Månedlige arkiver: september 2011

Hmm | Hva om FED kunne trykke euro og ECB kunne trykke dollar? Jeg tror hodet mitt akkurat brøt sammen.

Tyler Cowen med en ‘hva om’:

A simple cure for eurozone problems, requiring only one law:

Give the United States Federal Reserve System the power to create euros at will, at its discretion, subject to no outside checks.  This power may last for a specified number of years or who knows, maybe forever.

The Fed’s incentive is not exactly to maximize European social welfare, but it is probably close enough.  The Fed’s incentive is to prevent contagion from spreading to the United States and its banking system.  Toward this end it would create euros and distribute them to various European banking systems, or lend them out, do more swaps, etc.  It would help Europe but in a fairly balanced way, in particular the Fed probably would not “screw over” the major U.S. allies on the Continent, namely France and Germany.

Bernanke has a track record of dealing with severe financial crises, no?  And is he not insulated from the worst of European politicking and gridlock?  Foie gras and feta probably would not sway him, and the EU would have to agree to this only once.  No further plans need be announced and no coalition governments will have further checks.  Stock markets would rise immediately.

Conservatives might not mind if the Fed “wrecked the European economies with inflation.”

This law need not preempt other European initiatives, if those initiatives were to prove desirable.  The ECB would be ceding no powers whatsoever and it would not have to modify its charter.

Forget about the dual mandate, we need Dual Central Banks.

Such a rescue operation is not without historical precedent.

And while we’re at it, let’s give the ECB the power to create dollars! (just kidding folks…or am I?)

(Via Marginal Revolution.)

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Viktig | Hva skjer hvis du sier -3,8%, men burde sagt -8,9%? Rett før størrelsen på en tiltakspakke skulle debatteres?

Dette er hvordan statistikk er viktig. Ekstremt viktig:

How macroeconomic statistics failed the US:

There’s one big reason why the current economic weakness in the US has come as such a shock. It’s not the only reason, but it’s an important one, and it hasn’t gotten nearly the attention it deserves: the state of macroeconomic data-gathering in the US is pretty weak.

In particular, the data coming out of the Bureau of Economic Analysis at the beginning of 2009 was way off. Here’s Cardiff Garcia, introducing an interview with Fed economist Jeremy Nalewaik:

The initial GDP estimate for the fourth quarter of 2008 showed that the economy contracted by 3.8 per cent. It was released on January 30, 2009 — about three weeks before Obama’s first stimulus bill passed. That number was continually adjust down in later revisions, and in July of this year the BEA revised it all the way down to a contraction of 8.9 per cent.

The BEA is happy to try to explain what happened here — but whatever the explanation, the original 3.8% figure was a massive and extremely expensive fail. It was bad enough to be able to get a $700 billion stimulus plan through Congress, but if Congress and the Obama Administration had known the gruesome truth — that the economy was contracting at a rate of well over $1 trillion per year — then more could and would have been done, both at the time and over subsequent months and years. Larry Summers warned at the time that the risks of doing too little were much greater than the risks of doing too much; only now do we know just how right he was on that front. (And even he didn’t push for a stimulus of more than $700 billion.)

So what’s being done to beef up the state of America’s macroeconomic statistics so that this kind of monster error doesn’t happen again? The BEA is doing the best it can, but it’s constrained both in terms of its budget and in terms of the quality of economists it can attract.

Here’s how Cardiff ended his interview:

FT Alphaville was recently having a broader discussion about the status of macroeconomic data-gathering in the US with a fellow blogger, Felix Salmon, and he made the point to us that it’s been in secular decline for the last few decades. Do you agree? Is this something that’s come up in your work on output measures?

Some evidence suggests that the measurement errors in GDP growth have become worse in recent years. This may have to do with the increasing importance of services in the economy in recent decades, a sector where the GDP source data has historically been spotty. This is because, historically, the U.S. Census bureau has not collected spending data for many types of services on a regular basis.

Despite budget constraints, the statistical agencies have mounted a major effort to improve their measurement of services GDP. However, even as they make progress, it is important to keep in mind that there will always be measurement errors of some kind or another in the GDP and GDI source data, so taking some sort of weighted average, as I proposed in the Brookings paper, would be the soundest approach.

