No Lessons Learned: Next Financial Crisis to be Much Worse with US Dollar Collapse – Peter Schiff

Meanwhile, as the Americas criticize and threaten Venezuela over its financial collapse, the USA itself is very vulnerable to financial meltdown.

© Dado Ruvic / Reuters

A decade after the global financial crisis, the world is facing another crash even bigger than the one in 2008, according to veteran stock broker Peter Schiff, CEO of Euro Pacific Capital.

“The too big to fail banks are now both bigger than ever, and more exposed than ever to rising rates and recession. So the systemic risks to the economy are greater now than they were in 2008,” said Schiff.

Such banks should have been allowed to fail a decade ago, he says. “The moral hazard associated with the government having made the mistake of bailing out banks that should have been allowed to fail. Unfortunately, no lessons were learned from the last crisis. We repeated, and expanded all the mistakes that caused the last crisis, ensuring the next one will be much worse,” he said.

According to the investor, all the problems that caused the 2008 financial crisis loom even larger now. “The even worse monetary and fiscal policy since the last crisis guarantees the next one will be much worse. The crisis will be similar in that government will be the cause, everyone will be caught by surprise, and capitalism will be the scapegoat, but it will be much different in that it will be much worse,” Schiff said.

However, the nature of the next crisis would be different, Schiff predicts. While the 2008 crisis was centered around mortgage debt, dollar rise and gold fall, the new one would be about the US Treasury debt crisis. “Treasury debt will be the focal point of the next crisis, and the dollar will collapse and gold prices will soar. The ensuing recession will be much worse as consumer prices will also rise sharply.”

America's spectacular debt leaves them vulnerable to countries that are not necessarily close friends. Saudi Arabia and China control considerable amounts of American debt. We treat the kingdom very well, but remember who was behind 911 - these people are not our friends. China is being bullied by the US, justifiably, perhaps, but there are also areas of potential serious military and political dispute. China is closer to Russia than it is the USA. What happens if those countries conspire to bring about rapid interest rate increases? Will America follow Venezuela's hyper-inflation pattern? It's a little disconcerting.

In Canada, the Liberal government is spending like a drunken sailor, rapidly increasing the national debt and leaving us far more vulnerable to financial collapse than we need to be. 

West Bank Palestinians Don't Want Statehood - They Want to be Israeli Citizens

What a shocker this is. But it make perfect sense. However, you will never hear this on liberal media.

Ban Ki-moon and Abbas at the Cairo conference to "re-build" Gaza

As the Palestinian president, Abbas, is pursuing a UN Security Council resolution setting “a three-year time limit for Israel to end its occupation of parts of the West Bank, after which it would automatically recognize Palestine as a state.”  This writer visited the West Bank for months, and asked the Palestinians what they thought of Abbas’ statehood bid. As you will see in this report; the Palestinians seem afraid of what Abbas’ state will bring on them, and they sound more concerned with the poor living condition, slow economy and corruption they suffer under the Palestinian Authority (PA). Nonetheless, the Palestinians do not exhibit any love for Israel and are still not reluctant to voice their hatred towards it.

I spoke to a tribal figure from Nablus, and asked him what he thought of Abbas’ quest for statehood, he told me:”This is another bad movie from Abbas, what state? A state of poverty? A police state? This is what the PA brought us since it arrived here”, “Abu Mazen [Abbas] controls some of the West Bank and we are already living a nightmare in those areas, why should we want to expand Abbas’ control to the rest of the West Bank?”, “Before Oslo, we all thought we would have a state instead of occupation, what we got is a state of disaster and a new occupation called the PA”

A businessman from Bethlehem told me: “Abu Mazen went after the statehood to defuse our anger against him and our bad living conditions, he wants something to make him look like a hero, and that is why he is playing this statehood comedy”, “We want a state, but before that we want jobs, food on our tables and running water, these are things Israel secured for us when it was here, and under the PA we cannot even afford the basics of life”, he adds “Take Bethlehem for example, before the PA took over, the Al-Quds street in Bethlehem was a crossway from Israel to Jerusalem, [Israeli] Jews used to travel through it, shop, vacation and invest here, and the city was about the most thriving town in the West Bank, when the PA came, the first thing it did was banning Jews from entering the area and we lost the business that came from them and Bethlehem has been in economic ruins ever since”.

Israeli - West Bank wall

Khaleel is a shop keeper in Jerusalem whose family moved there from Hebron in the 1930s. “I don’t want Jews to take over Jerusalem but it doesn’t means I want Abbas and his men here either”, ‘We are afraid a Palestinian state might mean we will lose our Israeli residency status and become Abbas’ citizens [Israel identifies Arab Jerusalemites as permanent residents of Israel and provides them with full civil rights]… as residents of Israel, we get free healthcare and pensions, if we become citizens of Palestine we will lose all of that”.

