the 90s, or even of the USSR, almost overnight.”

There’s Cold Wars, and then there’s Brave New World Wars.

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Any word on when the Russian stock market will open again?

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I think you’re underestimating the ability of the average Russian to keep their mouth shut and put their shoulder to the wheel in the interest of the state. This is the way that they have survived for hundreds of years. I guess we will see if things have changed. Putin is betting that they haven’t.

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It has now been nearly four weeks since Professor Olga Chyzh said "it is matter of weeks before the state can no longer pay its employees" and Derek claimed that most private companies would be unable to make payroll.

While Russia is certainly experiencing financial hardships, those specific predictions seem to have completely failed to manifest.

Any chance of an updated post on the effects of Russian sanctions and maybe a retrospective on which ones have worked better or worse than expected?

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Very good piece. And thanks for posting Marcusson blog, which is also very good. Incidentally, we also published a similar blog on Russian import dependency (from EU and US). It might be a good complement. See the link here: https://ecipe.org/blog/russia-import-dependency-problem/

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