Russian Economy General News: #7

Austin wrote:Will a Modi-style clampdown on black money work in Russia?

Austin wrote:Will a Modi-style clampdown on black money work in Russia?

http://in.rbth.com/blogs/tatar_straits/2016/11/11/will-a-modi-style-clampdown-on-black-money-work-in-russia_646575

whir wrote:

Austin wrote:Will a Modi-style clampdown on black money work in Russia?

Forcing people to put their saving into banks is only going to foster poverty in the next economic downturn.

kvs wrote:

whir wrote:

Austin wrote:Will a Modi-style clampdown on black money work in Russia?

Forcing people to put their saving into banks is only going to foster poverty in the next economic downturn.

+1000

These "black" money crackdowns are retarded. That money will circulate in the economy regardless. So there
is zero justification for making it "clean". Of course, I am ignoring the obvious pretext: tax collection. Putin will
be sorely disappointed that such crackdowns will not bring more money in the long and medium run. But I am
sure he is aware of this since it was on his watch that taxes were reduced substantially which resulted
in more tax revenue and not less.

Singular_Transform wrote:

kvs wrote:

whir wrote:

Austin wrote:Will a Modi-style clampdown on black money work in Russia?

Forcing people to put their saving into banks is only going to foster poverty in the next economic downturn.

+1000

These "black" money crackdowns are retarded.  That money will circulate in the economy regardless.   So there
is zero justification for making it "clean".   Of course, I am ignoring the obvious pretext: tax collection.   Putin will
be sorely disappointed that such crackdowns will not bring more money in the long and medium run.   But I am
sure he is aware of this since it was on his watch that taxes were reduced substantially which resulted
in more tax revenue and not less.

Black money = untaxed money = higher inflation = low level of living for the masses

Austin wrote:15-20% of GDP in blackmoney is still huge , for Russia it might be more difficult to track as they have full capital account convertibility which means people would happily bribe in USD or Euro as much in Rouble making tracking it difficult.

India black money as % of GDP is put at 20% which itself is huge most of black money is paid in rupee unlike Russia we don't have capital account convertibility or free flow of capital.

That 20% is before demonitisation , the aim was not just to curb black money as much as possible but also to increase tax base , reduce counterfeit currency in circulation printed by Pakistan isi and used to support terrorism in Kashmir and other parts of India , push for digital transaction , increase tax on those with huge black money.

I don't know how much black money they might get in the end they are aiming for around USD 30 billion but the final figure will be known by end of December or perhaps in March when this scheme ends and RBI has more accurate figure.

I think even if they manage to reduce black many in circulation by 5-8% it would be a significant achievement for modi government.

Only large currency was demonitisation which made 86% of cash in circulation

kvs wrote:

Where did you pull the "untaxed money = higher inflation" equality from? Perhaps you could provide some references
for this profound equation.

You do know that the government spends tax money, do you? So obviously it contributes to inflation.

As an aside, black money =/= counterfeit money. It is money that hides from taxes. So there is obviously
nothing wrong with it. And this discussion, trolled by Austin, is brain dead since Russia's black economy has
been shrinking since 2000:

https://www.rt.com/business/siluanov-shadow-economy-gdp-055/

http://www.imf.org/external/pubs/ft/issues/issues30/

It was under 20% in 2013. In 1999 it was over 44% of the economy.

kvs wrote:The issue is wasting resources terrorizing the country trying to destroy the black economy when it is naturally receding.   The gradual approach is vastly superior to the ham-fisted brute force approach.    The war on drugs in the west and elsewhere has been an epic failure because it is impossible to force everyone to behave in any given country without a sci-fi totalitarian regime.   The state cannot make people act good it can only give them incentives to act good, which includes punishing crimes.   As you should know punishing crimes is a long and tedious process and not something that happens at the snap of the fingers.

India has little similarity to Russia in this.   Counterfeiting is much more rampant in India than in Russia.   There is no need for the
Indian program in Russia.   Around the year 2000 the US dollar was a major mode of transactions in Russia's economy.   This mode
has basically disappeared.

Dollar transactions were 40% of total in 1997:

https://www.imolin.org/pdf/imolin/rc84066e.pdf

http://eercnetwork.com/default/download/creater/working_papers/file/de085a00a42755f172288baffcfd9895da86b71e.pdf

Dollars are no longer used by Russians to shop for goods and services.   Russian banks have under 30% US dollar reserves/deposits but that
is fully legitimate.   It is likely that most of the shadow economy uses rubles as well since it is all about not paying taxes.

BTW, the shadow economy is rampant in Canada as well.   Only a sucker would believe that restaurants report all of their receipts
to the taxman.

Austin wrote:BTW what happened to Putins scheme of getting Russian money stashed abroad back to Russia , I recollect he started that in 2015 any figures how much money did he manage to bring it back ?

