Russian Economy General News: #7

China 10Y bond earns 3.31 % http://www.tradingeconomics.com/china/government-bond-yield
India 10Y bond earns 6.89 % http://www.tradingeconomics.com/india/government-bond-yield

Earn more money investing in these bonds and make relations more friendly.

Austin wrote:Watching the Senate Intelligence Hearing on Russian Interfering in US Election is an Epitome on Putin and Russian bashing Exercise.

Putin is the big Devil and Russia the bad player in Global Scene and hostile to US.

Makes me wonder why do the Idiot Russian even buy US Bonds which is worth $80 billion Today ,  Are they stupid or naieve or both.

Why not buy bonds of friendly country like China or India or other nations  , Why Reward the US even half a percent by buying their bonds ?

I agree, the CBR and the other major financial nodes are dominated by treasonous, poisonous snakes, that $80 billion could of been used to acquire S-500's and Nudol/235 ABM complexes.

Austin wrote:China 10Y bond earns 3.31 % http://www.tradingeconomics.com/china/government-bond-yield
India 10Y bond earns 6.89 % http://www.tradingeconomics.com/india/government-bond-yield

Earn more money investing in these bonds and make relations more friendly.

You can't buy them.

The US running the biggest trade deficit, and it is the result of the liberal rules for investment .

India / China restrict the foreigners in the investment opportunities, so you can't buy enought goverment paper from this countries to be able to run this magnitude trade surpluss like russia.

Or you risk a very expensive rubel ,that destroy the competitivness of the home indurstries.

Singular_Transform wrote:

Austin wrote:China 10Y bond earns 3.31 %     http://www.tradingeconomics.com/china/government-bond-yield
India 10Y bond earns 6.89 %    http://www.tradingeconomics.com/india/government-bond-yield

Earn more money investing in these bonds and make relations more friendly.

You can't buy them.

The US running the biggest trade deficit, and it is the  result of the liberal rules for investment .

India / China restrict the foreigners in the investment opportunities, so you can't buy enought goverment paper from this countries to be able to run this magnitude trade surpluss like russia.

Or you risk a very expensive rubel ,that destroy the competitivness of the home indurstries.

Cant say about China but in India FII are allowed to buy GSEC which is our Bond.

I see now reason why Russian government cant purchase those bonds in Government to Government or Central Bank to CBR deal , Just a year or two back Russian Finance Minister had mentioned they would buy BRICS bond

http://ndb.int/BRICS-Bank-plans-to-place-bonds-in-Russia.php

5 more years for CB Chief

Putin Nominates Bank of Russia Head Nabiullina for New Term
https://www.bloomberg.com/politics/articles/2017-03-22/putin-nominates-bank-of-russia-head-nabiullina-for-new-term

Austin wrote:5 more years for CB Chief

Putin Nominates Bank of Russia Head Nabiullina for New Term
https://www.bloomberg.com/politics/articles/2017-03-22/putin-nominates-bank-of-russia-head-nabiullina-for-new-term

Putin favors her. @kvs I think you must be missing something.

Viktor wrote:

Austin wrote:5 more years for CB Chief

Putin Nominates Bank of Russia Head Nabiullina for New Term
https://www.bloomberg.com/politics/articles/2017-03-22/putin-nominates-bank-of-russia-head-nabiullina-for-new-term

Putin favors her. @kvs I think you must be missing something.

Well keep in mind that she and her people did manage to maintain financial stability during coordinated attack on Russian economy back in 2014/15 and that she stopped hemorrhaging of monetary reserves and introduced floating exchange rate.

Nobody likes bankers (least of all me) and some things could have been done differently in hindsight, but that was no time for drastic experiments and I would say you guys are selling her a bit short.

Viktor wrote:

Austin wrote:5 more years for CB Chief

Putin Nominates Bank of Russia Head Nabiullina for New Term
https://www.bloomberg.com/politics/articles/2017-03-22/putin-nominates-bank-of-russia-head-nabiullina-for-new-term

Putin favors her. @kvs I think you must be missing something.

