Resurgent Russia Discharging Dollars

Posted 03 Jun 2009


Russia with 6,592,800 square miles (17,075,400 square kilometers) spanning 11 time zones is easily the largest country in the world covering about 1/8th of its landmass.  The BRIC  economies, Brazil, Russia, India and China are both similar and different.  With only about 142 million people, tremendous natural resources and about 8 million unemployed Russia is more akin to Brazil than the population behemoths.

Russia's total fertility rate is only 1.3 births per woman where 2.1 is required to maintain a stable population.  The death rate of 15 per 1,000 people per year is 66% above the world's average of 9.  With neither a rising generation nor much immigration and rapid deaths the Russian population is disappearing.


The collapse of the Soviet Union resulted in massive chaos.  Three wings, the siloviki, 'The Family' and the ogligarchs frantically grabbed power, resources, companies and wealth.  Into the KGB Putin brought the siloviki, mostly former KGB and other security contractors, and 'The Family', Yeltsin's relatives who burrowed into business and government to keep him in power along with the technocracy aligned with Western interests that kept foreign direct investment funds flowing on Russia's terms.

The billionaire oligarchs were allowed to keep their fortunes so long as they did not play politics.  For example, Mikhail Khodorkovsky the owner of oil super-major Yukos decided to play politics and succeed Putin as President.  Mr. Khodorkovsky is still in a freezing Siberian oubliette.

The credit crisis in 2008 has decimated most of the oligarchs.  With gigantic debts, declining revenues, access to very little credit and dissipating companies the oligarchs found that their business empires had rapidly evaporated.  For example, the Forbes billionaire list saw Russians disappear from from 87 in 2008 to 32 in 2009.


The real power elite in Russia are both siloviki and oligarch as they infest both corporate boardrooms and the Kremlin.  Like the politically connected in America they make the 'bailout cut'.  The Kremlin is able to determine which oligarchs survive.  Government power is consolidating in financial, economic, business, social and political spheres.

Out of the G-20 party came pressures on tax havens.  Obama and the US government led the charge.  Likewise the Russian government struck deals such as with Cyprus and Deloitte reported, "one of the most favourable treaties the Russian Federation has concluded".  It is getting increasingly difficult for those trying to figure out how to vanish.

TD F 90-22.1 FORM DUE 30 JUNE 2009 FOR 2008

This may be a good time to mention that for those subject to US jurisdiction the TD F 90-22.1 Form for reporting foreign bank accounts is due on 30 June 2009 for 2008 activities.

 I have received many inquiries about its application to GoldMoney holdings.  There are significant legal issues, questions of law and particular facts unique to each individual that will determine individual application.

I recommend filing the form if there is any question as to its requirement because it is not very burdensome and the penalties for not filing are draconian.  Nevertheless, if you do not wish to file because after reading the instructions on the form you do not think it is required then I do suggest consulting competent legal counsel.


Ironically, during the Information Age there is a return to all things real.  Immediate worldwide communication overextends and will eventually decimate the inherently unsound, unstable and immoral financial and monetary system.

The Internet is quickly aligning perception with reality.  Monstrous malinvestment is being liquidated and the costumed criminal clowns in Washington DC and St. Petersburg are intentionally exacerbating the greater depression.  As the tide goes out it is increasingly apparent which wealth is real and which was illusory.

Russia does have a real economy built by real labor that grows, produces or builds real things and generates real wealth.  Nevertheless, as Russia Today reports, "Russia’s economy is contracting at the fastest pace in 15 years".  Meanwhile the ruble has lost about 40% of its value in the past year and yet Putin praises the central bank.  Russia may not have anything to worry about.


The Gold Anti-Trust Action Committee, GATA, held the Gold Rush 21 Conference 7-9 August 2005 in Dawson City, Yukon, Canada and had an extremely interesting visitor:  Andrey Bykov a highly regarded economic advisor to Vladimir Putin.

Gold was trading at $436 at the time and two days later the gold market broke traditional trading norms and a bull upleg started that eventually took gold to new highs.

 On 22 November 2005 Vladimir Putin said, "The central bank should review its gold and forex reserves policy in favor of increasing the weighting of gold."  Putin is learning where and how to buy gold bars in his hot little hand.

On 19 May 2009 the FRN$ stopped being Russia's reserve currency with 47.5% of currency assets in the Euro, 41.5% in the FRN$ and about 500 tons of officially reported gold or about 2%.

Likewise Russia has begun asserting economic and military ambitions in its region.  There has been the Georgia skirmish with the US in August 2008.  On 26 May 2009 the Civil Georgia reported that protesters of United States puppet President Saakashvili  filled the 55,000 seat Tbilisi's national stadium.  Also, Russia has offered Azerbaijan assistance in building a nuclear plant.

Russia has agreed to pay Ukraine to run military drills over the Crimean Peninsula.  Of particular interest though is that while the American government says this 'could prove provocative and destabilizing' on 15 May 2009 Vladimir Putin met with Sergey Bagapsh, leader of the Georgian breakaway region Abkhazia, and agreed to sign an agreement for Russian military bases in Abkhazia where Russian troops will be stationed for at least 49 years.


Russia is a regional powerhouse but disappearing because of demographic factors.  The oligarch's power and influence is waning as the Kremlin reasserts its dominant role in finance, economics and politics.  The Great Credit Contraction grinds on and real things are becoming increasingly sought after.

Resurgent Russia is discharging dollars like refuse through a garbage disposal.  This challenge of FRN$ hegemony with its world reserve status along with United States dominance both economically, diplomatically and militarily will have significant geo-political and geo-strategic implications.  As a result, the FRN$ will be impacted negatively while gold will be a prime beneficiary of this change.

Disclosures:  Long physical gold and silver, no problematic GLD or SLV ETFs and no TLT.