Rainy day blues

Currency markets were rocked this week by a Japanese media report that Russian companies were being asked to restructure their debts to Western banks, prompting concerns of defaults on the $140 billion in corporate debt repayments due this year.
The good news - for Russian banks and their corporate clients - is that the government denied it was planning to restructure $400 billion in corporate debt, and that the report is therefore probably overblown. The debtors (probably) do have enough hard currency on hand to pay down their obligations.
The bad news - for everyone else in Russia - is how they got it.
Ever since the government announced its step-by-step devaluation of the rouble last year, it became a sure-fire, one-way bet against the currency for anyone with the cash to convert.
An inner circle of banks have taken some 3.5 trillion roubles (now worth $100 billion) in uncollaterised loans from the Central Bank. Yet this did not boost rouble liquidity, but simply encouraged the transfer of funds into hard currency.
So far, this losing bet has depleted Russia's reserves to the tune of $200 billion, and comes along with the plummeting oil price and the collapse in stock market values.
In the latest effort to boost rouble liquidity, Prime Minister Vladimir Putin last week ordered another 400 billion roubles to be injected into state banks. He called for those banks to start lending again, but experts are sceptical this will be enough to get the economy growing again.
After all, who would lend in roubles, pay off rouble debts, pay rouble salaries in full and invest roubles into job-creating activities - when you think there's another, simpler way to make money?
And everyone's doing it. Guess what everyone at your workplace is doing on payday - joining the cash lines, so they can convert their "regional reserve currency" into something else.
And this will continue if the Central Bank's latest attempt to draw a line in the sand fails.
The country's GDP will probably fall by 3 to 4 per cent this year, according to Nouriel Roubini, the U.S. economist who was belittled as "Dr. Doom" when he predicted the financial meltdown more than two years ago.
Yet in Davos last month, Roubini was one of the stars of the show - along with Putin, who was making his first appearance at the event.
There, and at a Troika Dialog conference in Moscow a week later, Roubini blamed the Anglo-Saxon model of self-regulated financial markets and credit bubbles for the mess the world is in.
But there's a second elephant in the room in Russia's case -
oil dependence. The country's prosperity has been built on rising oil prices, which swelled the coffers of the government's windfall-tax stabilisation fund - and helped to pay off sovereign debt.
The oil firms who generated those tax roubles then took advantage of Russia's soaring credit rating to soak up some $540 billion in loans with Western banks.
But since oil prices crashed from $140 to $40 per barrel, the tax roubles are drying up - provoking a sharp debate within government about how to revise this year's budget (which was originally based on $95 per barrel).
At the Troika conference, the government official heading the anti-crisis efforts, First Deputy Prime Minister Igor Shuvalov, told investors that budget spending would probably have to be slashed - to bail out the banking system some more. The likely result is even more job losses and economic pain.
Other officials, including Kremlin aide Arkady Dvorkovich, have called for a bailout that would do more to help ordinary Russians. At a conference this week, he called for the oil funds to be used now to fund jobs and social benefits, and invest in infrastructure - even if it entails running a budget deficit of some 8 per cent this year.
After all, if these funds are supposed to be for a rainy day, the time to use them is now. It's been pouring for months already.