Frankly, this just isn’t good enough. Moving to a weighted average of GDP and GDI doesn’t improve the quality of our statistics one bit; it’s just an attempt to cope with the fact that neither of them is particularly reliable. As the economy becomes increasingly complex and service-based rather than goods-based, it’s crucial that our statistical architecture keeps pace — and it clearly isn’t doing so.

When I told Cardiff that the status of macroeconomic data-gathering has been declining for decades, I was making two separate statements — first that the quality of statistics has been declining, and secondly that the status of economists collating such statistics has been declining as well. Once upon a time, extremely well-regarded statisticians put lots of effort into building a system which could measure the economy in real time. Today, I can tell you exactly how many hot young economists dream of working for the BEA on tweaks to the GDP-measurement apparatus: zero.

I’m pessimistic that this is going to change. Putting together macroeconomic statistics is not a prestigious part of the economics profession any more, and government payscales are pretty meager compared to what good economists earn elsewhere.

Increasingly the economists in the government who craft the policy responses to macroeconomic developments are working on a GIGO (garbage in, garbage out) basis. That, in turn, means more bad responses, more bubbles, more recessions, and in general more macroeconomic volatility. The world is getting messier — and we don’t even have a good basis for measuring just how messy it is, any more.

(Via Felix Salmon.)

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Flue på vegg | Trenger du en trener? Coach? Det gjorde denne kirurgen.

111003 r21338 p233
Atul Gawande er kirurg og fant ut at han trengte ekstern hjelp. Tall på bl.a. komplikasjoner, gjeninnleggelser og infeksjoner hadde stabilisert seg på et lavt nivå. Det var lite Atul kunne tenke seg for å videre senke disse tallene. Platået var nådd, dette var så god en kirurg som han skulle bli. Helt til han svelget litt yrkesstolthet og ringte en gammel mentor.

Og bare så det er klart: hvis jeg kunne skrive halvparten så godt som Gawande hadde jeg vært fornøyd.

Her er noen utdrag:

I’ve been a surgeon for eight years. For the past couple of them, my performance in the operating room has reached a plateau. I’d like to think it’s a good thing—I’ve arrived at my professional peak. But mainly it seems as if I’ve just stopped getting better.

As I went along, I compared my results against national data, and I began beating the averages. My rates of complications moved steadily lower and lower. And then, a couple of years ago, they didn’t. It started to seem that the only direction things could go from here was the wrong one.

Not long afterward, I watched Rafael Nadal play a tournament match on the Tennis Channel. The camera flashed to his coach, and the obvious struck me as interesting: even Rafael Nadal has a coach. Nearly every élite tennis player in the world does. Professional athletes use coaches to make sure they are as good as they can be.
But doctors don’t. I’d paid to have a kid just out of college look at my serve. So why did I find it inconceivable to pay someone to come into my operating room and coach me on my surgical technique?

So outside ears, and eyes, are important for concert-calibre musicians and Olympic-level athletes. What about regular professionals, who just want to do what they do as well as they can? I talked to Jim Knight about this. He is the director of the Kansas Coaching Project, at the University of Kansas. He teaches coaching—for schoolteachers. For decades, research has confirmed that the big factor in determining how much students learn is not class size or the extent of standardized testing but the quality of their teachers. Policymakers have pushed mostly carrot-and-stick remedies: firing underperforming teachers, giving merit pay to high performers, penalizing schools with poor student test scores. People like Jim Knight think we should push coaching.

I decided to try a coach. I called Robert Osteen, a retired general surgeon, whom I trained under during my residency, to see if he might consider the idea. He’s one of the surgeons I most hoped to emulate in my career. His operations were swift without seeming hurried and elegant without seeming showy. He was calm. I never once saw him lose his temper. He had a plan for every circumstance. He had impeccable judgment. And his patients had unusually few complications.

Hva som skjedde med treneren til Atul får du finne ut her.

Trenger makroøkonomer trenere?

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Ekspansivt? | Hvor ekspansivt blir det neste statsbudsjettet?

LB Sigbj rn Johnsen 218447c

Det er viktig at statsbudsjettet bidrar til ikke å øke presset på det norske rentenivået. Det er en prioritert oppgave å ha et statsbudsjett som er godt tilpasset den situasjonen, for det er mange norske bedrifter som vil merke sterkere konkurranse, så da er det viktig at vi både ser på lønnsutviklingen og utviklingen i valutaen.

