Archive for February, 2010

Economist Michael Khazin and the World Crisis

Thursday, February 25th, 2010

When some event unexpected by the majority of experts happens, which concerns the whole society, a “debriefing” begins. Often there are one or two experts, who, analogous to Kassandra were warning about approaching danger, however their arguments were not heard. One of such experts were Michael Khazin, who warned about the crisis long before it’s beginning.

Michael Khazin can be in general called a specialist in the crisis area. In 1997, while he was working in team of experts in Kremlin, he predicted the unavoidable defolt of 1998, however, there were measures taken to prevent it. On the contrary, insdead of reacting immediately, Kremlin forces, who were interested in continuation of functioning of GKO pyramid, were able to push out Khazin and his collegues from his job. Then what Khazin was predicting has happened – the crisis of 1998, the results of which are well known by all [Russia's default of 1998]. The government has learned the lessons, and created a golden currency reserve and reserve fund, however the economy of the country [Russia] has firmly sat on oil syringe needle. The neighbors helped: the prices for “black gold” [oil] were growing around the world, and China was called by experts the main source of growth, the economy of which required more and more resources for it’s growth. The incomes of russians were also growing, significantly surpassing the productivity of labor, and there were little numbers of those who paid attention to a few prognosis of economists, among which there was Michael Khazin. According to his prognosis, the growth was on a brink of it’s end, and not only in Russia.

Financial crisis of 2008 was a complete surprise for Russia. Indeed, the record throughout the entire history of the country size of gold-currency reservers and high oil prices weakened the awareness of the government and the society. Increasing government spending, it seemed, was satisfactory to all: by means of the budget, the russians were getting money, the real estate was growing in price to the joy of the developers, realtors were increasing their networks, and the car dealers were getting used to the lines of people who were after their products. However already in the end of 2008 it became clear, that the crisis was going to take longer times. Khazin warns, that we are on a brink of a another Great Depression or even something worse. Dollar, which is a world currency today, is in a weak position – in case of it’s devaluation the chaos in the world is possible. The rules of the game haven’t significantly changed for more then a 100 years and today there is no alternative to the dollar. Similar to Mr. Khazin’s warnings were issued by others. Such as, for example, George Soros, a well-known currency trader and philantrope.

However let’s get back to the russian realities. In the situation of unstability many russians are looking for their own soilutions. Where to invest money, so that the family budget can be saved from aftermaths of the crisis? What is to buy in 2008-2009 and what is to get rid of? In the beginning of December in the interview and live discussion with “Echo of Moscow” radio, he was answering the audience’s questions. In short perspective (3-4 months) he was suggesting to exchange roubles to dollars or euros, because the devaluation of the rouble was to continue in 2009 (at least in the first half of the year). The long-term “protective” solution Michael Khazin called gold. Just like hundreds of years ago, gold has not lost its protective function. As an alternative, one can buy gold in form of golden coins of Savings Bank of Russia.

Khazin gives advice not only on radio or in newspapers. He is an author of many scientific works and popular books. Besides this, Michael Khazin has his own page in internet – worldcrisis.ru where information about the world crisis (which is apparent from the site’s name) and also financial crisis in Russia for 2008 and 2009, and also articles and prognosis of Michael Khazin and other experts. Whether they will come to reality or not, time will show, however the experience has shown that intuition and strict computation of a scientist rarely betray Mr. Khazin. We will live and see.

Roman Ivanov (translated from http://www.zanimaem.ru/articles/51/185)

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