Russian Economy General News: #10

Austin wrote:When you know that some things wont work the way you want you dont keep banging your head against it but work on an effective alternative.

Interest rates cut by CBR is not a predictable thing like FOMC so Putin has to find out alternate ways to work out that shortcoming to boost the economy.

I think you are reading too many doomsday reports on Russia.

Russia is in the middle of a vicious economic war and needs to keep it's "powder dry"...that is, it must have fairly large reserves at hand

They've thrown everything but the kitchen sink at them and they've just shrugged it off...so they must be doing something right

The media learned about the volume of the "secret" economy of Russia

https://www.kommersant.ru/doc/4073889?from=hotnews

Austin wrote:
The media learned about the volume of the "secret" economy of Russia

https://www.kommersant.ru/doc/4073889?from=hotnews

That is a substantial reduction from even six years ago. Putin's economic and legal policies are clearly working in the right direction.
Back around 1999 the shadow economy was between 40% and 50%. It has shrunk by almost ten times.

In the UK, such things are not secret... they are added to GDP to make the economy look better... illegal things like drug sales and postitution....

GarryB wrote:In the UK, such things are not secret... they are added to GDP to make the economy look better... illegal things like drug sales and postitution....

Yeah, they are included also in the official figures for the italian GDP, even if, of course, there are no tax revenues from the "shadow" economy

But revenues for the politicians.

The above discussion prompts me to highlight that the reduction in the shadow economy in Russia is not due to GDP accounting
shenanigans but its actual emergence into the light. That is, the elimination of criminal control of substantial parts of the economy
and also rational taxes and regulations no longer giving honest businesses to hide from extortion of money by officials.

Putin the "tyrant" doing his job and controlling corruption. The new shadow economy statistic is also direct proof that the
war against corruption by Putin and his government is legitimately being waged and is succeeding. All the liberast 5th columnists
who are blocking street traffic with their illegal "demonstrations" and spreading blood libel on the internet are total liars.

“GDP growth will be above forecasts”: RDIF head Dmitriev on foreign investment and the impact of sanctions on the economy

https://russian.rt.com/business/article/665132-dmitriev-rfpi-vef-2019

Austin wrote:“GDP growth will be above forecasts”: RDIF head Dmitriev on foreign investment and the impact of sanctions on the economy

https://russian.rt.com/business/article/665132-dmitriev-rfpi-vef-2019

All these articles are trash since they never inform the reader about what controls Russia's GDP growth rate. As long as Russian
entities keep massively paying off foreign debt, Russia's GDP growth will be suppressed to below 2% and even below 1%. This "slow"
growth is an accounting fiction since the real economic growth is over 5%. There mere notion of debt nullification being a negative
for the GDP is pure BS:

1) The debt stimulus does not last for the duration of the debt burden and only occurs in a short period of time when the debt money
is injected into the economy. Instead the ongoing interest (including any principal) payments are an ongoing drag on the economy since
these payments are much like import purchases where money permanently leaves the domestic economy.

2) Following (1), the negative shock on the GDP from debt nullification is short-lived and transient and is offset by the elimination of
debt servicing payments. But in the retarded GDP accounting this offset is never included and all such monetary fluxes are treated as
if they are instantaneous without any long term impacts.

What is needed is a coherent report on the structural growth of the GDP. Pure fiscal transactions should not be lumped together with
production and consumption growth. That is, the real economy should not be hidden by the mostly fictional fiscal economy which consists
of money shuffling back and forth. But such proper accounting is not going to be popular with the self-anointed guiding lights of
humanity in the west since their phony fiscal economic fractions can exceed 50% of the total GDP.

kvs wrote:

Austin wrote:“GDP growth will be above forecasts”: RDIF head Dmitriev on foreign investment and the impact of sanctions on the economy

https://russian.rt.com/business/article/665132-dmitriev-rfpi-vef-2019

All these articles are trash since they never inform the reader about what controls Russia's GDP growth rate.  As long as Russian
entities keep massively paying off foreign debt, Russia's GDP growth will be suppressed to below 2% and even below 1%.  This "slow"
growth is an accounting fiction since the real economic growth is over 5%.   There mere notion of debt nullification being a negative
for the GDP is pure BS:

1) The debt stimulus does not last for the duration of the debt burden and only occurs in a short period of time when the debt money
is injected into the economy.  Instead the ongoing interest (including any principal) payments are an ongoing drag on the economy since
these payments are much like import purchases where money permanently leaves the domestic economy.  

2) Following (1), the negative shock on the GDP from debt nullification is short-lived and transient and is offset by the elimination of
debt servicing payments.  But in the retarded GDP accounting this offset is never included and all such monetary fluxes are treated as
if they are instantaneous without any long term impacts.  