Vi har hørt det før, og det er klassisk samfunnsøkonomi. Et ekspansivt statsbudsjett vil øke produksjonen i økonomien og via pengemarkedet legger dette press på renten. Finansminister Johnsen har sagt, flere ganger, at statsbudsjettet ikke skal legge ytterligere press oppover. Så hva betyr det? Hva slags statsbudsjett har liten eller ingen effekt på renten?

Før vi kjører på med grafene, er det viktig å forstå at budsjettprosessen er nærmest ferdig. Budsjettkonferansene/seminarene/lunsjene/kaffepausene er ferdige, ferdigforhandlet tidligere i år. Finansdepartementets representanter står med SSB, NB og sine egne beregninger i hånda, vifter med hendene, og sier at statsbudsjettet trenger ikke gi norsk økonomi noe ekstra hjelp i år. I følge SSBs Økonomiske analyser:

Skal årsveksten i 2011 bli 2,3 prosent, som anslått
i Revidert nasjonalbudsjett 2011 (RNB), må derfor veksten tilta kraftig gjennom andre halvår i år. Vi har valgt å nedjustere vårt anslag på veksten i konsumet i offentlig forvaltning til 2,1 prosent i 2011.

Finansdepartementet sier at veksten i offentlige utgifter er beregnet til 2,3%, mens SSB (som har mulighet til å oppdatere litt oftere) nedjusterer til 2,1%. Hvis vi hadde hatt 2,5% inflasjon, som målet er, ville et slikt budsjett vært svakt kontraktivt. Men inflasjonen anslås ikke til 2,5% og derfor vil revidert nasjonalbudsjett:

Våre anslag for finanspolitikken i 2011 ligger nær anslagene i RNB. Det vedtatte skatte- og avgiftsopplegget for 2011 er lagt til grunn. Indirekte skatter øker noe utover inflasjonsjustering og bidrar til å trekke opp konsumprisveksten med knapt 0,1 prosentpoeng fra 2010 til 2011.

0,1%-poeng er et tilnærmet nøytralt nasjonalbudsjett. Og det er slik du bør tenke om neste års budsjett.

(Merk vannrett sort strek skulle være inflasjonsmålet på 2,5%. Ikke alltid Excel gjør som du ber om)

Ifølge SSB hadde den norske stat utgifter på 1116 milliarder kroner i 2010. Hvis vi tar SSBs nedjustering fra revidert nasjonalbudsjett, vekst på 2,1%, blir utgiftene i år på 1116 * 1,021 = 1139,32 milliarder. Det er en økning på 22,32 milliarder kroner. Vi vet at p.g.a. 22 juli har statsbudsjettet økt med 722,9 millioner utover dette.
Så hva skjer i 2012?

SSB mener at veksten i offentlige utgifter øker med 2,6% i 2012.
Så hva betyr 2,6% i millioner?
1139,32 + 0,7229 = 1140,0429 milliarder. Legger vi på 2,6% blir utgiftene for staten i 2012 1140,0429*1,026 = 1169,6840 milliarder.

SSBs beregning på 2,6% kan være i meste laget hvis prisveksten i Norge avtar fremover, eller i minste laget hvis Regionalt Nettverk rapporterer lavere vekst i norsk økonomi.

Men 2,6% i vekst oversettes til nesten 29 milliarder ekstra over statsbudsjettet. Samtidig spriker det i anslagene for KPI i 2012, SSB sier 0,9% mens NB sier 1,75%.

Tar vi SSBs anslag betyr et inflasjonsnøytralt budsjett i 2012 en økning på ca. 10 milliarder (med 2,6% utgiftsvekst det blir da 19 milliarder ‘ekstra’ å rutte med).

Så hvis finansministeren stiller seg på Stortingets talerstol og forteller forsamlingen «regjeringen velger å bruke 10 milliarder med enn i fjor» er dette et ekstremt nøytralt budsjett (og allerede lovfestede forpliktelser presser det faktiske tallet over 10).

Hvis utsagnet er «regjeringen velger å bruke over 30 milliarder ekstra over statsbudsjettet fra i fjor» er budsjettet ekspansivt og iferd med å presse renten oppover i større grad enn det finansministeren var komfortabel med.
Husk at dette er utelukkende utgiftsvekst i staten, vi tar underskudd, oljepengebruk og skatteinntak senere.

