Some Interesting POV.

As you may have noticed in the latest discussion on this blog the issue of those poor Russians--there are some poor Russians, no doubt--continues to haunt many Western minds. Famous shyster from "geopolitics" George Fridman of formerly STRATFOR even came up today with this, I am sure prophetic, wink, wink, vision of Russia and Russians--a collection of platitudes, rumors from Russian liberda (no one of consequence will talk to him in Russia) and cliches which he titled no less than that: 

Russia is the world’s biggest loser from oil’s crash, and that’s reason to worry

Mind you, this is the guy who described how the United States (and NATO) can defeat Russia conventionally in Ukraine in 2015. So, enjoy. Strangely, however, AFP came up today with by far more balanced and, most importantly, very significant distinction between Russians' and Westerners' lives. 

Sokolniki (Russia) (AFP) - After years spent on submarines with Russia's Northern Fleet, Ivan Chernyshyov is having no problem adjusting to life on coronavirus lockdown -- especially as, like many Russians, the retired sailor can escape to the countryside. "It's good here. We'll grow carrots and strawberries and maybe even some potatoes," the 78-year-old says, while his wife Lyudmila trims rose bushes in the garden of their country home outside Moscow.

This is what I am constantly stressing--comparing standard of living between Russians and Westerners, especially Europeans, is a fool's errand. Consider this crucial fact--you see, Western media can sometimes operate with reality, when they want to--which is absolutely not accounted for when talking about Russia's REAL economy:

Nearly half of Russia's population is estimated to have a dacha, so when authorities began imposing lockdown measures on Moscow last month, thousands streamed out of the city.

Very many, I stress that, of those dachas are, well, how to put it politely, full blown houses with garden lots and can give a run for the money to many US suburban houses within $150,000-250,000 price range in some nice established neighborhoods. Recall this comparison recently. Russia's sub-urbanization was proceeding apace for decades now and vast growing dacha communities were to be found as early as 1970s even in such places as Petropavlovsk-Kamchatsky (to be more precise, Elizovo) or some cities in Siberia, not to speak of Moscow. Dachas are not only great supplemental food or even income when some of this food goes to local farmers' markets by the so called "dachniks" (people who own dacha) who decide to sell, but also great places to relax. In my first book I wrote:

But even today each Friday in Summer or early Autumn big Russian cities suffer from enormous traffic jams with millions of Russians driving, or taking a train to their dachas or village homes to not only tend to their gardens and garden beds, small agricultural additions to houses, which in the hard times of the 1990s inhuman “reforms” allowed many to survive. Many still escape the city for the calm and relaxation of pastoral living, going back to their village roots, from where the Russian nation sprouted. It is a totally normal picture to see some Ph.D. in electronics or a designer of crucial parts for aircraft to enthusiastically tend their cabbage, or potatoes with carrots on their country side plots next to often solidly built luxury houses which are still built on the ground from which, throughout centuries, nobody could uproot the Russian soul. (Chapter 5, page 124)

As one commenters to this article noted:

Western media always portrays Russians as very poor people. However, it seems that half of them have a second home in a country side? How is that for being poor?

Yes, this is the paradox and reality which even best Western alleged "scholars" could not perceive during the Cold War 1.0 and still cannot wrap their brains around this whole thing today. Here is how dacha (and their neighbors') of our relatives looks like in 80 kilometers (50 miles) from Moscow and those are pretty average, nice, but nothing overly special, except a large lot (they don't grow anything). 

So, the way wealth is spread in Russia, despite inevitable catastrophic stratification of 1990s during a nation-wide robbery, is rather different from the West even today. The process or dual-residency will continue in Russia and here is another wowser for many westerners--most Russians OWN their apartments (flats) and dachas, that means are not in debt on this valuable real estate. Russia's mortgage market is minuscule compared to cyclopic debt bubble of the American real estate and, you may have guessed it already, in US "economic science" this huge bubble is counted towards GDP. This is the fact which great "strategic mind" of George Fridman simply cannot grasp--it is difficult when one is brought up within Wall Street bubble and on cooked books. 

Are They Too Big To Fail?

Good dirty laundry on the US airlines. Really good.

Airlines are begging for a bailout, but they've used 96% of their cash on buybacks over the past 10 years. It highlights an ongoing controversy over how companies have been spending their money.

No shit! Pardon my French. Now they need this so much derided, oh ever trying to regulate things, government to bail their asses out. Cry me a river. 

Major airlines are reeling from massive wave of cancellations as Americans stay home and governments around the world implement travel bans to curb the spread of the coronavirus. "We cannot afford to wait long for assistance," the trade association Airlines for America said in a statement, warning that some companies could be bankrupt by June. But there's a catch. Over the past decade, major airlines — including Delta Airlines, United Airlines, and Southwest — have used roughly 96% of their available cash on stock buybacks, according to Bloomberg. By reducing share count, these repurchases have pushed stock prices higher.

