"Dutch Disease" Gets a Monument

Mark this moment, for this is when the real insanity begins.

Unsatisfied with their monolithic fortress of the future, Gazprom has decided that it will erect a 300m steel and glass monstrosity on banks the Neva, in St. Petersburg. Higher than the Eiffel Tower, twice the height as the Peter and Paul Cathedral, and three times higher than St. Isaac’s and Smolny Cathedral, many of the city's residents complain it will "bring irreparable damage to the fragile skyline of the city." Yet, even if Peter's architectural aficionados are up-in-arms, they don't, if you will, have a leg to stand on. Gazprom gets what Gazprom wants. This is an energy state on steroids.

Gazprom's latest fashion accessory is symptomatic of a malicious disease which has wholly consumed the Russian state. We are witnessing "Dutch Disease" in it's most acute, and terminal, manifestation.

This morning, the Russian government reported that it now holds $311 billion dollars in foreign currency reserves. That's $311 billion cash, more than the entire GDP (PPP) of Malaysia, Sweden, or Austria (God bless you CIA factbook). This stratospheric rise in wealth has set off a boom in Russia's construction and luxury goods markets, yet all the while the rest of the economy (unrelated to energy) withers on the vine.

In essence, Russia is all bling, and no substance. It has become the Kevin Federline of world economies. With more money than talent, it doesn't matter that you don't have talent -- at least until the money dries up. And it always dries up.

Yet, all of this lingers far off in the future, when the paint will once again crack and chip on the Winter Palace, the grime will return, and the Gazprom tower -- then empty or struggling for tenants -- will still disfigure the horizon of Russia's magical northern city. The tower will be a lasting monument to the brutal vanity of our time.

(Peter D.)