If you think about the USSR you likely think about communism, then the USSR was broken up and Russia became a capitalist society. It moved to one that is run by oligarchs, but it is still more capitalist than communist. Vladimir Putin became President and then President for life, and wanted to recreate the USSR again, one of the methods of doing so is to invade other countries. The closest one was the one on the eastern border – Ukraine. The President thought the war was going to be over in 2 weeks and he would do something else in the future. Ukraine fought back, the NATO countries sent arms as well as putting sanctions on Russia. A year later and Russia is still not winning the war, how does President Putin stay in power.

In an article by Anatoly Kurmanaev of the New York Times News Service, Putin has turned towards seemingly communism principles. Russia has immense stores of oil and gas or is an oil and gas economy, when prices rise the treasury benefits. Mr. Putin has poured the country’s sizable financial reserves into expanding military production and giving Russians higher pensions, increased government salaries as well as subsidizing mortgages.

The money has resulted in greater demands for everything, from beach holidays to tank chassis – all of which is fueling inflation. The central bank has raised rates more than expected.

As recently as 3 months ago, Western analysts expected the Russian economy to decline 0.9% according to a survey of 19 investment banks and other research institutions. In July, the projection has changed to 0.7% growth.

Lending has expanded rapidly since the invasion. Corporate loans increased 19% in the year to June according to Russian central bank’s figures.

The combined value of mortgages handed out by Russian’s top 20 banks rose 63% in the first 6 months, according to Dom RF and real estate firm Frank Media. In the first 3 months, one of every 2 new mortgages was subsidized by the state, through various social programs including loans to soldiers.

The impact of public speaking has been particularly pronounced in poorer regions on the periphery of the country that provide the bulk of military production and soldiers. Those soldiers are sending money back home and often the money they send home outstrips average local salaries.

The good news for Russia is because of sanctions, Russian cannot travel far so the money is going back into Russia. Hospitality spending is up 12% according to official reports.

The problem with any spending is that it is not sustainable. Russia’s oil and gas revenues are down and the country’s budget is in deficit. Russian government spending is up 50% according to Gaidar Economic Institute. Energy income is down 50% from the period with no sanctions.

Linking to dividend paying stocks, if a dividend paying stock is not generating a profit to pay the dividend, the dividend will be cut. If a country has less revenues and greater spending, eventually spending will be too much and outside investors will find alternatives. The internal investors try to hide their money for they know at some point the economy will collapse. When it will is a matter of time.

There are more questions than answers, till next time – to raising questions.