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“Build a custom one”…

It’s detail is impressive.

Ukraine has been inflicted with political instability ever since its declared independence., It has also been involved in a struggle to adopt a European parliamentary style democracy, something that Yushchenko has been opposed to.

The latest fall in the value of the hrivina does appear to be artificially controlled. The property market has boomed beyond sustainability and reach of the Ukrainian population and average income. A boom bust cycle is unavoidable. Ukraine has only recently been seduced by the accessible level of credit Unlike the 1998 bust it has not had to undergo major bank foreclosures. Banks in Ukraine are highly capital geared and in many cases hold more value in assets then in liquidity. If the loss of confidence and over inflation and devaluation of the hrivina creates a run on the banks some banks might take flight with assets and investments disappearing overnight. Ukraine does not have a strong regulatory enforcement system in place to deal with opportunistic lending practices or asset redemption. It is in effect a tinder box likely to ignite.

What needs to be look at is the comaritive indicators for neighboring states and economies. Ukraine appears to be more worst off then it’s neighbors, which begs the question why? to what extent did the political instability and threat of another round of parliamentary elections fueled the current crisis. It is difficult to see how fresh parliamentary election would resolve, only exacerbate Ukraine’s political instability.

Ukraine needs to rebuild its governing institutions and adopt European standards and system of governance

Most of the problems associated with Political instability are due primarily to the office of the President, According to recent public opinon polls by Viktor Yushchenko maintains 4% of public support. If fresh election are seen as a possible pressure release value then early Presidential elections are the better option. better still would be for Ukraine to adopt a European style parliamentary system of governance bringing it in line with other European states.

Ukraine has foundered under Viktor Yushchenko’s rule. Opportunity lost with effort and time wasted on trivial infighting between the Office of the President and the parliament.

Yushenko has sought to dismiss two parliaments and hold three elections under his termof office.

2007 saw Ukraine embroiled in conflict for nine months, in what was clearly an unconstitutional power grab by the President who further undermined Ukraine’s democratic development by illegally interfering in the independence of Ukraine judiciary.

The President’s attempt to further undermine Ukraine political instability in 2008 has only exacerbated Ukraine’s problems and fueled the loss of confidence.

The reformation of the governing coalition last month has added further concern as to the ineffectiveness of Yushchenko’s role as head of state.

Yushchenko has failed Ukraine.

Yushchenko is unlikely to win a second term of office should have resigned by now and handed over the role of head of state to someone else. The sooner Yushchenko is removed from office the sooner Ukraine hopefully, can begin to rebuild a democratic economy.

Of course replacing Yushchenko will not resolve all of Ukraine’s problems BUT it would go a long way towards reuniting a county that has suffered the negative consequences of his polices of division and destableization.

“2. You keep using “the Ukraine”, should we use “the France”? or “the Japan”?”

Sorry, my mistakes, writing to fast or whatever.

“3. Underground economy is huge……will it mitigate economic collapse?”

Basically no, since for what matters here it doesn’t exist. You can’t bail out a banking system with taxes from the informal economy, since by definition the informal economy doesn’t pay them. Access to the informal economy may help people get through the hard times better, but that is a different issue.

For the economy to be stable they need to incorporate the underground economy into the official one, but during a crisis like this the danger is that things move in the opposite direction.

“4. Will the recovery of global industrial and soft commodities(agricultural) improve the economic situation?”

Of course, especially after the devaluation of the currency. But when will this recovery come? This is the problem. Not quickly and probably not this year (2009). Maybe better to talk about this in January 2010, but there’s a long hard road for Ukraine between now and then.

Don’t worry about disagreeing with me, lots of people do.

“The best example of this is, of course, the black death of 14th century.”

Well look, could we have a more recent example, we are in the middle of a major demographic transition where the age structure of lots of countries is going to change while their populations shrink. I don’t think we need go all thje way back to interpretations of what happend back then (when incidentally population rebound was homestatic – which is the flaw in the Livi Bacci argument, which as it happens you are using, though you may be unaware of it. Since he is a great demographer you are in good company, even if I disagree with the way both of you would use the black death episode).

What I am saying (I think) is that in the BD case you have dramatic population decline in a high fertility enviroment, while what we have here is log term population ageing (I mean no population pyramid in any society has ever looked like our modern ones do, so I think people need to be very careful about arguing from “experience”).

Basically if we look at 6 modern societies, and put them into two groups – Italy, Japan and Germany – on the one hand – the US, the UK and Framce on the other. What we find is that populations in the first group are now stagnating, while in the second group they are still growing relatively robustly. What this means is that the pyramids are inverting more slowly in the second case, and more moderate change is ALWAYS in my book better than the more drastic variety when it comes to processes like this.

Now, when we come to compare GDP per capita between the two groups using Eurostat Purchasing Power Standards (for relative comparisons) we find that GDP PER CAPITA is growing much more strongly in those with a higher percentage of younger people (ie the UK, the US and France) rather then in the older group. I find it perfectly obvious that this should be the case, but many economists seem to have great difficulty coming to grips with all this.

At the present time we can only speak of slower GDP PER Capita growth, but all of this is now only starting. Italy is the first large economy to have GDP skirting the GDP growth zero bound, and realistically we can see GDP shrinkage begining in all three between now and 2020. When GDP contraction turns into GDP per capita contraction I don’t know, there are lots of factors involved, but the theoretical possibility is there. We will only know when it does or doesn’t happen, which should be between 2020 and 2030 as far as I can see.

I may be right, or I may be wrong, we’ll only really know when we get there. But are you happy to take the risk solely on the basis of what you know about the Black Death, since the risk is real, and if we let things degenerate to that point, then realistically for the societies involved there will be no turning back, since systematic melt down gets inbuilt.

But the Ukraine embassy in Riga decided that my sponsor was not good enough and I had to send my passport to the Ukraine embassy in Australia for renewal. Meanwhile my business partner managed to get deals via Russia.

I would like to add that driving through Ukraine discourages investors as the Police are incredibly corrupt with false breathalysers and threats on drug tests.

People are the resource that can save Ukraine economically and Ukrainian people are the cause as to why Ukraine struggles.