What is needed is a coherent report on the structural growth of the GDP.  Pure fiscal transactions should not be lumped together with
production and consumption growth.  That is, the real economy should not be hidden by the mostly fictional fiscal economy which consists
of money shuffling back and forth.  But such proper accounting is not going to be popular with the self-anointed guiding lights of
humanity in the west since their phony fiscal economic fractions can exceed 50% of the total GDP.  

plus guy states that growth still relies on oil and minerals..... No, because its based upon budget of $40bbl which rest goes into investments which btw, have not actually been even used yet so that throws the whole thing out. They figure this last quarter is where investment money for the national projects will be allocated. If not, then early next year.

In the meantime the west has to invend negative rates and print trillions of bucks just stand still.

All assets are valued based upon their discounted cash flow stream. It doesn't matter if they are equity or bonds. In its simplest form the equation for a perpetuity is PV = P/r or PV=P/(r-g) where PV = present value, P = payment stream, and g = the rate of growth of the payment stream and r = the discount rate. Fixed income instruments have a defined life, so they can be valued using a little algebra using the above formula.

Why does this all matter? Simply change the "r" in the above equations and calculate how dramatically the PV changes. In bonds this sensitivity is referred to as duration.

Now, keep in mind that there are $16 trillion in negative yielding debt instruments in the world today including German,Japanese, and French government bonds. Global interest rates are at their lowest level in 3,000 years - all of recorded history.

How can negative rates be input into the above equations? They can't. As rates approach zero, asset values approach infinity.

What does that mean?

It means the current economic model in not sustainable. Increasing marginal debt is required for a decreasing marginal GDP growth. Debt levels are matched by unsustainable asset valuations. The only reason the shell game continues is because all the major players bought into the game including China and the U.S. dollar is the de facto world currency.

The game will continue for as long as possible. Greenspan has already laid the case for negative rates in the USA. In fact, given the current and projected U.S. fiscal situation, a return to "normal" market driven interest rates would force the U.S. to abandon its trillion dollar military/intelligence budget. To cede "world leadership".

The world financial and political elite are not stupid. They understand this as well as I do. That means they must desire this outcome and they likely are planning on this outcome. There will be a dollar crisis at some point in the future and there will be an economic depression. Most likely they are practicing classical dialectics and seek  a crisis in which the outcome will likely be consolidated world government with a global central bank and with fiat currencies replaced with an electronic currency.

"TRANSNEFT AND ROSNEFT PUBLICLY CLASH OVER OIL EXPORT QUALITY QUESTIONS."

What is happening here?

https://southfront.org/transneft-and-rosneft-publicly-clash-over-oil-export-quality-questions/

Over that oil quality issue where Belarus got subpar quality oil. Now both companies pointing fingers at each other over it as Transnaft got penalty over it but rosneft didn't and Transnaft saying it was rosnefts fault.

As if something like that wouldn´t happen in a western country.

miketheterrible wrote:Over that oil quality issue where Belarus got subpar quality oil. Now both companies pointing fingers at each other over it as Transnaft got penalty over it but rosneft didn't and Transnaft saying it was rosnefts fault.

But how did the contaminant get into the oil in the first place? Was it sabotage or incompetence? The latter seems highly unlikely
since oil is always transported under containment. That is, one would have to have deliberately added another chemical to it.
Accidentally mixing oil with other chemicals would require "mistakes" like using the wrong type of oil tanker truck which is about
as likely as you using some random car on your street to drive to work. Unless this chemical was a essential for operation of oil
distribution infrastructure (oil tanks, pipelines, pumping stations) it had to be introduced as an act of sabotage. And even if
it was some cleaning agent, such "incompetence" pushes the sabotage limit.

Oreshkin assessed the impact of oil prices on the Russian economy

https://tvzvezda.ru/news/vstrane_i_mire/content/201992546-Eq6E6.html

The Russian economy will not be under serious pressure and will retain the ability to invest even if oil prices drop to $ 40 per barrel. This was stated by Minister of Economic Development of the Russian Federation Maxim Oreshkin.

“The Saudis and I swapped places in the oil market: they need $ 70 per barrel, and 40 will suit us. Although, of course, better than 60 is the optimal price,” Oreshkina quotes TASS.

The minister cited the example that if in 2014 Russia needed oil at $ 115 per barrel in order to maintain the budget and balance of payments, now this amount is up to $ 45.


If oil prices fall, no disaster will happen in Russia, the minister said. The protection for our country in this case, according to Oreshkin, is the macroeconomic structural reforms carried out over the past few years. This is a mechanism for buying currency, and a budget rule, and much more.

Well New Zealand was embarrassed when it was revealed that a New Zealand milk product was contaminated a while back.

Turns out a chinese partner was watering down the milk but that resulted in test levels showing the reduced levels of certain elements the milk was promoted as having... so they added melamine to the powdered milk formula to hide that they were using less powder to reconstitute it than they were supposed to so they could make more formula cheaply. Normally it wouldn't be a problem, but when the person drinking the formula drinks nothing else then obviously there are serious consequences including deaths and serious health issues.

The milk powder was not contaminated as such, the melamine was added intentionally to make it seem like there was more milk powder in the drink than their actually was.

Not really something the NZ companies could control except to fire that company of course.