To viktige ting å merke seg. Det ene er at staten bare representerer litt over 40% av økonomien, hvordan det går med de resterende +50% er vesentlig i bestemmelse av statsbudsjettet. Det andre er at 4%-regelen er ikke tatt med her. Norge brukte ca. 113 milliarder, målt ved det strukturelle, oljekorrigerte budsjettunderskuddet i fjor, men det er ikke vesentlig i utgiftssiden av budsjettet.

Oppdatering: I skrivende stund sier Stoltenberg på NRK at mange vil protestere på neste års statsbudsjett. «Ordet nei» blir visstnok en vane å bruke neste år.

Hørte Stoltenberg lyden fra tastaturet mitt?

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QE | Milton Friedman om en QE3 (MF i Canada anno 2000)

Milton Friedman Bio
I 2000 holdt Milton Friedman hovedtalen ved en konferanse i regi av Bank of Canada. I ‘Spørsmål og Svar’ delen var det noen interessante spørsmål.

Om euroen (som knapt hadde feiret ett-årsdagen):

Milton Friedman:…I think the euro is in its honeymoon phase. I hope it succeeds, but I have very low expectations for it. I think that differences are going to accumulate among the various countries and that non-synchronous shocks are going to affect them. Right now, Ireland is a very different state; it needs a very different monetary policy from that of Spain or Italy. On purely theoretical grounds, it’s hard to believe that it’s going to be a stable system for a long time. …

If we look back at recent history, they’ve tried in the past to have rigid exchange rates, and each time it has broken down. 1992, 1993, you had the crises. Before that, Europe had the snake, and then it broke down into something else. So the verdict isn’t in on the euro. It’s only a year old. Give it time to develop its troubles.

Merk hvordan han får hovedproblemet til euroen inn i én setning:

I think that differences are going to accumulate among the various countries and that non-synchronous shocks are going to affect them.

Alle i Nei-til-Eu har vel lært seg uttrykket ‘usynkron’.

Om Japan og renten ved nedre grense:

David Laidler: Many commentators are claiming that, in Japan, with short interest rates essentially at zero, monetary policy is as expansionary as it can get, but has had no stimulative effect on the economy. Do you have a view on this issue?

Milton Friedman: Yes, indeed. As far as Japan is concerned, the situation is very clear. And it’s a good example. I’m glad you brought it up, because it shows how unreliable interest rates can be as an indicator of appropriate monetary policy. The Japanese bank has supposedly had, until very recently, a zero interest rate policy. Yet that zero interest rate policy was evidence of an extremely tight monetary policy. Essentially, you had deflation. The real interest rate was positive; it was not negative. What you needed in Japan was more liquidity.

During the 1970s, you had the bubble period. Monetary growth was very high. There was a so-called speculative bubble in the stock market. In 1989, the Bank of Japan stepped on the brakes very hard and brought money supply down to negative rates for a while. The stock market broke. The economy went into a recession, and it’s been in a state of quasirecession ever since. Monetary growth has been too low. Now, the Bank of Japan’s argument is, “Oh well, we’ve got the interest rate down to zero; what more can we do?” It’s very simple. They can buy long-term government securities, and they can keep buying them and providing high-powered money until the high powered money starts getting the economy in an expansion. What Japan
needs is a more expansive domestic monetary policy.

Første paragraf går litt tilbake til hva Paul Krugman sier om måten man leser yieldkurver på:

The reason for the historical relationship between the slope of the yield curve and the economy’s performance is that the long-term rate is, in effect, a prediction of future short-term rates. If investors expect the economy to contract, they also expect the Fed to cut rates, which tends to make the yield curve negatively sloped. If they expect the economy to expand, they expect the Fed to raise rates, making the yield curve positively sloped.

But here’s the thing: the Fed can’t cut rates from here, because they’re already zero. It can, however, raise rates. So the long-term rate has to be above the short-term rate, because under current conditions it’s like an option price: short rates might move up, but they can’t go down.

Be en kjørelærer forklare deg hvordan man over- eller underkorrigerer en bil i høy fart og konsekvensene det har. Der har du et økonomisk argument i ett nøtteskall.

Hele talen og S&S sekvensen finner du her (pdf, 12 sider)

(Hodenikk går til Alex Tabarrok)

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Døh! | BBC intervjuer trader som bryter alle regler, forteller folk at ‘incentiver styrer’

Regner med at de fleste på gulvet ved New York Stock Exchange har sett denne på sin smartphone allerede:

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Diktator | Noen har skrevet «The Dictator’s Handbook». Med en herlig undertittel.