No. Putin dropped the ball and/or is in a bad power situation. The CBR kept financial stability during the 2000 to 2012 period
without the monetarist BS. Nabiullina came after the real potential instability was in the past so heaping praises on her is not
warranted.

PapaDragon wrote:

Viktor wrote:

Austin wrote:5 more years for CB Chief

Putin Nominates Bank of Russia Head Nabiullina for New Term
https://www.bloomberg.com/politics/articles/2017-03-22/putin-nominates-bank-of-russia-head-nabiullina-for-new-term

Putin favors her. @kvs I think you must be missing something.

Well keep in mind that she and her people did manage to maintain financial stability during coordinated attack on Russian economy back in 2014/15 and that she stopped hemorrhaging of monetary reserves and introduced floating exchange rate.  

Nobody likes bankers (least of all me) and some things could have been done differently in hindsight, but that was no time for drastic experiments and I would say you guys are selling her a bit short.

I disagree fully with the claim that Nabiullina and the CBR saved the day in late 2014 and early 2015.

1) They were forced to abandon ruble support operations because there was not enough money to continue them. In fact,
they should have ended these operations years before.

2) The inflation response pattern proves that it is Russia's economy that absorbed the ruble forex drop shock and not
some CBR magic. It was clearly a forced-damped response with the weekly inflation rate at the end of March of 2015 returning
to the level of 2014 before the shock. If you look at the inflation cases around the world, then you see that inflation does
not behave in a forced-damped way whatsoever under unstable conditions. Instead of being damped it accelerates and
is near to impossible to suppress by central bank policy. Jacking up rates can have the opposite intended effect by
weakening the economy, increasing unemployment and creating uncertainty that stimulates price increases as a type
of compensation mechanism. The underlying high inflation of course sets all of this up since the price setters are always
fighting the real drop in incomes.

Putin may be good at spying and power politics, but he clearly does not have a good grip on economics. He needs to get
better advisers, ASAP. Coddling Kudrin is not going to bring Russia prosperity.

Russia's banking system has SWIFT alternative ready

https://www.rt.com/business/382017-russia-swift-central-bank/

If the Society for Worldwide Interbank Financial Telecommunication (SWIFT) is shut down in Russia, the country’s banking system will not crash, according to Central Bank Governor Elvira Nabiullina. Russia has a substitute.

"There were threats that we can be disconnected from SWIFT. We have finished working on our own payment system, and if something happens, all operations in SWIFT format will work inside the country. We have created an alternative," Nabiullina said at a meeting with President Vladimir Putin on Wednesday.

She also added that 90 percent of ATMs in Russia are ready to accept the Mir payment system, a domestic version of Visa and MasterCard.

Izvestia daily reported that as of January 2016, 330 Russian banks had been connected to the SWIFT alternative, the system for transfer of financial messages (SPFS).

In 2014 and 2015, when the crisis in relations between Russia and the West were at their peak over Crimea and eastern Ukraine, some Western politicians urged disconnecting Russia from SWIFT.

In November 2015, Nabiullina said the SPFS was close to being completed.

The central bank’s website says the system was established “as an alternative channel for interbank cooperation with the aim of ensuring the guaranteed and uninterrupted provision of services for the transmission of electronic messages on financial transactions.”

At present, the system has some drawbacks. It doesn’t work from 9pm to 5am Moscow time and costs up to five cents per wire transfer, which is regarded expensive.

My humble opinion:

kvs is right in expecting the CBR to lower rates to stimulates economy. Of course, lowering the borrowing rate by a few percentage points will encourage the average Ivan and Natasha to buy more big ticket items (cars, TVs, etc.) on credit. Similarly, businesses will invest more and produce more. Economy will grow by 4% or 5% or 6% per year.

But that is not the main objective of the CBR (and the government), they don't want the GDP growth rate to be dependent on low rates (like the Western countries). They want the economy to be more efficient/competitive and be in the positive (1% to 2% growth) without having to resort to rate cutting.