Austin wrote:Oreshkin assessed the impact of oil prices on the Russian economy

https://tvzvezda.ru/news/vstrane_i_mire/content/201992546-Eq6E6.html

The Russian economy will not be under serious pressure and will retain the ability to invest even if oil prices drop to $ 40 per barrel. This was stated by Minister of Economic Development of the Russian Federation Maxim Oreshkin.

“The Saudis and I swapped places in the oil market: they need $ 70 per barrel, and 40 will suit us. Although, of course, better than 60 is the optimal price,” Oreshkina quotes TASS.

The minister cited the example that if in 2014 Russia needed oil at $ 115 per barrel in order to maintain the budget and balance of payments, now this amount is up to $ 45.


If oil prices fall, no disaster will happen in Russia, the minister said. The protection for our country in this case, according to Oreshkin, is the macroeconomic structural reforms carried out over the past few years. This is a mechanism for buying currency, and a budget rule, and much more.

Only 7% of Russia's GDP depends on oil and gas sales. The Russian budget depends on these exports to the level of 17%. There will be
no 50% collapse in this sector. All the talk about super cheap oil is utter BS. The intrinsic demand for both oil and gas is not shrinking
and the only reason we have such large price swings is because of manipulation via futures and other means. For example, US gasoline
stocks are used to set the WTI oil price. This is patent nonsense since gasoline stocks have nothing to do with global oil demand and
supply. Global oil supply is tight and the only big supply increase has been in the USA via tight oil plays such as the Bakken. These tight
oil plays are running out much faster than conventional oil plays for obvious reasons. Deliberately playing the futures to underprice oil
is delusional BS that is running out of steam since reality of global oil supply is catching up and fast.

kvs wrote:Only 7% of Russia's GDP depends on oil and gas sales.   The Russian budget depends on these exports to the level of 17%.   There will be
no 50% collapse in this sector.   All the talk about super cheap oil is utter BS.   The intrinsic demand for both oil and gas is not shrinking
and the only reason we have such large price swings is because of manipulation via futures and other means.   For example, US gasoline
stocks are used to set the WTI oil price.    This is patent nonsense since gasoline stocks have nothing to do with global oil demand and
supply.   Global oil supply is tight and the only big supply increase has been in the USA via tight oil plays such as the Bakken.  These tight
oil plays are running out much faster than conventional oil plays for obvious reasons.    Deliberately playing the futures to underprice oil
is delusional BS that is running out of steam since reality of global oil supply is catching up and fast.

Well said....they've doing the same thing with the Gold price, although they haven't been able to prevent it's recent rise....likely has much further go over the medium-long term

PhSt wrote:

Prime Ministers of Belarus and Russia initialed Union State integration program

GORKI, September 6. /TASS/. The Prime Ministers of Belarus and Russia Sergey Rumas and Dmitry Medvedev have initialed the integration development program within the Union State and approved a list of 31 roadmaps for implementing the document, the Belarusian Prime Minister announced following talks with his Russian counterpart.

"We put our visas under the action program and approved a list of 31 roadmaps," he said.

Rumas noted that by December "a package of the program of action, a list of roadmaps and several intergovernmental agreements" should be prepared and submitted to the two presidents for signing.

This year marks the 20th anniversary of the signing of the Treaty on the Creation of the Union State between Russia and Belarus.

I think all this formalities with Belarus concerning the Union State is just a waste of important time, Russia needs to get straight to the point and incorporate Belarus as a Russian oblast or if not, a Russian republic at the very least.

You are right, Lukashenko is paving the way for another Maidan like Yanukovich. He is tries to act like some "independent" player
like Ceausescu and meets with US regime change commissars (I can call them that since that is what they are). Unlike Russia,
Belarus has a lot of pro-west idiots who can create a critical street mob mass to stage regime change.

Yeah, to be honest if it is not their choice to join Russia then Russia does not need the burden... let them have a Maiden of their own and let them enjoy the benefits of being part of the west... anything of value stripped of that value and then sold off and then run to the west with the money.

The irony will be when it happens to the US and Wall Street tanks and all those billionaires disappear via their private jets and boats to far away places with low tax rates and not too many dark skinned people...

GarryB wrote:Yeah, to be honest if it is not their choice to join Russia then Russia does not need the burden... let them have a Maiden of their own and let them enjoy the benefits of being part of the west... anything of value stripped of that value and then sold off and then run to the west with the money.

The irony will be when it happens to the US and Wall Street tanks and all those billionaires disappear via their private jets and boats to far away places with low tax rates and not too many dark skinned people...

It saddens me that all it takes is a minority to take over power. The Banderite part of Banderastan is at best 40%. In Belorus some
pathological NATO-loving subset is at best 30%. But with enough street theater, two-bit dictators like Lukashenko can fall. Into
the vacuum move in the NATO installed maggots. Lukashenko originally was a very positive force for Belorus. He did not impose
the monetarist shock therapy voodoo that Russia was subjected to. But over time he has left the sanity reservation. BTW,
Ceausescu was supporting the Prague spring until he went to North Korea in 1970s and found a new religion.