Russian Economy General News: #4

BTW guize Brent is at 67 USD (with a dollar 20% stronger than a year ago). Russian budget calculated on USD 50 basis and 10% lower USD.

As one Russian poster said it on MP.net...L.O.L. Sanctions.

Yuan broked into top 5 most used currencies about a month ago . yuan rose quite quickly but still Euro , Dollar , Pound and Yen are ahead of it . But Yuan will beat Yean by 2020 .

Reporting quite late

Central Bank lowers key interest rate to boost economy:

http://tass.ru/en/economy/792714

TheArmenian wrote:Central Bank lowers key interest rate to boost economy:

http://tass.ru/en/economy/792714

That's way too timid a move. It should have gone down back to 10.5%. There is no chance for any inflation surge.
The way that the inflation shock dissipated by March is rather shocking. It indicates that there is no actual basis
for inflation growth in the Russian economy. If there was it would be self-amplifying and propagating into next
year instead of being totally evanescent. The CBR interest rate policy cannot claim credit. In no other country
has playing with the interest rates resulted in inflation spikes disappearing in a matter of weeks if inflation growth
conditions existed in the economy.

The monetarist brain rot still afflicts Russian government finance thinking.

kvs wrote:

TheArmenian wrote:Central Bank lowers key interest rate to boost economy:

http://tass.ru/en/economy/792714

That's way too timid a move.  It should have gone down back to 10.5%.  There is no chance for any inflation surge.  
The way that the inflation shock dissipated by March is rather shocking.   It indicates that there is no actual basis
for inflation growth in the Russian economy.  If there was it would be self-amplifying and propagating into next
year instead of being totally evanescent.    The CBR interest rate policy cannot claim credit.   In no other country
has playing with the interest rates resulted in inflation spikes disappearing in a matter of weeks if inflation growth
conditions existed in the economy.  

The monetarist brain rot still afflicts Russian government finance thinking.  

The 17% interest rate did it's job at stopping the speculators in their tracks and stabilised the ruble. I doubt whether that could've been achieved without it. Maybe they didn't have to raise them that much....but that's a moot point now

Cyberspec wrote:

kvs wrote:

TheArmenian wrote:Central Bank lowers key interest rate to boost economy:

http://tass.ru/en/economy/792714

That's way too timid a move.  It should have gone down back to 10.5%.  There is no chance for any inflation surge.  
The way that the inflation shock dissipated by March is rather shocking.   It indicates that there is no actual basis
for inflation growth in the Russian economy.  If there was it would be self-amplifying and propagating into next
year instead of being totally evanescent.    The CBR interest rate policy cannot claim credit.   In no other country
has playing with the interest rates resulted in inflation spikes disappearing in a matter of weeks if inflation growth
conditions existed in the economy.  

The monetarist brain rot still afflicts Russian government finance thinking.  

The 17% interest rate did it's job at stopping the speculators in their tracks and stabilised the ruble. I doubt whether that could've been achieved without it. Maybe they didn't have to raise them that much....but that's a moot point now

Actually what stopped the speculators was that the CBR fully floated the ruble. Once no intervention in the form of money was
forthcoming from the CBR, the speculators lost interest. The magic of the invisible hand of the free market at work

But the 17% interbank overnight rate hike did dampen Russian bank hysteria. More then half the problem is the paranoia
of the domestic financial industry and Russian consumers. The foreign speculators, e.g. Soros, are the catalyst. This
paranoia is what Washington was banking on. The CBR did do a good job in quashing it.

One of the key differences this time around was that transferring rubles into dollars became much harder for the Russian
public. So the reflex hoarding of dollars and dumping of rubles was stymied.

kvs wrote:

Cyberspec wrote:

kvs wrote:

TheArmenian wrote:Central Bank lowers key interest rate to boost economy:

http://tass.ru/en/economy/792714

That's way too timid a move.  It should have gone down back to 10.5%.  There is no chance for any inflation surge.  
The way that the inflation shock dissipated by March is rather shocking.   It indicates that there is no actual basis
for inflation growth in the Russian economy.  If there was it would be self-amplifying and propagating into next
year instead of being totally evanescent.    The CBR interest rate policy cannot claim credit.   In no other country
has playing with the interest rates resulted in inflation spikes disappearing in a matter of weeks if inflation growth
conditions existed in the economy.  