Austin wrote:BTW what happened to Putins scheme of getting Russian money stashed abroad back to Russia , I recollect he started that in 2015 any figures how much money did he manage to bring it back ?

Austin wrote:BTW what happened to Putins scheme of getting Russian money stashed abroad back to Russia , I recollect he started that in 2015 any figures how much money did he manage to bring it back ?

Austin wrote:

kvs wrote:The issue is wasting resources terrorizing the country trying to destroy the black economy when it is naturally receding.   The gradual approach is vastly superior to the ham-fisted brute force approach.    The war on drugs in the west and elsewhere has been an epic failure because it is impossible to force everyone to behave in any given country without a sci-fi totalitarian regime.   The state cannot make people act good it can only give them incentives to act good, which includes punishing crimes.   As you should know punishing crimes is a long and tedious process and not something that happens at the snap of the fingers.

It was not terrorizing the country

They tried the gradual approach by introducing newer 500 and 100 rs notes in past decade without demonitising but it did not help much black money simply went to newer currency.

They had to try the 1 or 0 approach either demonitise bigger denomination currency at one go making 85 % of total cash in circulation invalid over night and replace it with new ones or dont go at all , the gradual approach didnt work they tried it in past decade.

Before demonitisation for a year they had a Voluntary Disclosure scheme  where disclosure of black income could be made legal by paying 45 % tax , till october it could disclose around $10 billion  http://www.business-standard.com/article/economy-policy/income-declaration-scheme-rs-65-000-cr-and-counting-116093001207_1.html

Post that they went for the kill switch , like like said demonitisation was not just limited to target black currency but also widen tax based ( we have the lowest tax reach in India ) , promote digital transaction , remove Fake Currency printed by Pakistan which has direct effect on terrorism.

India has little similarity to Russia in this.   Counterfeiting is much more rampant in India than in Russia.   There is no need for the
Indian program in Russia.   Around the year 2000 the US dollar was a major mode of transactions in Russia's economy.   This mode
has basically disappeared.

Dollar transactions were 40% of total in 1997:

https://www.imolin.org/pdf/imolin/rc84066e.pdf

http://eercnetwork.com/default/download/creater/working_papers/file/de085a00a42755f172288baffcfd9895da86b71e.pdf

Dollars are no longer used by Russians to shop for goods and services.   Russian banks have under 30% US dollar reserves/deposits but that
is fully legitimate.   It is likely that most of the shadow economy uses rubles as well since it is all about not paying taxes.

BTW, the shadow economy is rampant in Canada as well.   Only a sucker would believe that restaurants report all of their receipts
to the taxman.

Russia does not need Full Capital Account Convertibility or Free Flow of Currency it just makes it easier to pay the bribe in USD without keeping a track and its easier to stash ones money in London without having to pay tax in Russia.

These things are good for Anglo Saxon Countries that have USD and Euro as their currency or puppets like Japan UK , free flow of currency and capital account convertibility is fine for them.

kvs wrote:

Austin wrote:BTW what happened to Putins scheme of getting Russian money stashed abroad back to Russia , I recollect he started that in 2015 any figures how much money did he manage to bring it back ?

And your evidence that nothing has happened is what?   That $200 billion in "capital flight" occurred in the last 2 years?

The pattern in this discussion is clear.   Since there is nothing to bash Russia over in regards to new business formation,
diversification and re-gearing of the financial markets, the hate has to coalesce around "corruption".   So if there is
not a hysterical program to force every transaction into the open, then Russia must be a total failure.

F*CK OFF.

kvs wrote:

Says you. Prosecution by the authorities is a type of terror that has been seen throughout history.

What the hell are you smoking.  What relevance has "Full Capital Account Convertibility" got to do with the discussion.  Your are just pulling
terms out of the air to distract from the fact that you have no point.   Russia does not need India's program to remove cash from transactions
to force tax collection and control counterfeiting.   Russia had a crisis in tax collection in 1998.   Thanks to Putin and Gref this problem went
away when Yeltsin's ridiculous tax system was removed and a proper, low tax rate system imposed.    There was a massive surge in tax
receipts and there was never any need for re-denomination and removal of cash from circulation.   This crap you are harping on about is a
total non-issue for Russia.   Thank God Putin does not eat such drivel advice from fairweather "friends" and outright enemies, who only
have the "best interests" of Russia at heart.

Stolypin club Boris Titov suggested a way to increase GDP and balance the budget

Russia's GDP will shrink by 2.4 trillion rubles, or 2.8%, to 2019 because of the decision to freeze the budget of the Ministry of Finance expenses for the next three years in nominal terms. That is the conclusion reached by experts Stolypin club, who heads the business ombudsman Boris Titov (presentation available to the "News"). The alternative is extremely tight budget could be saved in real terms of expenditure, which can be directed to stimulate growth, according to the Stolypin club. And in the organization believe that such a measure does not unbalance the budget.

