Moscow Countdown, etc.
Jude Wanniski
December 19, 1991

 

MOSCOW COUNTDOWN: As Boris Yeltsin's self-imposed deadline of January 1 approaches for the lifting of price controls throughout the ruble orbit, the ruble is already approaching hyper-inflation velocity in the black market, trading yesterday at 170 to the dollar. It could easily get to 1,000 to the dollar in January, on the way to infinity. Yeltsin's vice president, Alexander Rutskoi, correctly forecasts that the plunge will lead to anarchy, not a market economy. [See "Yeltsin Deputy Opposes Plans for Economy," p. A-ll, today's Wall Street Journal]. As Rutskoi was instrumental in pulling the military to Yeltsin's side at the time of the August coup, I assume a serious coup attempt will be led by Rutskoi and the Cossacks of the Red Army unless Yeltsin soon aborts plans for the official floating of the ruble. [The Journal will run an op-ed tomorrow in which I urge postponement of the ruble float to avoid anarchy, fixing the currency before price controls are lifted.] The "reformers" who are pushing Yeltsin and 300 million people over a cliff are being manipulated by the IMF and European bankers, led by Jacques Attali, head of the European Bank for Reconstruction and Development. These mindless forces are now trying to persuade Yeltsin to fire the chairman of the Russian central bank, Georgi Matyhkin, and replace him with one of Attali's stooges. Matyhkin, whom I met with last week, is the most sensible economist I've yet encountered in that part of the world. He's probably counseling Rutskoi, as it was Matyhkin who told the WSJ two weeks ago that the ruble float would be worse than an atomic bomb. Even more worrisome, Russians in Moscow advised me last week that the weak link in the nuclear chain should anarchy occur would be the tactical weapons possessed by the Islamic republics on China's borders. Should the fundamentalists decide to seek retribution for their miseries by using these weapons against Israel, an idea raised by the Russians, there would of course be profound consequences for us all. The national security people in Washington, Gates of the CIA in particular, are eminently aware of this darkening cloud on the not-so-distant horizon. Secretary of State Jim Baker could intervene and urge postponement of the ruble float, on security grounds, but shows no inclination to do so, instead planning his international aid conference for mid-January, after D-Day. Remember, Yeltsin could avert the crisis at the last minute by simply announcing the government will honor its debts to its own people, not cheat them out of their life savings, as Attali, Treasury Secretary Nick Brady, and the western bankers are counseling. At one moment the entire ruble stock would be worthless, the next it would be as good as gold. It should not be that hard for anyone in the Bush Administration to understand.

DOMESTIC GRIDLOCK: Fed chairman Alan Greenspan was absolutely wonderful yesterday in his testimony before the House Ways & Means Committee. He could not have been more clear in his arguments that there should be no foo-foo tax cuts for the middle class, upper class, or lower class, only a cut in the capital gains tax that increases the reward for risk-taking and enterprise for everyone. For the umpteenth time, he told a powerful committee of Congress that a capgains cut would gain revenue, not lose revenue, and that it would bring instant relief to the banking industry, by increasing the value of real estate along with that of all capital assets. Network television ignored all this, of course, concentrating on the doom and gloom part of the Greenspan testimony. David Rosenbaum of The New York Times, who yesterday wrote that tax cutting is "good politics, but bad economics," in his report of Greenspan's testimony today made only a passing reference to capital gains. The intellectual dishonesty in the press corps has reached profound levels, matching that of the Beltway in general. President Bush plans his duck hunting trip to Texas as his advisors continue to press foo-foo tax cuts on him, including the tax rebate schemes that involve dropping hundred dollar bills from airplanes. Meanwhile, Nobel Laureate James Tobin of Yale, the evil genius in our time behind the idea of currency devaluations everywhere, writes in The Wall Street Journal two days ago, 12-17, that all our problems can be solved by the Fed printing more hundred dollar bills and dropping them from airplanes. As the President's popularity continues its decline, the more attention he gives to the political nitwits around him, his "handlers." Next, he will promise a chicken in every pot.

DEMOCRATIC FIELD: Unless Mario Cuomo gets into the race tomorrow, it looks awfully bleak on the Democratic side. After the countless hours I spent with former California Gov. Jerry Brown, trying to get him up to supply-side speed, he turned in a ghastly performance on last Sunday's televised Democratic debate. Cuomo still might be able to push the debate to a respectable level, if he gets in. If he chickens out, there is that much more reason to feel grinchy about Christmas and beyond.