The monetarist brain rot still afflicts Russian government finance thinking.  

The 17% interest rate did it's job at stopping the speculators in their tracks and stabilised the ruble. I doubt whether that could've been achieved without it. Maybe they didn't have to raise them that much....but that's a moot point now

Actually what stopped the speculators was that the CBR fully floated the ruble.   Once no intervention in the form of money was
forthcoming from the CBR, the speculators lost interest.   The magic of the invisible hand of the free market at work

But the 17% interbank overnight rate hike did dampen Russian bank hysteria.   More then half the problem is the paranoia
of the domestic financial industry and Russian consumers.   The foreign speculators, e.g. Soros, are the catalyst.   This
paranoia is what Washington was banking on.   The CBR did do a good job in quashing it.

One of the key differences this time around was that transferring rubles into dollars became much harder for the Russian
public.  So the reflex hoarding of dollars and dumping of rubles was stymied.    

I personally think that the whole point why they are "slowly" reducing interest rates rather than just dumping interest rates is a couple of things: have the ability to reduce it later when the ruble strengthens again so that they can keep the Ruble floating at around 50/USD and that they are afraid of sudden shocks of reducing it too much, so they rather just gradually drop it to prevent shocks.

On that same note, housing development has apparently slowed but this year will be higher than the second biggest boom in Russia's history - 1986, to 76 million square meters of living space, last year, hitting to over 80 million square meters. Most development is also in lower cost housings and a growing number of single family homes, but apartments still being most popular.

sepheronx wrote:

kvs wrote:

Cyberspec wrote:

kvs wrote:

TheArmenian wrote:Central Bank lowers key interest rate to boost economy:

http://tass.ru/en/economy/792714

That's way too timid a move.  It should have gone down back to 10.5%.  There is no chance for any inflation surge.  
The way that the inflation shock dissipated by March is rather shocking.   It indicates that there is no actual basis
for inflation growth in the Russian economy.  If there was it would be self-amplifying and propagating into next
year instead of being totally evanescent.    The CBR interest rate policy cannot claim credit.   In no other country
has playing with the interest rates resulted in inflation spikes disappearing in a matter of weeks if inflation growth
conditions existed in the economy.  

The monetarist brain rot still afflicts Russian government finance thinking.  

The 17% interest rate did it's job at stopping the speculators in their tracks and stabilised the ruble. I doubt whether that could've been achieved without it. Maybe they didn't have to raise them that much....but that's a moot point now

Actually what stopped the speculators was that the CBR fully floated the ruble.   Once no intervention in the form of money was
forthcoming from the CBR, the speculators lost interest.   The magic of the invisible hand of the free market at work

But the 17% interbank overnight rate hike did dampen Russian bank hysteria.   More then half the problem is the paranoia
of the domestic financial industry and Russian consumers.   The foreign speculators, e.g. Soros, are the catalyst.   This
paranoia is what Washington was banking on.   The CBR did do a good job in quashing it.

One of the key differences this time around was that transferring rubles into dollars became much harder for the Russian
public.  So the reflex hoarding of dollars and dumping of rubles was stymied.    

I personally think that the whole point why they are "slowly" reducing interest rates rather than just dumping interest rates is a couple of things: have the ability to reduce it later when the ruble strengthens again so that they can keep the Ruble floating at around 50/USD and that they are afraid of sudden shocks of reducing it too much, so they rather just gradually drop it to prevent shocks.