Rates can be lowered anytime, it is easy. Optimizing the economy (more productive, more efficient, more competitive) and making it adapt to more difficult conditions is more difficult.

my 2 kopeks

Nabiullina certainly displayed a very steely nerves and had a very calming composure during peak of 2014 crisis when the odds were not in their favour ruble was mentioned to go beyond 100 for 1 USD and Forex reserves wont last beyond a year , it was a co-ordinated attack by Western Intelligence , Banks and Politicians but she stood by her decision and was proven right.

Putin certainly trust her a lot after that event.

Its easy to blame CBR for all the ills but CBR around the world depends on political mandate , Putins government does not have the balls to try any radical reforms on the economy , He prefers a very conservative known approach where he does not want inflation and any policy that can increase burden on the people of russia.

1998 is etiched in his mind.

What ever reforms like floating currency rate was forced by circumstances. Interest rate fall in Russia will be gradual at rate of no more than 0.5-0.75 % per year

We will have to see what economic policy is adopted for 2018-2025 under works now.

Putin has said many times he does not want any social upheavel due to Economic experiments that was imposed on the people in 1990's

One good thing came out was CbR is now buying more gold , I think more than they publish , 2014 was a wake up call .......Floating rouble was a good decision specially when you want to maintain full capital account convertibility ....Market forces decide Rouble rate thats how capitalism should work.

My only hope is CBR stops buying more US Papers and instead diversify and buy India/Chinese Government Bonds and buy all the gold they can.

Rosneft wanted CBR to bail them out some them in 2014-15 she said to Rosneft FO

Putin supports the tactics and strategy of the Central Bank

Подробнее на ТАСС:
http://tass.ru/ekonomika/4122986

MOSCOW, March 24th. / TASS /. Russian President Vladimir Putin as a whole supports the policy of the Central Bank. This comment gave a press-secretary of the head of state, Dmitry Peskov, asked by reporters about the decision of the Central Bank to reduce the key rate.

"Most recently, during a meeting with Chairman of the Central Bank of ... the President gave a positive evaluation and support the tactics and strategy of a mega-regulator" - recalled Sands.

Подробнее на ТАСС:
http://tass.ru/ekonomika/4122986

TheArmenian wrote:My humble opinion:

kvs is right in expecting the CBR to lower rates to stimulates economy. Of course, lowering the borrowing rate by a few percentage points will encourage the average Ivan and Natasha to buy more big ticket items (cars, TVs, etc.) on credit. Similarly, businesses will invest more and produce more. Economy will grow by 4% or 5% or 6% per year.

But that is not the main objective of the CBR (and the government), they don't want the GDP growth rate to be dependent on low rates (like the Western countries). They want the economy to be more efficient/competitive and be in the positive (1% to 2% growth) without having to resort to rate cutting.

Rates can be lowered anytime, it is easy. Optimizing the economy (more productive, more efficient, more competitive) and making it adapt to more difficult conditions is more difficult.

my 2 kopeks

You are missing my point.  The 10.5% prime rate (i.e. actual rates at banks are 11.5% and higher) is damaging business financial
activity.   I am not talking about consumer credit buying at all.   Go back and read my posts.   Companies need loans not because they are
crack addicts but because their revenues cannot respond arbitrarily to market trends.    Nabiullina and the CBR 5th column are killing normal
company financing forcing them to delay investments (retooling, redesign) and makes financing for startups almost impossible.   Unlike
the USA and EU, Russia does not have a big enough stock market for companies to obtain venture financing by stock issues.   And your
statement about this being a discussion of economic stimulation is totally off the mark.   The issue is economic suppression ("destimulation")
by a rate that has nothing to do with the inflation situation in Russia.    A rate of 6% is not high or out of control for Russia or the USA for
that matter.   The 2% and less inflation rate is not a relevant target for Russia to aim for in the next 20 to 40 years.   This low rate only
appeared in the west after 1990 and smells of manipulation (aside from the obvious examples such as hedonics adjustments).

Seriously, the CBR is full of sh*t. Russia was running an inflation rate of 13-15% for the 2000-2011 period when the money supply
was increasing by 50% per year. And somehow now Russia has an inflation problem? Get real, the CBR set a rate of 8.5% when the
inflation was over 10%. Now it "needs" to set a rate of 10.5% for an inflation of 6%? Obvious BS.