Khaleel’s son, a lawyer in training, joined the discussion, he said:”Most of us [Palestinians] here are afraid of PA takeover of Eastern Jerusalem or any part of it, that is why most of us have applied for Israeli citizenship, we are afraid that we could become Palestinian citizens instead of Israel’s residents…we don’t want to lose everything so Abbas could sit in the UN as head of state”

A souvenir shop owner in Jerusalem –who is a Hamas loyalist and a frequent guest on Hamas’ TV Al-Aqsa– told me:”I have applied for an Israeli citizenship myself, Israel gives us many benefits and retirement pensions, I will keep working on saving Al-Aqsa from Jews, but I also have to take care of my family and the future of my kids”.

I asked him why couldn’t he see “the future of his kids” with the Palestinian state Abbas is trying to have recognized through the UN, he said: “Abbas will build a state that serves him not us, I am getting older and I need a pension, Israel could secure that for me, not Abbas!”

An Israeli Knesset Member confirmed to me that the Israeli government witnessed a record increase in the number of citizenship application from Palestinians from Jerusalem after Abbas began seeking the statehood status.

West Bank

A renowned Palestinian journalist spoke to me:”The PA has monopolized the Palestinian cause and turned it into a business, a privately-held company, through which the PLO leadership benefits from, that is why we [Palestinians] are not even interested in Abbas’ talk about the Palestinian statehood status”, “With the Arab Spring, ISIS and the Syrian civil war…Abbas and his men will lose everything if the Palestinian issue is not the main show on the international media, therefore, Abbas went after the statehood to continue getting the global attention and more international aid money and VIP treatment for him and his associates”, “We want Israel to leave the West Bank, but who will replace it?”, “Each and every town Israel has handed to the PA fell into poverty and hopelessness, is this what anyone would want for their children?”,”It is safe to say that most Palestinians are not interested in Abbas’ state, and many of them are in fact afraid of the outcomes of such a state”.

The journalist’s father who joined us for the discussion said:”When Israel took over the West Bank from the Jordanian king in 1967, we were poor and unemployment was a major problem, a year after Israel took over, the economy was thriving and all of us found jobs, this is because Israel is a modern state, with a professional system, now if we replaced Israel’s system with the PA’s administration which made us poor again “,”People [West Bankers] cannot tell you this openly, but God knows they would rather be under Israel than under Abbas”.

S. a Ramallah-based businessman and a native to Hebron told me:”Abbas having a state is like playing house, a state that exists in his own fantasy, but for us, we are concerned that Israel would give Abbas Area C [C areas are West Bank regions that are under full Israeli control, http://www.biu.ac.il/SOC/besa/books/maps.htm] those areas are our normal resorts in the West Bank, if the PA gets those we will have no hope left for us on all aspects”.

I asked him why “he would lose hope if Abbas takes over the rest of the West Bank”, he responded: ”Let’s just do some comparison, before the PA came, cars were cheap and we were able to drive brand new German cars, when the PA came, the first thing they did was imposing 150 percent tariff on each car”, “a car that costs $10,000 in Israel costs more than 25,000 in the PA areas”.”Then they increased all sorts of taxes, we started paying taxes we never heard of under Israel, for example, people pay a special tax for supporting Palestinian refugees abroad, and I have relatives who are refugees in Jordan, I never heard they got anything from the PA, why does the PA take our money and gives us almost zero services?”.

Hebron

An executive of a major Palestinian mobile phone service company told me:”Palestinians in Israeli-controlled areas do not want the PA to take over their lives, nor do they care for the statehood title”, “We don’t want the PA because it has never brought us anything good since it arrived here two decades ago’, “For example, we [Palestinians] used Israeli mobile companies and the rates were very cheap, when the PA came, they imposed a new country code for Palestine instead of the Israeli country code, to ban the Palestinians from using the Israeli network”, “The PA charges premium prices for communications”, “We had a good life under Israel, and we foolishly exchanged for the PA’s poor governance and high taxes”.

I asked him why was he unhappy with the PA monopolization of the communications as it secures him a job, his answer was: ”they pay us nothing, we get a fraction of what our counterparts in Israeli companies get”.

M. a resident of Tulkarem, Northern West Bank, noted that the PA imposed a “departure fee” on travelers leaving from the West Bank to Jordan, each traveler has to pay $50 to the PA, a family of 4 will have to pay $200 just to travel to Jordan, which is a substantial amount of money for West Banker. He told me: ”Israel ran the Palestinians’ departure points with Jordan for almost 50 years and it never imposed any fees, the minute Israel gave the PA the right to oversee the Palestinians leaving to Jordan, the PA imposed this fee”, “What will happen if Israel gives the PA the entire West Bank? We will end up with more trouble and even higher taxes.”

A professor who lectures at a West Bank university told me: ”Abbas and his administration could be the only people interested in the statehood, most Palestinians couldn’t care less about that” I asked him why, he replied “I could draw a comparison between the Palestinians today and the Russians when the USSR began to collapse, the Soviets were taught to hate the West and capitalism for decades and all of a sudden they discovered that communism and the USSR is not what they wanted… in the same way we were brought up to hate Jews and to seek to liberate Palestine, and now we found out that a liberated Palestine is not in our best interest; as each and every one of liberated Palestinian towns has fallen into misery and trouble, if that is liberation, I would rather be under occupation”.

