Thursday, August 5, 2010

Russia Bans Grain Exports as Prices Soar; Putin Clueless

If anything should be obvious to everyone over 30, interventionists simply like to intervene. Whatever is going on, they will come up with a reason to intervene.

In China, the Chinese central bank props up the dollar (creating domestic inflation), so that Chinese goods can be sold cheaply overseas. In Russia, where there is apparent huge demand for certain Russian products (grain), Russia bans exports of grain, because, heaven forbid, they might be able to sell their product overseas.

Record temperatures and droughts in Russia and other parts of Eastern Europe have destroyed crops and have sent grain prices soaring. September wheat futures hit $7.11 a bushel on Wednesday, up 58% from June's lows. This should be a great opportunity for Russian farmers who have grain to sell, but Putin has banned grain exports. The farmers are a victim of Putin's poor understanding of basic economics

Putin really needs to just chill, instead of issuing edicts, and get a better grasp on what the law of comparative advantage teaches.


  1. W closed limit up (another form of price fixing?) at 785'6, so tack on another 8% to the rally total. The last calendar spread trader was escorted from the building to an ambulance in waiting.

    As far as Putin, I'm sure he's clueless about economics, but I'd probably do the same, cet.par. Nothing puts the ol' boot crush on a regime quicker than food riots, which is why you can bet Xuren will throw out the USD peg in a Hong Kong minute if hungry peasants started heading for the coast, kamas in hand.

  2. Basic economics is by far not enough to make such judgment. Putin knows what he's doing, how his country works, and what happens in Russia when troubles with basic food arise. Sharply rising bread price would be the trouble.

    The only side that would benefit from the higher prices in that particular place and time is the traders. Farmers will not. Consumers will certainly not. There are more sides to this story than basic economics is aware of. And people in Russia don't take it lightly when traders of all kinds are benefitting from their troubles. Compared to them, Putin is the example of restraint and overall soft touch. That's how things are there, and even Putin cannot change that. He lives in a real world populated by (millions of) real people with their peculiar views at life, and yes, their often peculiar human action, not in a theory land. Those people want their interests to be the priority in their country. Their interest in this particular situation is simply their food security, not a quick buck for some traders. Russia is perhaps one of the few countries with strategic food reserves. If necessary, Russia will not be chasing the markets for supply, but open the vault. In cold war times there was food for 90 days - for the entire country. In cold-to-hot war, a country would need food, not grain futures. That mindset is not just Putin's, he just delivers what is expected of him. As you see, this is waay beyond basic economic theory. This is knowledge of real human action in a real country.

  3. Its unfortunate what is happening in Russia this summer and I wouldn't be surprised to see their yields be even lower than what was stated.

  4. It is unfortunate that morons like Anon drop by with their moron comments and speak with an authority they do not have and will never deserve.

    Anon: "There is such a thing as a free lunch. Prices are arbitrary. I am in touch with the mystics."

    Go away.

  5. Conant:

    You are not an expert on Russia. You don't know how it works. So shut up and may be, just may be, you will learn something. Or do go away, really.

  6. Anon,

    I won't dignify your moronitude by further comment. You are a mystic. The whole idea that Russia is not a "theory land" and economic law is or can be suspended by Putin to satisfy the fickle demands and ideas of Russian people is childish and unintelligent.

    You spent two, long paragraphs pretending to be thoughtful when you've said absolutely nothing of consequence, permanence or intellectual consistency.