On that same note, housing development has apparently slowed but this year will be higher than the second biggest boom in Russia's history - 1986, to 76 million square meters of living space, last year, hitting to over 80 million square meters.  Most development is also in lower cost housings and a growing number of single family homes, but apartments still being most popular.

The housing development indicates that Russia's economy is solid. But my point is that a tight-assed interest rate policy
produces an opportunity cost for Russia. Russian startup companies and existing ones need access to liquidity to
capitalize on the import substitution opportunities. The CBR needs to drop the long term lending rate from 8.5% to
5% and reduce the interbank rate to under 10%. I just do not see any inflationary shock from interest rate reductions.
Basically, show me the money. Where is there evidence of any such shock. Look how quickly the massive ruble
devaluation induced inflationary shock has dissipated. As I wrote above, if the Russian economy was in an inflationary
mode, this simply would not have happened. To would have been self-propagating and jacking up the interbank rate
to 17% would not stop it.

http://expert.ru/2015/04/29/oshibka-doktora-kudrina/

Nice article in Russian putting Kudrin's monetarist BS into place.

Here are my comments not taken from the article:

Kudrin believes that increase in the money supply leads to inflation.   Kudrin is an idiot or malicious.   The inflationary
pressure would only be true if the economy was equilibrated and the rate of money supply growth was excessive.  There
is no indication of either in the case of Russia.

During the 2000s, Russia saw annual money supply growth of about 50% but the inflation was under 15%.   This is what
one would expect under conditions of economic growth and transition from command economy voucher prices to market
prices.   The money supply has to grow to reflect the demand for money.    The Harvard Boys (Jeffrey Sachs et al.) and
their sycophants like Kudrin claim that the economy can grow without a money supply increase.   They are peddling
nonsense, since a static money supply under economic growth would imply negative price increases, i.e. deflation.   In
the case of Russia it would have been as if the old Soviet prices would be the new market prices.    Maybe such states
are accessible to academic theorists, but not in the real world.   Prices in Russia shot up close to western ones for food and
consumer goods.   There is no way that the demand for money would be small.

Some nice graphics from the article:



(red line: monetary base, blue line: M2 and green line: inflation)

Note the "paradoxical" year of 2008 when inflation spiked even though there was almost zero money supply growth.



Oh my, look at that correlation between money supply growth (inflation adjusted) and GDP growth.

Kudrin should wrap his dear little head around the reason why prices behave as if there is a single global market.   Instead,
he dishes out BS advice that has no relevance to economics on this planet.

kvs wrote:http://expert.ru/2015/04/29/oshibka-doktora-kudrina/

Nice article in Russian putting Kudrin's monetarist BS into place.

Here are my comments not taken from the article:

Kudrin believes that increase in the money supply leads to inflation.   Kudrin is an idiot or malicious.   The inflationary
pressure would only be true if the economy was equilibrated and the rate of money supply growth was excessive.  There
is no indication of either in the case of Russia.

During the 2000s, Russia saw annual money supply growth of about 50% but the inflation was under 15%.   This is what
one would expect under conditions of economic growth and transition from command economy voucher prices to market
prices.   The money supply has to grow to reflect the demand for money.    The Harvard Boys (Jeffrey Sachs et al.) and
their sycophants like Kudrin claim that the economy can grow without a money supply increase.   They are peddling
nonsense, since a static money supply under economic growth would imply negative price increases, i.e. deflation.   In
the case of Russia it would have been as if the old Soviet prices would be the new market prices.    Maybe such states
are accessible to academic theorists, but not in the real world.   Prices in Russia shot up close to western ones for food and
consumer goods.   There is no way that the demand for money would be small.

Kudrin should wrap his dear little head around the reason why prices behave as if there is a single global market.   Instead,
he dishes out BS advice that has no relevance to economics on this planet.