Undertittelen er «Why bad behavior is almost always good politics». Regner med det er rimelig vekt på almost. Over hos The Monkey Cage bidrar forfatterne med gjesteposter. I den første forklarer de hvordan Gaddafis Libya så så bra ut en stund. Helt til, du vet, massemordet på egne innbyggere startet. Her med fem nyttige regler for fremtidige diktatorspirer:

The Dictator’s Handbook I: Gaddafi’s Failing? Too Kind:

Bruce Bueno de Mesquita and Alastair Smith are professors of politics at New York University. They write about the choices facing leaders in “The Dictator’s Handbook” (Public Affairs Press, 2011). The book provides an intuitive, example-driven introduction to politics that covers aspects of political economy, comparative politics and international relations and is based on over 18 years of academic development of selectorate theory. The following is a guest post by Bueno de Mesquita and Smith:

Libya’s former leader Muammar Gaddafi knew the essentials of coming to power and keeping power. At the end of the day this is what politicians of all stripes crave and so it is the metric by which they should be measured. He seized power when King Idris was away, seeking medical treatment in Turkey in 1969—Richard Nixon had just become President.

He then proceeded to follow the five essential rules of retaining office.

Rule 1: Rely on as few supporters as possible.
Gaddafi suppressed all political opposition, criminalized dissent and ensured that only close family and friends had any power.

Rule 2: Make sure essential supporters know there are plenty of replacements for their them.
By disbanding the Monarchy and making Libya an Arab Republic, Gaddafi ensured that virtually anyone could be brought into the coalition. This put his supporters on notice that they could easily be replaced.

Rule 3: Control the revenue.
It’s always better for a ruler to determine who eats than it is to have a larger pie from which the people can feed themselves. Gaddafi forced oil companies to increase royalties from 50% to 79%. He and his family took over virtually every economic enterprise in Libya. This did not help the economy but it did ensure no one could succeed economically except through Gaddafi’s benevolence.

Rule 4: Reward your supporters so they don’t go looking for your replacement.
Flush with oil revenues Gaddafi bought loyalty.

Rule 5: Never be nice to the people at the expense of your coalition.
It is hard for the people to rise up if they are kept hungry, isolated and ignorant.

Gaddafi was a successful leader. He outlasted seven U.S. presidents and survived for nearly 42 years. But complacency cost him more time in office—he did not pay enough attention to Rule 5. He was too nice.

Conditions in Libya were certainly brutal under Gaddafi, but they could have been much worse. According to the index of press restrictions produced by Reporters Without Borders, Libya shifted from being more repressive than its neighbors in 2005 to being freer than Syria, Yemen, and Tunisia and on a comparable level with Saudi Arabia in 2010.

Only Egypt was substantially freer, but then its former – with “former” being the key word – President Mubarak needed a relatively educated and connected workforce since much of the Egyptian economy relied on commerce and tourism. Gaddafi had oil wealth. He did not need an educated population to engage in commerce, and yet according to UNDP’s development indicators he provided substantially more years of education than his neighbors. And it cost him dearly.

The National Transitional Council is set to inherit vast wealth in unfrozen assets with which to buy loyalty and form as small a coalition as possible. Anyone who believes the NTC will empower the people is deluding herself.

(Via The Monkey Cage.)

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Fart | Hvilket land tror du har verdens nest kjappeste internetthastighet?

35 petabytes og 27 millioner nedlastinger fra 224 land senere har Pando Networks målt internetthastighet i alle kriker og kroker av denne kloden.

Kina er nummer 82 i verden, USA er 26. Vinneren, Sør Korea, har verdens hurtigste hastighet. Faktisk raskere enn UK, Tyrkia, Spania og Australia – tilsammen.

Her er topp 10:
Screen shot 2011 09 26 at 20 56 41 Romania, Bulgaria, Litauen og Latvia er alle topp 5. Sverige og Danmark slår oss. I Congo kan ikke lyden av et modem ikke være langt unna.

Norge har en hastighet på 802 KBps, og er akkurat utenfor topp 10.

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Russlands FinMin går av og dette, tro det eller ei, påvirker landets kredittverdighet.