Another Palestinian Western-educated professor told me: ”We thought the PA would be the messiah, it turned out to be a monkey in the middle, complicating our daily lives, making our livelihoods difficult and causing both, the Israelis and us, more trouble”, “The only achievement the PA has brought was enriching its own leaders… while our people keep getting poorer by the day, and now Abbas wants a state; I can say on behalf of all people here in the West Bank that we do want a state but not under Abbas nor under the PA” He then adds: ”I would rather be under a fair and logical enemy like Israel instead of dictatorial and thuggish friend like the PA”.

Mohammad, a shopkeeper in the small town of Batonia, near Ramallah, told me:” before the PA came, we were able to go everywhere in Israel, we could drive to Tel Aviv, we spent vacations in the North [of Israel], and we swam in Eilat’s sea [Southern Israel], now we just have boundaries upon boundaries and a Palestinian state does not mean we will have those boundaries removed, but rather enforced on us”

I spoke to a female professor at a major Palestinian university and she told me: ”This is our homeland, we will never recognize Israel, and yes we want a Palestinian state, but what state?”,”If the Palestinian state is an expansion of what Abbas’ cronies are doing to us, then we should pick up arms and fight against that state”, “Such a state would mean a gang becoming state, what do you think the PA is? the PA is just a Mafioso-like organization which is controlling the Palestinians’ lives”, “An occupation is much better than a dictatorship, at least you would call an occupier an occupier, while the PA is state is a thug-regime claiming to be our liberators”.

O., a Palestinian Christian, told me:”I used to be an active member of the PLO until the PA arrived here and I saw how badly they treat the people, now I am against the PA, against the PLO and against a Palestinian state”, “Under the PA our people became poor and have lost everything”, “Ask any Palestinian here would they rather be under Israel’s rule or the PA’s rule?”,”We have had enough of this big lie called liberation, I will hate Israel until I die, but I cannot trust any other option as they are all bad: the PA, Hamas, and who knows maybe even ISIS soon!” He adds “We thought we could have a Palestinian state and enjoy Israeli benefits and thriving economy at the same time, what we ended up with is a neither a state nor an occupation, the PA acts like an occupation, like a gang and collects our taxes and leaves nothing for the people, and now they are talking about a state? No thanks”.

A known West Bank feminist and activist told me: ”Things are better under Israel, what we Palestinians have today is a literal example of ‘be careful what you wish for, you might have it’; we wanted Israel out and we got that and the PA destroyed our lives and now many wish Israel would come back, but none dares to say it openly”, I asked her why is that, she said: “The PA would imprison anyone who criticizes it, at least we had democracy when Israel was here”.

I spoke to M., a resident of a Bedouin town in area C, [which is under Israel's control], he said:  ”God forbid that the PA comes here”, “We don’t want to be under the PA”, “Most of the residents of this town work in the transportation industry, we buy cheap vans from Israel and operate them using the Israeli license plates, if the PA comes it will impose a 150% tariff on our cars which is close to 200% per van”, “also, the PA’s police will be issuing us tickets left and right like they do in the areas they control, we also will lose the Israeli water supply and we will be like PA areas where they have no running water and have to buy it from private suppliers.”

I asked a private water distributor why there wasn’t a constant water supply to PA-controlled cities in West Bank, he replied: ”There is enough water reserves in the West Bank, but since Israel pulled out from most Palestinian cities; the PA has been poorly-managing our water and as a result we are always thirsty”, “If the PA takes over more towns we will become more thirsty’, “I hate Israel but I don’t want to die of hunger and thirst so PA becomes the Palestinian State and takes more areas”.

I spoke to a public figure from Jineen, Northern West Bank, he told me: “We never knew this corrupt, thuggish and ridiculous PA was in our future, I am in my sixties and I have lived under the Jordanians, the Israelis and the PA, and the Israelis were the most decent of them all”, “I am not saying I miss Israel, I am just saying we lived as normal human beings only under Israel”, “Abbas’ state-dreams mean nothing to us, he is doing this because he needs a new arrangement to keep him in power and he wants that under international blessing, that is why he wants a UN recognition of state”, “His state is going to mean more unemployment and poverty for us, I say to him may God rewards you for your kindness Abbas but we do not need your state”.

A tribal figure from Hebron told me: ”Before the PA, we used to work in Israel and in the Israeli settlements, now our sons cannot find work, and the PA bans them from working at Israeli settlements, all at the same time PA officials are dining and wining in Tel Aviv, even Abbas’ wife received treatment in an Israeli hospital at the helm of the Gaza war”, “The PA wants to be the sole agent and the only medium of connecting us to Israel and the rest of the world, so we become prisoners in a cage to which the PA holds the key”, “To summarize things in two lines: under Israel we were praying to God to have mercy on us and we did not realize that we were already living in mercy until Israel left and the PA came here”.

Jewish settlement - West Bank

I spoke to a field officer from the Palestinian electricity company, he said: “Israel still picks up the tab of most of our electricity consumption, we never pay the full bill and in many cases we do not pay them anything at all” for example “At the refugee camps, like Aida refugee camp in Bethlehem and other places, the locals do not receive any power bill, and Israel picks most of the tab, in addition Israel paid the power bill of several Palestinian towns before handing them over to the PA, I do not care for politics but I am not sure how will Abbas pay for all of our electricity consumption if Israel leaves the West Bank and gives us a state”. He adds:”Also, Israeli power plants generate our electricity, so we are basically working as a distributor of Israeli electricity which just increases the cost to the end consumer [the Palestinians]; if we become a state, how will we generate our electricity without Israel?”