Furthermore with a fongible economy like the RUssian one, IE where people use cash massively, restricting cash supply will simply have a two folds consequence. A first spiral of inflation, money will have to circulate faster and each flight in cash becomes a small disaster, opening the door to specualtion, then a deflationist burst, because low supply of cash means practically that most transactions would be virtual, therefore directly playing with the availability of the physical notes. IE, if there isn't physically enough cash, all checks, non-cash payments don't have the real basis to be honored and in case of withdrawal, we'd have a crash. For illustration look at Cyprus circa 2009.

The monetarist approach however facilitates another kind of phenomenon, ghost debts. Companies, declare debts while keeping cash "just in case". This is omnious in Russian business.And this is also why the Economy in Russia didn't suffered that much last year. Much of the "debt to repay" was self cycled. But this works only for short laps of time. For instance, this year you cannot underwrite more ghost debt, since the company will effectively incur losses, notably because of low ruble and "sanctions". Therefore, this kind of thievery is typical of Kudrin's kind.

http://sputniknews.com/business/20150506/1021755279.html

Load of crap really. Russia's exports are doing quite well and are ever growing in demand for local produced goods and their end goods now reaching more nations than it did before. That is why their economy will grow, not because of oil which accounts for 18% of GDP. So called specialists.... I wonder where they all went to school to get their diplomas from.

sepheronx wrote:http://sputniknews.com/business/20150506/1021755279.html

Load of crap really.  Russia's exports are doing quite well and are ever growing in demand for local produced goods and their end goods now reaching more nations than it did before.  That is why their economy will grow, not because of oil which accounts for 18% of GDP.  So called specialists....  I wonder where they all went to school to get their diplomas from.

We have to see where the oil price will go. If it hovers at 75 USD by the end of June, we might not see that 3% contraction. Rather a 1.5%. Ceteris Paribus at 75 USD/bbl the oil doesn't handicap Russian budget too much, nor does it start going Las Vegas.

Buahahaha.. the RUble is now at 49.8 per dollar  

http://www.bloomberg.com/quote/USDRUB:CUR


Just 2 days ago Anti Russian trolls were claiming Ruble will only get worse when it was a 52..
But Oil prices keeps going up..and Russia Ruble performance increase// i think a sweet price
could be 45 to 48 ?

for comparisons before the ukraine conflict coup..by january 2014 before sanctions and oil decline ,Ruble was trading at ~35 per dollar. if the Oil prices climb to $70 , the Ruble without a doubt will be trading for 45 ,or bit less.

RUSSIAN LIVING STANDARDS


Very interesting article


http://www.unz.com/akarlin/on-frosts-russia-article/

MOSCOW, May 6 - RIA Novosti / Prime. The Reserve Fund of the Russian Federation in April fell by almost 0.5 trillion rubles as of May 1 totaled 3.95 trillion rubles, which is equivalent to 76.41 billion US dollars; the total volume of the National Welfare Fund amounted to 3.946 trillion rubles, which is equivalent to 76.33 billion dollars, the Ministry of Finance said Wednesday.

Reserve fund as of April 1 amounted to 4.426 trillion rubles ($ 75.7 billion); NWF - 4.347 trillion rubles (74.35 billion dollars).

РИА Новости http://ria.ru/economy/20150506/1062855493.html#ixzz3ZM652Div

Austin wrote:

MOSCOW, May 6 - RIA Novosti / Prime. The Reserve Fund of the Russian Federation in April fell by almost 0.5 trillion rubles as of May 1 totaled 3.95 trillion rubles, which is equivalent to 76.41 billion US dollars; the total volume of the National Welfare Fund amounted to 3.946 trillion rubles, which is equivalent to 76.33 billion dollars, the Ministry of Finance said Wednesday.

Reserve fund as of April 1 amounted to 4.426 trillion rubles ($ 75.7 billion); NWF - 4.347 trillion rubles (74.35 billion dollars).

РИА Новости http://ria.ru/economy/20150506/1062855493.html#ixzz3ZM652Div

Since the ruble is fully floated they are spending the money on the national economy instead of feeding western speculator parasites.