Alexei Kudrin 167x220
For å forstå hvorfor Alexei Kudrin er var så viktig for Russlands kredittverdighet må du forstå hva han har gjort og under hvilke forutsetninger:

Having worked in the Yeltsin administration during Russia’s 1998 sovereign default, when he came to the helm of the finance ministry in 2000 Kudrin instilled fiscal discipline lacking in the country. He is widely credited with maintaining spending restraint and ensuring Russia had sufficient reserves to ride through the financial crisis of 2008/2009.

HSBC Russland-desk skriver:

Fiscally, without such an influential person as Alexey Kudrin, the state budget would likely become distressed suffering from a series of incremental expenditure decisions. We see an appetite for more liberal and responsible economic policies to resurge only with a substantial decline in oil prices, as it has always been in Russia in the past.

Her er hele artikkelen:

Kudrin in the line of fire – Medvedev forces resignation – FT Tilt: Alexei Kudrin, Russia’s well-respected finance minister who was instrumental in instilling fiscal discipline in the country that defaulted just thirteen years ago, resigned on Monday evening in what could be a significant blow to the integrity of the country’s public finances and its creditworthiness.

Earlier in the day, president Dmitry Medvedev, in retaliation to comments made by Kudrin over the weekend that he would not serve in a Medvedev-led government when the president swaps jobs with prime minister Vladimir Putin in March, forcefully suggested the finance minister resign if he did share his boss’ views on the economic issues of the day.

Kudrin had told journalists in Washington at the International Monetary Fund and World Bank meetings that he would “definitely refuse” to work with Medvedev in the new cabinet as a result of differences of opinion on government spending. As a well-respected fiscal hawk, Kudrin opposed attempts from Medvedev to force through increased military spending.

In addition, Kudrin is also believed to have harboured hopes of becoming prime minister if Putin became president again, a job that is expected to be filled by Medvedev.

Late in the Moscow evening on Monday Kudrin confirmed he had resigned from the post he has held for almost 11 years.

Having worked in the Yeltsin administration during Russia’s 1998 sovereign default, when he came to the helm of the finance ministry in 2000 Kudrin instilled fiscal discipline lacking in the country. He is widely credited with maintaining spending restraint and ensuring Russia had sufficient reserves to ride through the financial crisis of 2008/2009.

Euromoney dubbed Kudrin the «Finance Minister of the Year» in 2010, and in what looks to have been a rather prescient commentary, said at the time:

Kudrin has been acknowledged a finance manager of the highest order, not only in the West, but also in Russia, the country that has always had a rather chilly attitude towards reformers
Jochen Wermuth, CIO of the $400m AUM Wermuth Asset Management and a former advisor to the finance ministry under Kudrin’s tenure, said the minister’s influence on Russia’s finances has been monumental. As he told FT Tilt:

Alexei Kudrin is a great professional who deserved the “finance minister of the year award” several times. [Kudrin] single-handedly turned Russia from a banana republic in terms of debt levels into one of the best credits in the world. Losing him would be a huge loss to Russia, its debt and equity markets.
With Kudrin out of the picture Russia might embark on a spending splurge and put reforms on the back burner, warned HSBC’s chief Russia economist Alexander Morozov. He said in a research note:

Fiscally, without such an influential person as Alexey Kudrin, the state budget would likely become distressed suffering from a series of incremental expenditure decisions. We see an appetite for more liberal and responsible economic policies to resurge only with a substantial decline in oil prices, as it has always been in Russia in the past.
Nomura analyst Tatiana Orlova even said a Kudrin exit could weigh on Russia’s credit rating (which has been kept supressed due to the question of whether Putin or Medvedev would stand for election next year). This is because Russia’s budget is no longer based on conservative oil price assumptions — the average Urals price required to balance the 2012 federal budget is $116 a barrel — and Kudrin is one of only a few people capable of keeping a handle on Russia’s budget, she said.

In short then, Kudrin is a big player – both in Russia and on the global scale. But he was not untouchable, as the manuevring demonstrated.

The finance minister had earlier said he would first consult Putin before making a decision. And even with the current PM seen as the senior partner in Russia’s ruling tandem (as the weekends’ announcement testified), Medvedev has shown before that he has the stomach for a fight and is not afraid to use the powers at his disposal.

In September last year Medvedev took what appeared to be the risky move of sacking Yuri Luzhkov, the powerful Moscow mayor. Whoever thought Medvedev had become a lame duck for his last six months in the Kremlin looks likely to be proved wrong.»

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