Even the internet is expensive in the Palestinian areas. W. is an internet cafe owner in Ramallah, he told me: “The Internet service in our areas costs almost double the price of that in Israel at half the speed”, ” I know the internet service we have is basically an extension of the Israeli internet and communications services, if the Palestinian internet companies would leave us alone, we would buy the internet service from Israel directly, but they have a monopoly from the PA and they treat us as their slaves, charging us high prices and providing us bad service”.

W.’s brother commented “Be it internet, electricity, water, food or anything else we had it better off under Israel and we miss the days Israel was here, but we cannot say this loudly or we will go to jail or be called traitors”.

I went to Hebron, which is considered the Hamas-garrison in the West Bank. I arrived there in August -while Israel’s operation Protective Edge was ongoing- with daily confrontations between the locals and the IDF. The situation was so tense and it was very difficult to get people to talk. Through personal connections and acquaintances, I was able to eventually speak to some people.

A successful industrialist who exports his products to the Israeli market told me: ”Hebron is the business and industry hub of the West Bank, our community has never been interested in politics until recently when the PA’s corruption made us lose hope and disrupted our businesses and jobs”, “Our young men can no longer find work like before, and Hamas offers them money in exchange of loyalty.”, “Hamas pays money to our young men to throw rocks at Israeli soldiers and settlers which disturbs our security and hurts our economy even further”, “Since the beginning of the Gaza war our city has been under an economic stalemate, Hamas pays our young men up to NIS 2500 ($600) per month to cause trouble,”, “Most residents of Hebron would like for this to end and this could never end while the PA is in existence and I warn the Americans and the Israelis that if you keep the situation as is or give Abbas more power; trouble will increase because Abbas is a part of the problem”, “The US and Israel have to think of a solution, the situation is a time bomb that will hurt all of us”.

I visited a major refugee camp at a very tense time: operation Protective Edge was at the helm and on the very same evening I entered the camp, the IDF arrested a Hamas member who was hiding there.

I spoke to a leading figure there, he told me: ”The PA controls our income and gambles with our fate and they are no better than Hamas”, “If you ask me, the only reason we are not in a bad situation like those in Gaza is because Israel still has some control over the PA, if the PA gets its own way, we will be much worse off”, “We know now the PA was a mistake for all of us, and we yearn to the old days [under Israel]”

I asked him:”If that is the case, how come anti-Israeli graffiti is all over the walls of Aida refugee camp?”. He replied to me: ”People will always hate Israel, this will not change, but the younger generation has been brainwashed into deeper hatred for Jews by the PA’s TV, in fact, our children and grandchildren are more hateful of Israel than we have ever been, nonetheless, those young men are not willing to die in order to fight Israel, that is why there were not any serious anti-Israeli protests here in the West Bank during this [Gaza] war; people want to make a living; the young men posting anti-Israeli slogans would do anything to find a job in Israel or inside the settlements”.

K is a laborer from a small town in the West Bank, he said: “I have been working legally inside Israel for almost a year and made good money; I was able to buy a house, pay for my wedding and buy a small car”, “Now my work permit is about to expire and I am not sure Israel will renew it for me and I don’t know what will I do then”,” I’m working in Israel during this war in Gaza and I was thinking: we [the Palestinians] seek to work in Israel, import goods from Israel and at the same time we pray to God that He destroys Israel! This does not add up? What are we seeking? A Palestinian state run by the nasty PA bunch?”.

The man’s father joined the discussion: ”I served with the Israeli civil administration of the West Bank before Oslo as a public servant”.”Life was good, pay was great and our Israeli bosses were polite”, “They managed the land well, they provided to everyone and they took care of us despite us being openly anti-Israel”, “They used to take us on trips and vacations inside Israel, they gave us bonuses and they gave us generous loans, the minute the PA arrived they stripped us from all of our benefits and almost halved our salaries”.

B is a businessman and a public figure: ”We replaced Israel’s democratic westernized system with an ancient tribal system we call the PA”, “We would not want the PA to take over any further towns”, “Before the PA used to do business across the country, we were free to go everywhere”, “I even knew Sharon [late Israeli Prime Minister] personally and I used to buy sheep from him, he treated me fairly and he never used his position against me, the PA officials blackmail me and extort me, and unless you pay them bribes they would shut down your business, I say this publicly, I wish we were under Israel’s occupation and I do not want a Palestinian state under the PA criminals”.

A Palestinian journalist who writes for a known Palestinian news website, told me: ”No Palestinians really care for Abbas quest for a state, this is nothing on their table, and nor are they even interested in this”, “People in the West Bank are very anti-Israel, but they hate the PA just as much as they hate Israel”.