Austin wrote:Putin supports the tactics and strategy of the Central Bank

Подробнее на ТАСС:
http://tass.ru/ekonomika/4122986

MOSCOW, March 24th. / TASS /. Russian President Vladimir Putin as a whole supports the policy of the Central Bank. This comment gave a press-secretary of the head of state, Dmitry Peskov, asked by reporters about the decision of the Central Bank to reduce the key rate.

"Most recently, during a meeting with Chairman of the Central Bank of ... the President gave a positive evaluation and support the tactics and strategy of a mega-regulator" - recalled Sands.

Подробнее на ТАСС:
http://tass.ru/ekonomika/4122986

Well, it would have been just too good to be true if Putin was excellent in every category. He is proving to be a typical mixed bag of
success and failure. His pimping of Nabiullina is a career defining failure. Russians will be reaping what he sowed for decades to come.

Austin wrote:Nabiullina certainly displayed a very steely nerves and had a very calming composure during peak of 2014 crisis when the odds were not in their favour ruble was mentioned to go beyond 100 for 1 USD and Forex reserves wont last beyond  a year , it was a co-ordinated attack by Western Intelligence , Banks and Politicians but she stood by her decision and was proven right.

Putin certainly trust her a lot after that event.

Its easy to blame CBR for all the ills but CBR around the world depends on political mandate , Putins government does not have the balls to try any radical reforms on the economy , He prefers a very conservative known approach where he does not want inflation and any policy that can increase burden on the people of russia.

1998 is etiched in his mind.

What ever reforms like floating currency rate was forced by circumstances.  Interest rate fall in Russia will be gradual at rate of no more than 0.5-0.75 % per year

We will have to see what economic policy is adopted for 2018-2025 under works now.

Putin has said many times he does not want any social upheavel due to Economic experiments that was imposed on the people in 1990's

One good thing came out was CbR is now buying more gold , I think more than they publish , 2014 was a wake up call .......Floating rouble was a good decision specially when you want to maintain full capital account convertibility ....Market forces decide Rouble rate thats how capitalism should work.

My only hope is CBR stops buying more US Papers and instead diversify and buy India/Chinese Government Bonds and buy all the gold they can.

Then Putin is a hypocrite since Nabiullina is engaged in a finance experiment with serious implications for the Russian economy.
I can't even find an example of what she and the CBR are doing in any other country at any given period. High interest policy
(at the levels the CBR is setting) is required when inflation is unstable and not when even an 50% forex devaluation cannot produce
more than a 5 month spike. People should be aware that when the central bank jacks up their prime rate, it does not instantaneously
change the pricing dynamics in the economy. It takes several months to a year for the impact to be felt. So attributing the short
life span of the inflation spike in Russia to CBR policy is simply wrong. The inflation rate anomaly would have started to decline after
March of 2015 and not have been gone by March of 2015.

If Nabiullina was such a strong believer in the floating ruble she and her cronies at the CBR would have implemented it in 2012. You
are giving false credit to her. She had no choice in late 2014 to stop interventions because those interventions became over twice
as expensive and there was a massive speculative attack orchestrated by NATO that forced her to increase the rate of interventions
beyond any capacity available to the CBR. I guess the credit is due for not committing suicide.

Nice discussion of the absurd financial situation in Russia. While people here talk about consumer credit, the reality
is that the CBR sabotage is slamming small businesses hard. The case of the dairy farmer whose milk cost
carries a 35% fraction from borrowing costs says it all. So note this important detail:

-> The CBR high interest rate directly contributes to inflation.

So the last thing that we should be discussing here is some sort of consumer spending stimulus. It is freaking
total non-issue. A 35% price hit from normal banking activity is a serious burden factor for the CPI.

He also outlines how the CBR is in effect maintaining a system to devalue the ruble. This is the result of
not imposing controls on capital movements so that capital flight directly puts pressure on the ruble exchange
since massive amounts of rubles are sold for dollars "at the border". The CBR should at least slow down capital
movements and damp this pressure on the ruble forex.