The State Duma on Friday approved in the final, third reading of the budget for the 2017-2019 years. During the discussion in the lower house of parliament, the main parameters of the document (including the freezing of expenditures) have not changed, only the deputies distributed 87.5 billion rubles from the Reserve Fund of the Government on priority projects. Parliamentarians traditionally have increased spending to support the regions - from 100 billion to 200 billion rubles. However, the overall rate of the Ministry of Finance on the budget consolidation has been left unchanged.

Such a tight fiscal policy was not supported in Stolypin club, which, along with the Center for Strategic Development (CSD) is now one of the centers of development of economic reforms. Boris Titov has been dubbed the document the Ministry of Finance of stagnation budget and promised to come up with alternative proposals. They are contained in the materials with which the familiar "Izvestia".

In particular, the club proposes to increase funding for the development of human capital, the demand (0.5 trillion, aimed at subsidizing mortgages and car loans) and development institutions (0.8 trillion rubles) to stimulate GDP growth. The total volume of additional costs (1.3 trillion rubles) will be lower gain to GDP (2.2 trillion rubles). The club also offers to freeze tariffs of natural monopolies and reduce the key rate to 8% (currently - 10%). According to the organization of economists, only the last step can give boost to GDP growth by 1.3 percentage points To finance the growing deficit in the Stolypin club offer by increasing the national debt.

In itself, decrease the key rate does not necessarily lead to an increase in GDP, according to the chief economist for Russia and CIS at ING Dmitry Polevoy. According to him, one should also bear in mind that cheaper borrowing gives rise in consumption, but it can lead to an increase in imports. Thus, the effect will be compensated.

- Reduced rates can give an increase in consumption and investment, but at the same time, it could trigger the growth of demand for imports. In the end, the net GDP growth will be less - he explained.

According to Dmitry Polevoy, experts now expect to reduce the key rate to 8-8.5% by the end of next year, while GDP growth of 1.5%. Now at the rate of 10% recession is expected to reach 0.7%.

As stated in the documents of the club in the next three years, budget spending decrease in constant prices will exceed 12%. "Given the importance of budget expenditures for certain sectors such reduction of the economy will lead to a substantial loss of the level of demand and income, as well as convert government consumption (percentage of GDP of about 19%) in one of the main factors hindering economic development", - stated in the materials.

As calculated in the Stolypin club, complete loss of GDP from reduced expenditures for investment purposes amounted to 0.9 trillion rubles, on the other personal, social and communal services - 0,7 trillion rubles, on public administration and defense - 0.4 trillion rubles, healthcare - 0,2 trillion rubles, agriculture - 0,1 trillion rubles. This proposed redeployment of business income and in favor of the fiscal system (tax maneuver in the energy sector, the increase of excise taxes, the change in the rules of transfer of income tax, an additional exemption of dividends from state-owned companies), due to lower macroeconomic efficiency, expenditure leads to potential GDP losses 170 billion rubles.

As a result of conservative economic and fiscal policy may be a situation in which Russia's GDP in 2019 will be almost at the level of 1990, will begin to increase the gap with the level of developed countries in per capita GDP, there will be risks to maintain defense spending, fear in the Stolypin club.

The Ministry of Finance considers its main task to enter the non-deficit budget in the medium term. According to the ministry, Russia must live within its means and not spend more than it earns. The adopted budget assumes reduce the budget deficit by 1 percentage point per year: from 3.2% of GDP in 2017 to 2.2% in 2018 and 1.2% in 2019. Consolidation is achieved by freezing nominal expenditures.

Stolypin club counted impact on the GDP of the two scenarios: Scenario proposed the Ministry of Finance and save costs in real terms (that is, their indexation to inflation annually). As a result, according to the organization, in the first scenario, GDP is reduced by 660 billion rubles in 2017, while the second - is growing at 490 billion rubles.

Offers Stolypin club can give GDP growth, but on a smaller scale because of the complexity of forecasting the effectiveness of such measures, says the head of the Laboratory of analysis of financial markets and institutions RANHiGS Alexander Abramov.

- To obtain the GDP growth still need to be prerequisites. Development institutions funding partially makes sense when the business is ready to create new projects, and to this he is not ready due to numerous risks, - he said.

According to the expert, you must first create a solid foundation for economic growth, which would consist of a total liberalization of the economy, judicial reform, easing pressure on the security forces and the predictability of the business tax system.

The Ministry of Finance has not responded to the request of "Izvestia".

WASHINGTON, Dec. 16 - RIA Novosti. US President Barack Obama called Russia a weak country that does not produce anything but gas, oil and weapons.

"They are smaller, they are weaker (than the US - Ed.). Their economy does not produce anything that would like to buy (other countries), other than oil, gas and arms," ​​- Obama said during a press conference in Washington on Friday.