E is a Christian lawyer from Beit Allah, he said: “The PA is worst thing that has ever happened to Palestinians and especially us Christians, the PA destroyed our livelihoods and we are neither impressed by, nor interested in, the PA becoming a state,”, “In fact we are afraid of a Palestinian state for two reasons: the first; a Palestinian state means more Palestinian towns under Abbas, which is a spreading of misery.”, “The second reason is the fact that Israel could boycott the new state just like Gaza, because Abbas is breaking the Oslo agreement by unilaterally seeking the statehood, and we do not want to be in the Gaza scenario”.

Russia's Collapse in 5 Stats

After a stunning currency collapse, Russia is now fully in the grips of an economic crisis. How deep is the chaos? Here are five stats that put Russia’s woes in context.

Ruble Riot

Russia’s currency entered free fall this week, hitting a record low of 80 rubles to the dollar today before recovering slightly. The ruble has lost over half its value this year, making it the worst-performing currency among the 170 tracked by Bloomberg. Passed on the way down: the Ukranian hryvnia.

Recession Looming

Russia's economy has been slowing for some time, and is now poised to fall into recession. In early December, Russia's economy ministry was forced to revise its estimate of 1.2 percent growth for 2015 down to a 0.8 percent contraction. Since then, oil—which makes up 50 percent of government revenue—has continued to slide, falling below $60 this week. Russia's central bank warns of a contraction of 4.7 percent in 2015 if oil prices stay at that level on average.

Surging Borrowing Costs

The economic chaos is making it significantly more expensive for Moscow to borrow money. Dollar-denominated bond yields rose above 7.5 percent, meaning the cost of international borrowing for Russia is now higher than Rwanda, the Ivory Coast and Kenya, according to the FT. Russia's 10-year local bond yield, the interest rate the government has to pay to borrow, jumped more than 2 percent to 15.36 percent.

Brain Drain

In addition to money, Russia is bleeding talent, as ordinary Russians vote with their feet. In the first eight months of this year, Bloomberg reports, more than 200,000 people left Russia—more than any full year since Vladimir Putin took control.

Capital Flight

Russia is watching money head for the exits too. Capital outflows for 2014 are estimated at $134 billion, according to the Financial Times. 2015 is likely to see a similar exodus, with the Central Bank yesterday forecasting $120 billion in departing capital.

What Does It Mean?

So far, economic chaos hasn't dented the popularity of Russian's president. Putin won “man of the year” this week for the 15th year running in a Russian poll. His aggressive foreign policy has only strengthened his domestic political standing. Russia's currency collapse is bad news for Russians, but for the rest of the world, the problem is more geopolitical than economic.

Ian Bremmer is president of Eurasia Group and global research professor at New York University. You can follow him on Twitter, Facebook and LinkedIn.



Sanctions and low oil prices are responsible for this crisis. The question is, how will Mr. Putin respond to the intense pressure from the west and Saudi Arabia? I have no idea, but whatever he does, it will probably be unexpected.

Meanwhile, Mr. Putin still has his admirers

Putin Rallies Russians for Hard Times By Invoking 'Old School' KGB Paranoia

'It's us against the world', 'the whole world wants to destroy us', 'the west is always plotting against us'. These are the attitudes that the tiny branch of Soviet military, Cheka, used to build itself into the KGB, the world's biggest spy agency - spying all over the world and especially within the Soviet Union. 

Vladimir Putin
was a KGB agent

They feasted on the paranoia of Lenin and Stalin to build it's enormous empire. Formed in Dec 1917, for the purpose of rooting out all counter-revolutionaries, identifying them, interrogating them, sometimes executing them. By 1922, when Cheka was reorganized into the NKVD, their internal security branch exceeded 200,000 personnel. From there it continued to flourish under the severe paranoia of Joseph Stalin.

Vladimir Putin was a KGB agent in the 1980s. Whether he is still brainwashed into thinking the world is out to get him, or whether he is deliberately choosing to use what worked before for 73 years, is anybody's guess.

President Putin: "The times we are facing are hard and difficult"

President Vladimir Putin has warned Russians of hard times ahead and urged self-reliance, in his annual state-of-the nation address to parliament.

Russia has been hit hard by falling oil prices and by Western sanctions imposed in response to its interventions in the crisis in neighbouring Ukraine.

The rouble, once a symbol of stability under Mr Putin, suffered its biggest one-day decline since 1998 on Monday.

The government has warned that Russia will fall into recession next year.

Speaking to both chambers in the Kremlin, Mr Putin also accused Western governments of seeking to raise a new "iron curtain" around Russia.

He expressed no regrets for annexing Ukraine's Crimea peninsula, saying the territory had a "sacred meaning" for Russia.

A Ukrainian soldier fires a cannon close to Donetsk airport, 2 December

He insisted the "tragedy" in Ukraine's south-east had proved that Russian policy had been right but said Russia would respect its neighbour as a brotherly country.

Speaking in Basel in Switzerland later, US Secretary of State John Kerry said the West did not seek confrontation with Russia.

"No-one gains from this confrontation... It is not our design or desire that we see a Russia isolated through its own actions," Mr Kerry said.

Russia could rebuild trust, he said, by withdrawing support for separatists in eastern Ukraine.

