Monday, January 12, 2009

T-Formation Redux

Its playoff season for American Football. Most of the remaining teams have similar playbooks. Run the football, play excellent defense, and dominate the other team physically. Perspicacious readers will also note this philosophy translates well to Rugby Union, where my favorite team, the SA Springboks, employ a similar style pejoratively referred to as "subdue and penetrate". It also explains their success despite a relative lack of "talent" compared to the more flashy teams such as the New Zealand All-Blacks.

[For my foreign readers, who find American Football hopelessly complex, a "playbook" is simply a set of instructions given to players to outline their responsibilities and actions during a football play. There is no other sport that requires a textbook size set of instructions, but complexity breeds innovation as very small differentials can be exploited.]

So Football evolves. For example, the "T-Formation", which was employed to great effect by The Chicago Bears in the 1940s (and even features in the Chicago Bear's fight song, still sung today), is now extinct. The forward pass and modern offenses have relegated such run-heavy formations to the scrap heap of history. (Read "The Blind Side" by Michael Lewis for a wonderful exposition on how the free agent market for players reinforced the importance of the forward pass in the NFL)

So on to Russia...

With few policy options available on the fiscal side, devaluing the Ruble (despite persistant claims that Russia would never do such a thing) is an interesting move. We will see continued aggression, either militarily (such as its Georgian expedition) or economically (such as the Ukraine) in order to smooth over this decision. This is what happens when you have former KGB officers running a "democracy". They run their offenses by old playbooks.

Unfortunately for rank and file proletariats in Russia, this means Putin will seek to increase his power using draconian, lack of due process means. These actions also set a worrying precedent for other countries in the region, which will closely observe any Western reaction and adjust their playbooks accordingly.

UPDATE 1-Russia devalues rouble on 1st trading day of 2009
2009-01-11 08:41 (UTC)
MOSCOW, Jan 11 (Reuters)
- Russia started the first trading day of 2009 with another mini-devaluation of the rouble on Sunday, making its 13th such step in two months as the country grapples with low oil prices and the possibility of a recession.

By 0751, the rouble had weakened to 35.30 versus a euro-dollar basket, extending losses of around 17 percent sustained in 2008 and moving beyond the 34.80 mark seen as the previous central bank support level.

An official at the central bank confirmed the rouble's trading band had been widened.

'For the next month or two the trend is clear, the population will continue to buy foreign currency, with everyone buying themselves a small slice of Russia's gold and forex reserves,' said Maxim Oreshkin, analyst at Rosbank.

'The pressure is coming from the real economy.'

On Sunday, the rouble weakened beyond the 30 mark versus the dollar for the first time since late 2003 and held near a record trough versus the euro set at the end of 20088.

The rouble downtrend started in late summer due to rising risk aversion over Russia's brief war with Georgia and fuelled by falling oil prices and broad flight from emerging markets.

Russian companies and citizens, mindful of the 1998 currency collapse, picked up the baton and started converting their money into euros and dollars, thus further pressuring the rouble. In November, retail rouble deposits fell 4 percent.

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