Vann7 wrote:Buahahaha.. the RUble is now at 49.8 per dollar  

http://www.bloomberg.com/quote/USDRUB:CUR


Just 2 days ago Anti Russian trolls were claiming Ruble will only get worse when it was a 52..
But Oil prices keeps going up..and Russia Ruble performance increase// i think a sweet price
could be 45 to 48 ?

for comparisons before the ukraine conflict coup..by january 2014 before sanctions and oil decline ,Ruble was trading at ~35 per dollar. if the Oil prices climb to $70 , the Ruble without a doubt will be trading for 45 ,or bit less.

Well, cant have ruble too high or it affects import substitution industry and their exports. So they need to lower interest rates again to decrease ruble value.

Best value for Ruble is above 60 to dollar. Worst can happen for Russian industry is oil price to go higher, 50$ is perfect. The fall of the price was an unintentional gift for Russian production.

Hannibal Barca wrote:Best value for Ruble is above 60 to dollar. Worst can happen for Russian industry is oil price to go higher, 50$ is perfect. The fall of the price was an unintentional gift for Russian production.

Most Russian on sdelanounas stated around the high 50's is the sweet spot, but I agree with you. Hopefully the Rus gov ignores the gains and continues to push the development. If their currency gets too strong, they can simply lower interest rates and possibly increase money supply.

I think Russia has a chance to make the price of oil go very high, with the war in Yemen, would Russia consider supporting the Houthis and their allies. I mean if the Houthis and their allies hit just one or two Saudi oil fields boom, the price of oil is going up. It's not like Saudis are friends of Russia, they are always try to hurt Russia.

Hannibal Barca wrote:Best value for Ruble is above 60 to dollar. Worst can happen for Russian industry is oil price to go higher, 50$ is perfect. The fall of the price was an unintentional gift for Russian production.

There have to be a balance. if Ruble in 60 it will help Russia Energy industry ,but not the
local industry.. because any business in Russia based from US and Europe will cost more its
products , it will be too expensive fast food , and technology too..that Russia cannot substitute .. like the things people buy more in christmast.. technology or home system entertainment..
like a playstation or Xbox or video games , musical instruments , Flat monitors ,PCs and fashion will be more expensive that comes from the west.. and it could provoke European and American store chains to close in Russia leaving people thousands of students unemployed.

So i think ,a better prices of the Ruble should be in the flat 50 ,until Oil prices move beyond $75, then it should move to 45. So small business investment from the west based in fashion and technology can continue operating. Ideally of course should be nice if Oil prices $100 again until at least end of year and later permanently have oil at $80 to $90. And the RUble value in the 35 per dollar to attract investors.

Vann7 wrote:

Hannibal Barca wrote:Best value for Ruble is above 60 to dollar. Worst can happen for Russian industry is oil price to go higher, 50$ is perfect. The fall of the price was an unintentional gift for Russian production.

There have to be a balance. if Ruble in 60 it will help Russia Energy industry ,but not the
local industry.. because any business in Russia based from US and Europe will cost more its
products , it will be too expensive fast food , and technology too..that Russia cannot substitute .. like the things people buy more in christmast.. technology or home system entertainment..
like a playstation or Xbox or video games , musical instruments , Flat monitors ,PCs and fashion will be more expensive that comes from the west.. and it could provoke European and American store chains to close in Russia leaving people thousands of students unemployed.    

So i think ,a better prices of the Ruble should be in the flat 50 ,until Oil prices move beyond $75, then it should move to 45. So small business investment from the west based in fashion and technology can continue operating.  Ideally of course should be nice if Oil prices $100 again until at least end of year and later permanently have oil at $80 to $90.  And the RUble value in the 35 per dollar to attract investors.

It is the very import industry you are talking about that has caused a lot of problems for Russia, and it is that industry that has prevented Russia from progressing their own development. You might want to rethink your comments because you cannot complain about not doing enough for import substitution/diversification of economy, and at the same time promote the import industry.