The United States is a deadbeat that needs to get its debt house in order.That’s the word from Vladimir Putin, anyway, as Bloomberg reports in “Putin Calls U.S. ‘Parasite’ as Russia Gobbles Its Debt.”
In it, Putin astutely argues that “the U.S. ‘is living beyond its means and shifting part of the weight of its problems onto the world economy, acting to some extent as a parasite on the global economy and its dollar monopoly position,” and that by “living beyond its means,” the United States has stressed the global economy to the breaking point.
What makes this most interesting is that after “the S&P downgrade, Russia joined the largest holders of U.S. debt in rushing to voice support by pledging to retain their Treasuries holdings.” This, combined with the fact that “Russian holdings of U.S. Treasuries have expanded in the last five years as soaring oil revenue boosted the reserves of the world’s largest crude producer,” essentially ties Russia to the U.S. debt markets.
Russia, then, despite Putin’s complaints and observations, has few alternatives outside of U.S. treasuries.
Consequently, then, what will be most fascinating to watch in the coming decade is how Russia plays its oil and energy (and, obviously, overall commodities) hands in the progressively shakier world markets.
Obviously, while current investment in the United States represents a simple case of “flight to quality,” Russia represents an intriguing investment alternative within the BRIC economies.
In other words, get ready for a contentious 2012 and beyond.