My feel about it is conflicting. I work in commercial aerospace and I understand how industry is tied closely to air travel, in the same time, as it was the case in the US economy in the last decades, stock buybacks are merely tools to make fat cats fatter while leaving many industries rot and labor, without which those industries wouldn't exist in the first place, with ZERO benefits in terms of raises and better health coverage among many other thigs. As long as some CEO can ride his personal business jet to some exotic golf-club and see his salary and bonuses grow who cares, right? 

Led by the tech and finance sectors, buybacks peaked to a record in 2018, according to a according to JPMorgan. For many, the takeaway was simple: These companies were electing to enrich shareholders, rather than invest in their businesses and labor forces.

This is exactly how, as an example, real estate prices got driven into the stratosphere in Seattle area. It was this class of smart managers and financial engineers who did this:

See this lovely, 1987 (33 y.o.) condo in Bellevue, WA? Who wouldn't afford this condo, right? Only Million and a half plus--so typical. But, as a long-time resident of the state, I can recall when houses (not condos) twice larger than this in the same area--you could buy them for $270,000 in mid-1990s. You could buy for $250,000 a superb 3 bedroom house there. Even then, when Microsoft was already on the peak of its might. But then bubbles started: dot com bubble, real estate bubble, so called tech bubble and the number of fat cats close to the life giving springs of dividends and executive bonuses which put decent housing beyond reach of even many white collar highly qualified professionals with decent pay, skyrocketed. Even decent pay stopped being enough. All that was a result of a new financial reality, which saw market "grow" without creating any serious value in anything. Real estate prices grew everywhere, while the distance (pitch) between airline seats grew smaller, the service became shittier and all this was compounded, in the end, by the consequences of 9/11. Obviously, airlines were not the only ones who did stock buybacks, but spending 96% of profits on that--this is really something. 

You, of course, recall what Boeing did too? Now it also calls for help:

On Tuesday Boeing called for a $60 billion lifeline for the struggling U.S. aerospace industry.

I would, however, consider Boeing separately. Airlines can go bankrupt, the new ones will immediately take their place. Same goes for banks. Nobody can take Boeing's place. As much as I abhor Boeing's financial, managerial and some manufacturing practices, it is one of those REAL too big to fail which must be kept afloat at any price. But the state has a right, in this case, to have many strings attached to bailout, which under no condition could be spent on yet another stock buyback, executive privileges or dividends to shareholders. "Socialism" you say? If one wants to use a misnomer, so let it be "socialism". Anyone violates those terms, get FBI busy with something of real national security significance, instead of wasting time on ridiculous conspiracies. Is this arrangement on the horizon for the United States? I don't know, I do not pretend to know but what I know for sure is that "business as usual" is over because it is a physical impossibility, unless one wants to completely destroy the country and drown it in chaos and the bloodshed. I heard one libertarian (a euphemism for being inadequate in assessing reality) is still holding off on what is remarkably "socialist" package which actually considers ordinary folks, however inadequately, for the first time in a long-long time. Remember, these folks are the ones who are armed to teeth and their patience is at the breaking point. 

UPDATE: for demonstration on how Seattle became unlivable. Sadly I could find only data starting from 2006. I am sure Bellevue will have similar profile. 

Now ask yourself a question, who, unless they already owned housing since early 1990s or earlier, can afford to own anything in Seattle area? Right, unless you are a millionaire or making way above 180-200 Ks. As we all know, these salaries are typical for the United States. Nah, I am screwing with you;)  

Real Economies.

A superb demonstrator, and a "predictor" of the size of REAL economy globally through real tangible indicator--electricity generation. It gives a good framework and order of magnitude of what each nation is capable of and it explains why Russia is realistically 5th or 4th economy globally. 

Here is another video of an enormous significance, from yesterday: 

Here you can see the assembly of first MS-21 which starts test-flying with PD-14 engine in the nearest future. Well, that, plus Russia finishing final tests of GTD-110M, which is first fully Russian gas-turbine of very large (between 110 to 500 MWT) power (in Russian). That means one thing: bye-bye, Siemens (and GE as a very remote second). The serial production of GTD-110M starts in 2020. Meanwhile this shows that modern Russia, especially when one accounts for energy-saving technologies, in terms of electricity production begins to surpass that of the...Soviet Union.

But that brings me to the point of getting into a very "dangerous" field of the actual standard of living. Sergei Brekotin of Aftershock News went there (in Russian) yesterday:

But I have my own, down to earth, observations which I will share on the account of actual living standard in Russia and in the West, especially the United States. I'll give you a hint: Russia's ownership of personal automobiles grew tremendously, plus enormous number of Russians OWN some real estate which doesn't need to be mortgaged and paid off. And, you can easily buy antibiotics over counter which spares you visit to a doctor, which, most of the time, is free anyway. I'll elaborate on that later.