Letters to MoneyWeek: We dismiss Russia at our peril

A selection of the best letters to MoneyWeek and their replies.

I would argue that Matthew Lynn has rather understated the power and capabilities of Russia, both as a global power and as a global economy (MoneyWeek 838). Matthew asks: "Have you ever bought a smartphone made in Russia or a car, or a television, or indeed anything at all?" The answer to this may be no, but that doesn't mean Russia doesn't manufacture anything, or doesn't have a global market for its exports.

Russia is a big producer of weapons, many of which are "big ticket" high-tech systems worth hundreds of millions of dollars. China depends on Russia for high-tech weapons, particularly aero engines and fighter aircraft. India too relies upon Russian weapons and is collaborating with Russia in the manufacture of the fifth generation T50 stealth fighter, for which there is likely to be abrisk export market. And don't forget aerospace. Where would the international space station be now without Russian technological assistance and support?


Russia undoubtedly has enormous technological prowess in certain areas, including aerospace and defence as, of course, did its predecessor, the Soviet Union. Your comments on the space station underline this. Only three nations have successfully put people into space and the third, China, depended heavily on Soviet/Russian technology to achieve this. In addition, it remains a major military power. So Russia's importance and influence in the world cannot be ignored.

That said, its economy is narrower than it should be. Russia relies on its abundant natural resources, as Matthew notes in his article. The technological capabilities it enjoys in some sectors have mostly not translated into a broad high-tech economy. This stands in contrast to the US, where research originally done for the military and Nasa has had vast benefits for the private sector. Meanwhile, demographics are dire. Wealth is highly concentrated. And the leadership shows little sign of making serious efforts to address its structural problems. So while Russia remains a global power, it may well be a declining one.

Beware the risks of Bitcoin

Everyone seems to be extolling the virtues of Bitcoin with its impressive increase in value and the anti-establishment options that it seems to present, but Bitcoin is nowhere as secure as cash or gold.

I bought £200 worth of Bitcoin in 2012 and left it sitting in the MtGox Bitcoin exchange while I watched it rise in value to £2,500. Then it all got stolen when MtGox was hacked and declared bankruptcy in 2014. Now everyone, including MoneyWeek, goes on about how every Bitcoin transaction is encrypted into every Bitcoin providing a forensic record, making it secure without bank and government guarantees. Apparently not: my £2,500 worth of Bitcoin disappeared without a trace and I have lost the lot.

A magic 1,000%-plus return in two years means nothing if the whole lot can be stolen without a trace and there is no bank guarantee or insurance to cover your loss. My advice is to stick to traditional forms of investment that are regulated, guaranteed or insured.


Bitcoin has a number of significant problems that stand in the way of its adoption as either a store of value or means of exchange. These include its wildly oscillating exchange rate and disputes over how to resolve technical limitations in recording transactions in the blockchain (see MoneyWeek 838 for a discussion of the proposed "fork" in the Bitcoin protocol arising from this disagreement).

However, your unfortunate experience with MtGox shines a light on one that is not so widely discussed by Bitcoin enthusiasts, probably because it clashes with the cryptocurrency's anti-government roots. There is no regulation of most types of Bitcoin service provider such as exchanges, no statutory compensation scheme to protect users in the event that the service provider collapses and little effective enforcement that can track down stolen or mislaid Bitcoin-based assets and return them to their rightful owners.

MoneyWeek writes about Bitcoin and we consider much of the underlying blockchain technology to be extremely interesting (see our cover story in MoneyWeek 835). However, we have always been sceptical about Bitcoin as an investment although some individual contributors to MoneyWeek have different views and we would echo your advice to stick to more secure forms of investment at this stage.

Britain's booming gold exports

I recently read some information on the internet that stated that gold represented 9.8% of the total exports of the United Kingdom in 2015. Please can you explain why gold is such a large share of our exports? Is this related to bullion trading and central bank reserves, or is it something else? I also checked imports, and gold only amounted to 1.9%. We imported $11.8bn and exported $40.8bn.


These figures may seem hard to believe at first, given that gold mining activity in the UK is negligible. The answer is, as you suggest, due to bullion trading. London is a global centre of gold trading and a great deal of gold bullion is consequently stored in vaults in this country. Shifts in global gold ownership can result in bullion flowing in and out of the country.

In recent years, a great deal of gold has been purchased by buyers in Asia and shipped out of the UK (much of this initially goes to Switzerland to be melted down into smaller bars before being shipped to buyers in China and elsewhere). The size of these flows and the abrupt swings between exports and imports is sufficiently great that some analysts have suggested that they may have distorted recent trade and investment figures and made it harder to determine whether the slump in sterling is boosting Britain's exporters.

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