The video is not recent but describes the situation in late 2014 and early 2015.

kvs wrote:

Viktor wrote:

Austin wrote:5 more years for CB Chief

Putin Nominates Bank of Russia Head Nabiullina for New Term
https://www.bloomberg.com/politics/articles/2017-03-22/putin-nominates-bank-of-russia-head-nabiullina-for-new-term

Putin favors her. @kvs I think you must be missing something.

No.  Putin dropped the ball and/or is in a bad power situation.   The CBR kept financial stability during the 2000 to 2012 period
without the monetarist BS.   Nabiullina came after the real potential instability was in the past so heaping praises on her is not
warranted.

Im not talking here exclusively on the economics because decisions he makes must always be part of some broader picture. I sincerely doubt Putin is ill informed about the economics.

For all we know in due time he may change his policy radically if it finds it to fit the moment. I think that predictions are not made just for the next four years. They are planned for a longer  time. You have to understand that by changing the format of the functioning as what happened in all Soviet and East European states meant that all of us needed to learn new rules of the game. Still all of those states found themselves with ruined industries (most likely as a part of a well planned operation)
corrupt governments and a ideology which good chunk of population of those states would describe as heresy and burned it

I think that is the reason Russia persistently takes small but always secure steps in economics while at any moment tend to find and eliminate problems.
You can be pissed at Putin/Nabulina combo for not lowering interest rates but at the same time that same decision can be viewed as a Putin decision not to let Russians into more debt yet. Later on might be a right time but now is not for some reason that is unfamiliar to us. And that reason might not be tied to a economy for all I know.

Thats why I dont think any of us here can be the judge

So loosen up with the accusations, lets wait and see what happens

I think Russia is on the right part. I think Putin has managed the one most important think that no East European/Soviet state leader up to now ever did. He managed to activate whole Russia for the benefit of it in this new system. All other are just struggling and barley managing with huge parts of their population bellow poverty line. And thats the whole southern EU. News Russia on the other hand has marked a machine tool industry for a major problem and thats excellent. That it.
Intellectual potential of Russia has greatly increased and Russia is now yearly producing 455 000 engineers per year (No.1 in the world unofficially) and in building Euroasian civilization they will not follow the West. I see no problems with decision making as long as the base of the country is getting stronger.

I think Putins economic performance is mediocre specially after 2014 he could have done much.

But If he stands for next election and wins , he will have 6 years to try something more radical then telling CBR to keep interest rate high keeping savers aka mass population happy

Like many politician he is still remembers the traumatic moment of 98 and is very conservative to the point he has been hurting Russian Business.

Michael Pento-Stock Market Will Fall at Least 50%

here is what Savers in Russia will earn in Safe Fixed Deposit as interest rate

https://russia.deposits.org/


The interest rate is pretty much where FD savers in india earned in 2010

http://www.onemint.com/2010/05/19/fixed-deposits-interest-rates-in-india/

Alexander Mercouris: Russian Central Bank cuts key rate to 9.75%, optimistic about Russian economy

Some quotes:

"To be clear, this is a token cut that will not by itself make any difference to the state of economy.  Its importance is that it clearly signals that more cuts are on the way.  That may in itself act as a spur to growth, consolidating the recovery."

"The state of Russia’s economic statistics is at the moment one of confusion, with Rosstat – Russia’s state statistical agency – admitting what many people – including myself – always suspected, that it had previously seriously overestimated the severity of the recent recession, which was significantly shorter and shallower than it had previously said.  Rosstat is now in the process of undertaking a comprehensive review both of its methodology and of its earlier calculations.  However this process is far from complete, so it is difficult at present to give a precise picture of the current state of the economy."