Analysis: BBC's Sarah Rainsford in Moscow

The final draft of Vladimir Putin's annual speech is written by the president himself. It is his view of the state of the Russian nation and outlines his priorities for the year ahead.

So it's telling that Mr Putin chose to stress his unwavering hard line on the crisis in Ukraine: what happened in Kiev was an "illegal coup" and Crimea, which Russia annexed, is like "holy land" for Russia and will always be treated that way.

Vladimir Putin again accused the West of meddling in Russia's internal affairs and using sanctions to "contain" the country as it grew stronger and more independent. His response was a rallying-cry to Russians to pull together for the good of their country.

That included a remarkable call for a one-off amnesty on the return of Russian capital stashed offshore. But people here are starting to feel the economic consequences of their president's defiance, through sanctions. For those who are worried, this speech probably offered little reassurance.

Mr Putin's speech came amid continued volatility in the value of the rouble.

The currency slid almost 9% against the dollar on Monday, before rallying after a suspected central bank intervention.

But on Thursday it weakened again as Mr Putin's speech failed to impress investors. At 14:30 GMT it was 1.6% lower on the day against the dollar.

"Not seeing any new big ideas in this speech which are going to help the Russian economy, or ease market pressure on Russian assets," Standard Bank analyst Tim Ash said in a note. "This is old school, Cold War stuff."

Crosses are reflected in the window of a bureau de change in Moscow, 4 Dec.

Over the past year, the rouble has lost around 40% of its value against the dollar and inflation is expected to reach 10% early next year.

Russians are believed to have taken more than $100bn (£64bn; €81bn) out of the country this year and Mr Putin promised an amnesty for anyone choosing to bring their money back.

He said that they would face no questions over how they had earned it.  That should keep him popular with his Oligarch buddies, for awhile.

Other economic measures Mr Putin outlined included:

A four-year freeze on tax rates to help businesses
A drive by the central bank and government to combat "speculators"
Lending by the National Welfare Fund on favourable terms to major banks.

A woman irons clothes as Vladimir Putin speaks on a TV screen in Moscow

Sanction 'stimulus'
Falling oil prices have affected Russia because of the country's reliance on energy exports. Russia's estimate of the cost of sanctions and falling oil prices is $140bn a year.

Mr Putin foresaw budget cuts of at least 5% over the next three years but hoped to see a return to above-average economic growth within "three to four years".

A Moscow street shows exchange rates, 3 December
President Putin was once admired for keeping the rouble rate stable

Stressing that Russia remained "open for the world", Mr Putin suggested Western sanctions should be seen as a stimulus.

"We have a huge internal market and resources... capable, intelligent people," he said. "Our people have demonstrated national strength, patriotism - and the difficulties we are facing create new opportunities".

Russian marines at a parade in Crimea last week

Condemning the "pure cynicism" of the West, he suggested that even if Crimea had not been annexed, the West would have come up with a different pretext to impose sanctions to contain Russia's resurgence. Russia's greatest resurgence is in paranoia.

Russia, he said, would not enter an "expensive arms race" but would provide its own security.

Mr Putin said: "There is no doubt they would have loved to see the Yugoslavia scenario of collapse and dismemberment for us - with all the tragic consequences it would have for the peoples of Russia. This has not happened. We did not allow it."

President Putin remains popular, the BBC's Steve Rosenberg reports. One opinion poll this week suggested that 72% of Russians still approved of the way he was running the country. Give them 6 months or a year with a rapidly declining economy and they will turn on Putin. That's why he's trying to deflect the issue. Will he be willing to abandon his expansionist dream for the good of the Russian economy. We'll see.

China's Out-of-Control Construction Industry Defies all Logic and Sanity

The Ordos Shopping Mall sits empty, much like the rest of the city that surrounds it.

China's ghost cities aren't going away. Even as Beijing wants local governments to move away from GDP targeting and is more focused on developing social housing, wasteful construction still plagues China.

A report from CLSA's Nicole Wong, cited by The Wall Street Journal, found that the problem lies in the excess supply in China's third-tier cities. Vacancy rates for homes constructed in the past five years stand at 15% but are projected to rise over 20% in 2016-17, according to Wong. The very concept of vacant homes in China is barely fathomable for me.

Rob Schmitz, China correspondent for Marketplace/American Public Media, recently ran a story titled "China's economic boom leaves a trail of ghost cities." We reached out to Schmitz to get an update on Kangbashi and Yujiapu.

Here is an excerpt from our email interview with Schmitz:

Business Insider: How has Ordos changed now from when it first started making headlines a few years ago?

Rob Schmitz: I first visited Ordos in October 2010, the same year many other Western journalists had reported on the city. When I returned this year, there were a lot of interesting differences. Back in 2010, the few people who lived there seemed defensive about the Western media labeling the place a ghost city. This time, everyone I spoke to had come to an acceptance that Kangbashi (the proposed new city of Ordos) was most likely going to remain mostly vacant, and many seemed OK with that.  

Empty street in front of vacant residential complex in the city of Kangbashi, Ordos.

I spoke to one of the largest developers while I was there and he told me that Kangbashi had a population density similar more to a city in Canada or the U.S. than of a city in China, and he thought this was a draw for the city. But my conversations with folks didn't confirm this. I've never seen a city of similar physical size in Canada nor in the U.S. as empty as Kangbashi is today, and most of the people I spoke to during my latest visit didn't seem very happy to be living in a place where most of the buildings were empty.

Another big difference between this time and last was that the Ordos government has moved its headquarters to Kangbashi, so there are more people there during the day around the city's civic center. That said, the government of Ordos has actually increased the size of the city since 2010 by building more skyscrapers and infrastructure including a park with a large lake, three sports stadiums, and a skyscraper office park on the banks of the lake which are under construction.

I walked through a development of more than a dozen 20-story high-rises built adjacent to this office park, and there were no signs of life. The same developer I mentioned above also expressed concern over the fate of three gigantic sports stadiums built specifically for China's 'Ethnic Minority Traditional Sports Games' of 2015 outside of Kangbashi. It was surprising that after being admonished by China's own state-run press, Ordos' government has continued to build at the same rate as it had done before.

Ordos is a province in north-central China, in Inner Mongolia, about 500 km west of Beijing.

Ordos has issued a construction ban to halt any further wasteful projects,
scheduled to go into effect in three years. Before then, the government is
spending hundreds of millions of dollars on three gigantic
sports stadiums for the 2015 Chinese Ethnic Games.

The last difference from last time is that real estate prices in Kangbashi have plummeted since my visit in 2010, and I met dozens of migrant workers who were renting vacant office spaces as apartments for as low as $65 a month. These spaces weren't built to house people, but one office building I visited was full of migrant workers at night, living in windowless office spaces and using an office bathroom down the hall to bathe.

I also visited a government office in charge of mediating disputes between shadow bankers and those who couldn't afford to repay their loans. This is a very big problem in Ordos, as most businesses there would never qualify for a loan from a state bank, and now that the local economy is doing so poorly, many businesses have gone bankrupt. The office was in charge of repossessing whatever assets they could get from those who owed money. Their storage room was full of refrigerators, flat-screen TVs, and shelves full of dozens of bottles of high-priced Baijiu (Rice Wine) which they had seized.

BI: Do the people that you meet in these ghost cities have any plans of returning to their hometowns or are they optimistic?

RS: Many have already returned home. Those who are left are looking to make a little money and then leave when the economy finally fizzles out for good. Keep in mind that nearly twenty miles away from Kangbashi (the largely empty city) is Dongsheng, which is known as the old city, and actually has a functioning economy and population, so many people are watching this unfold from there.

Construction work on Yujiapu, planned to be
"the financial capital of the world,"
has been largely put on hold
(above is an artist's conception)

BI: Some, like Stephen Roach, have argued that these ghost cities can be explained away as part of China's urbanization plan. In your experience, does this add up?

RS: Perhaps some of them can, but for the most part, I don't agree with this statement. While it is true that some cities are filling up – the outskirts of Zhengzhou, which the TV program "60 Minutes" profiled a couple of years ago as a ghost town is a good example of a city that has defied early criticisms – other cities like Ordos do not fit neatly into China's urbanization plan.

Roach uses the Pudong district of Shanghai as an example of a place that was built, stood empty for a while, and then filled up, the message being other empty cities like Ordos just need time. It's important to remember that 1. Pudong was built in the 1990s, before China had even entered the WTO and was on the cusp of more than a decade of double-digit GDP growth. China's economy today is very different. It's slowing down and China's economic planners are taking the first steps to rebalance the economy from one built on investment-led growth to one built on consumer growth. That's not an easy transition to make, especially for an economy of this size, and it's going to require years of slower economic growth. 2. Pudong is in Shanghai, which is strategically located and is home to one of the world's largest ports. Ordos is in the middle of the desert and is running out of groundwater. If it's running out of groundwater while it sits largely empty, how could it survive if suddenly full?

If all of these ghost cities and ghost suburbs were part of a master plan hatched in Beijing by the central government, I'd imagine we'd see more affordable housing, as that's what is needed in China. Instead, most of the housing that's been built in these empty districts are luxury condos and villas. I have a hard time believing people will eventually move into these empty complexes in the next five years, especially in the scenario of a cooling economy. The other thing to keep in mind is that many of this new housing isn't built well, and it's hard to imagine them retaining their value over the time it may take for China's economy to return to its glory days. I think another danger is that once housing prices begin to plummet – which we are already seeing initial signs of in second tier cities in China – it'll devastate the financial stability of cities like Ordos. 

I think it's important to remember, too, that the ghost city phenomenon in China is partially due to how local governments are forced to finance themselves. Local governments in China are in a perpetual cash squeeze because they have to hand over a bulk of their tax revenue to the central government and because the central government often orders localities to build all sorts of infrastructure projects but Beijing often neglects to help with funding. Because the Party owns all of the land in China, local governments solve their funding problems by seizing land from their poorest residents, giving them a paltry sum in return, and then they sell the land to developers, essentially flipping real estate on a massive scale. Of course this has the added benefit of raising GDP figures, increasing the chance that local leaders will be promoted within the Party.