"A never stated fact about the Russian economy is that every contraction since 1991 has been shorter and shallower than its predecessor.  The contractions of 1991 and 1998 were existential crises that threatened the very existence of the Russian state, whilst the 2008 recession, though significantly less severe, was still (as Nabiullina’s figures show) a very steep recession indeed and something of a near death experience.  The latest 2014-2015 recession was by these standards not merely short and shallow, but qualifies as Russia’s first ‘normal’ recession.  As I have discussed many times, its overall effect has been to leave the Russian economy fitter and stronger than it was before."

Austin wrote:here is what Savers in Russia will earn in Safe Fixed Deposit as interest rate

https://russia.deposits.org/


The interest rate is pretty much where FD savers in india earned in 2010

http://www.onemint.com/2010/05/19/fixed-deposits-interest-rates-in-india/

You are missing important details. During that period the CPI in India was between 9 and 10%. So the policy
reflected the same approach as the CBR, which I already noted (8.5% rate when CPI was over 10%). India
clearly has the right approach. Look at the interest rates and the CPI. In 2015 the inflation rate fell to around
6%

http://www.inflation.eu/inflation-rates/india/historic-inflation/cpi-inflation-india.aspx

and the interest rate was cut to 7.75% at the start of the year and decreased more later:

http://www.bbc.com/news/business-30825893

So India's financial policy has no resemblance to Russia. The prime rate is properly lowered to reflect inflation and not
kept at some absurdly high level for indefinite periods. Even the mere fact that the CBR does not signal that it will
drop the prime rate is bad since it offers no prospect of relief even after the crisis that was the pretext for
the rate policy is long gone. This is pure 5th column criminal activity at the CBR and Putin has disappointed me to
a significant extent. It appears that he was on a lucky streak with this leadership and that luck has run out. Now
he is damaging Russia's economy. He has zero excuse for pimping Nabiullina and could easily have gone back to the
2011 policy.

Kimppis wrote:Alexander Mercouris: Russian Central Bank cuts key rate to 9.75%, optimistic about Russian economy

Some quotes:

"To be clear, this is a token cut that will not by itself make any difference to the state of economy.  Its importance is that it clearly signals that more cuts are on the way.  That may in itself act as a spur to growth, consolidating the recovery."

"The state of Russia’s economic statistics is at the moment one of confusion, with Rosstat – Russia’s state statistical agency – admitting what many people – including myself – always suspected, that it had previously seriously overestimated the severity of the recent recession, which was significantly shorter and shallower than it had previously said.  Rosstat is now in the process of undertaking a comprehensive review both of its methodology and of its earlier calculations.  However this process is far from complete, so it is difficult at present to give a precise picture of the current state of the economy."

"A never stated fact about the Russian economy is that every contraction since 1991 has been shorter and shallower than its predecessor.  The contractions of 1991 and 1998 were existential crises that threatened the very existence of the Russian state, whilst the 2008 recession, though significantly less severe, was still (as Nabiullina’s figures show) a very steep recession indeed and something of a near death experience.  The latest 2014-2015 recession was by these standards not merely short and shallow, but qualifies as Russia’s first ‘normal’ recession.  As I have discussed many times, its overall effect has been to leave the Russian economy fitter and stronger than it was before."

I already posted that the 2014-2015 recession was shallow without requiring Rosstat revisions. People can look at the GDP drops in 2009 and
the cumulative drop 2014 and 2015 to see that the 2008-2009 recession was more intense. The other detail is that the recovery was faster
by looking at the GDP curve even if there was no growth in 2016. The CBR can see the situation perfectly fine and all is bleating about
inflation is utter BS.

The CBR leaves everyone in Russia guessing what it will do. This is not a rational central bank policy. Given the large drop in the inflation
rate the CBR should have reduced the prime rate to under 8% instead of hovering around 10%. It is clear that the CBR is foisting essentially
a 10% rate on Russia regardless of the CPI. This means the banks are charging businesses on the order of 12% (consumer loans cost 20%
https://russia.deposits.org/). All this while the CPI is about 6%. Since the CBR increases the CPI directly with its interest rate, the current
inflation reduction in Russia is due to a great extent to economic constriction (i.e. prices are kept under control by lack of demand and companies
that can't afford to pay the CBR protection fee go bankrupt). This is simply criminal.