BI: Do you see more Chinese ghost cities propping up? Is it possible that some ghost cities are worse than others?

RS: I think each ghost city/ghost suburb should be treated differently – each of them has its own unique background and circumstances. Some of them will survive – we've already seen that happen in places like Zhengzhou and even in some of the exurbs of Shanghai that have filled out – but many won't. I was talking with Arthur Kroeber at GK Dragonomics a couple of months ago, in my mind one of the best experts on China's economy, and he was telling me about the city of Guiyang and how the province it belongs to, Guizhou, has an 80% debt-to-GDP ratio, which is incredibly dangerous. 

Arthur's usually pretty bullish on China's prospects, but he threw his optimism out the window when talking about the empty suburbs of that city, where hundreds of thousands of apartments sit, empty, while the largely mountainous province continues to plod along as one of China's poorest. The FT's (moving to The Economist soon) Simon Rabinovitch did a great story about all of Guiyang's empty housing, and what's happened there looks pretty scary. 

I think whether we see more ghost cities popping up depends on whether the central government is serious about promises to overhaul the GDP-based local official evaluation system and the way that local governments finance themselves.

BI: What's the most bizarre experience you've had in China's ghost cities?

RS: My first morning in Kangbashi, I woke up and walked through the empty hotel lobby to take a look outside onto the public square. There wasn't a soul in sight, and the first birds of spring were singing outside. The only other sound was Muzak pumping through the speakers from the hotel. As I looked around for any signs of life, I suddenly recognized the song. It was a Chinese version of Simon and Garfunkel's "Sound of Silence" played with a Chinese erhu.

China's most famous ghost cities

America Could Become a Third-World Country Overnight - Dr Ben Carson

Dr. Ben Carson is quite possibly going to be the next President of the United States. A brilliant neurosurgeon and one of the best conservative thinkers of the day, he lays out how easily America could collapse and turn to internal chaos.

Unfortunately, the panelists at this meeting seemed more interested in gun rights than in the possible complete collapse of the American economy.

On Monday at The New York Meeting, Dr. Ben Carson said he does not believe in gun registration because America's massive debt could transform the nation into a third-world country in which martial law may be imposed.

Dr Ben Carson

Carson, the retired neurosurgeon who has been getting buzz in conservative circles, said that he changed his mind and was against gun registration because of the "sinister internal forces" that could surface in that scenario. He said he "used to think they needed to be registered, but if you register them they just come and find you and take your guns." A politically expedient 'change of mind' for an ambitious Republican.

"If we were only concerned about external forces, then we would be okay," he said. "But there are some pretty sinister internal forces."

He then asked the audience to think about a scenario in which countries around the world drop the dollar as their reserve currency.

"We have a national debt that is so high, and it's being raised even higher," he said. "Now, the only reason we can do that is because we are the reserve currency for the world. What if that changes?"

Carson mentioned that Russian President Vladimir Putin threatened to "remove America as our reserve currency" if America imposed economic sanctions. This ought to scare the heck out of a lot of people; the US for one, but also China, Saudi Arabia, and all the other countries to which the US is heavily indebted.

"What if other people come along?" Carson asked, saying China and the U.N have mentioned doing the same. This has been discussed for a few years now. It would cost China a bundle if the American dollar were dramatically devalued, but it might be worth it, particularly should any military issues erupt between the two countries.

Just today, RT (Russia Today) announced that VTB, Russia’s second biggest lender, has signed a deal with Bank of China, which includes an agreement to pay each other in domestic currencies.

“Under the agreement, the banks plan to develop their partnership in a number of areas, including cooperation on ruble and renminbi settlements, investment banking, inter-bank lending, trade finance and capital-markets transactions,” says the official VTB statement.

The Renmindi is another name for the Yuan. I think I like Yuan better. But is this a signal from Putin that he is serious about removing America as reserve currency? It is certainly not beyond him to do something like that. And what would be the consequence?

"We would become a third-world nation overnight. Occupy Wall Street would be a walk in the park". 

"And all of a sudden, the things that would be going on in this country which would necessitate marital law... all this could happen very rapidly. We should be really concerned."

The Wall Street Journal's James Taranto mentioned previous comments of Carson's in which he gave an urban/rural distinction on gun rights. Carson had suggested that he would not want a crazy person to have a chance to get a semiautomatic rifle in high-density urban areas, while not having a problem with someone living alone in the countryside with those guns.

"Do you think the Supreme Court was wrong when it found that the Second Amendment guarantees the right to keep arms in Washington, D.C., and Chicago?" Taranto asked.

"I truly believe in Second Amendment rights," Carson said. "I would never advocate anything to interfere with Second Amendment rights; however, I do think we have to be intelligent." Remember, the NRA is reading this, Dr Carson.

He said his point in saying that was to address situations--like in Detroit--where people with AK-47s are mowing people down.

"We need to engage in a discussion about, 'Is there something we can do?'" Carson said before saying that "we have to keep in mind that law-abiding American citizens absolutely should have gun rights."

The New York Meeting is a monthly event run by Mallory Factor and O’Brien Murray. Panelists included Taranto, Peggy Noonan, and Sirius XM radio host and Breitbart contributor David Webb.