Russian Economy General News: #12

Russian economy, currently, needs over 2 million workers. Increase in salaries would help mitigate that shortage, as well.

Russia's unemployment rate is very low by European standards. I doubt you will get even a third of that from salary increases. The only ways to cover that is to 1) import more workers or 2) use more automation and such so that you don't need as many workers.

Autodestruct wrote:

Russian economy, currently, needs over 2 million workers. Increase in salaries would help mitigate that shortage, as well.

Russia's unemployment rate is very low by European standards.  I doubt you will get even a third of that from salary increases.  The only ways to cover that is to 1) import more workers or 2) use more automation and such so that you don't need as many workers.

Only way to import workers are too raise salaries. I'm talking about importing qualified workforce, not some ditchdiggers from Tajikistan. Also, minimum wage should be raised.
These neoliberal economic policies are damaging regular people too much. Russia has been running budgets like it is a wartime since 2014. Consumers and small businesses are saddled with expensive short term loans.

Putting money and effort into training or retraining to get the workforce you want is also valuable in that you don't need to rely on imports that are not usually the ideal solution most of the time... you head hunt them from somewhere else there is a risk that some other country might just increase their offers and you lose them.

GarryB wrote:Putting money and effort into training or retraining to get the workforce you want is also valuable in that you don't need to rely on imports that are not usually the ideal solution most of the time... you head hunt them from somewhere else there is a risk that some other country might just increase their offers and you lose them.

Yes, that is definitely best option. But, economy is missing 2 million people due to demographics. Only this year, they didn't invest planned 1 trillion rubles in infrastructure due to labor shortages, among other reasons.
Salaries are low and ordinary citizens lost a lot of buying power, in big part, due to over restrictive policies of the central bank. I understand that they needed to fill up state coffers. Now, when that is done, they should let more money flow in the economy. Limit foreign purchases and even stop them for some time and lift oil cut off price for budget.
It would be mad to continue to pile money into reserves at this tempo, while consumers and small business are suffering.

Russia needs to speed up modernization of the economy and self reliance efforts before the US sanctions everything.

This chart shows nicely how manipulated exchange rates distort reality. In Rubles the russian economy grew 20+ times, but converted to Dollars just 7 times.

Hole wrote:
This chart shows nicely how manipulated exchange rates distort reality. In Rubles the russian economy grew 20+ times, but converted to Dollars just 7 times.

Area i highlighted is the problem. Last 10 years, give or take.
Russian government can't free itself of the neoliberal economic agenda. There's money to be redistributed and levers to be pulled, yet they are autistic and continue to pile up money in reserves. Their answer on the oil drop and sanctions of 2014 and now is the same, even though situation is vastly different. Commodity market is very strong and they hit monthly export record. But, all this doesn't mean much if regular person doesn't see it. Hopefully, they reverse the course and start spending more into economy, but that remains to be seen. Right now, they are still basing budget in ridiculously low oil prices and by doing that they are starving economy of money and growth.
Btw, whenever there is a ruble drop ( like one that just happened) they get an inflation spike, which in turn makes Nabiulina hike more, further starving economy and population of cash.
About 75% of consumer products in Russia is from imports and that get repriced higher fueling inflation. Instead of limiting foreign currency purchases they caught themselves into this self reinforcing cycle.
Direct consequence of that is pushing consumers into taking more loans in order to keep same quality of life. Levels of consumer debt per capita has exploded in last 10 years.
I'll go on a limb and say that if they don't stop with this nonsense, sooner or later they might get social unrest.

This group of neoliberals you mention. What is their long term take on this? I mean what is the strategy behind their behavior?

Preserving status quo? When it comes to economic policy, Russian is a neoliberal capitalism on steroids with some sprinkles of state capitalism. Whatever sectors they perceive as strategic will be owned by state and oligarchs that play ball. It is good for shareholders, as Ru companies pay big dividend.
Otoh, they are running war time budgets that are very bad for everyone not making foreign currency or exporting (small business and regular consumers). Russian public debt hit 215% of GDP, where bulk of the increase was taken by general population and small business. These are not cheap loans, as well.
It is a self defeating policy, cause of huge account surplus and state that is awashed in cash. Whether foreign reserves are $630 or $700 bln is same from perspective of  macro stability. Removing so much money from the system only means that there's so much less money in real economy.

I find it strange that a nation with a surplus would not use that for public infrastructure and other things. Then again I'm not a genius and am pretty ignorant on economics.

Are there new populist parties or alternative parties growing to change things in russia? Also what parties tend to lean to the west? Is there issues in russia of these oligarchs selling out their country? Also what do you think of Putin?

I have a mixed view on Putin. I mostly don't agree with him on economic policies. Also, i am against wasting money on huge sporting events. Not while country has much bigger problems to solve.
I see that communists did pretty well in last elections. I have a reason to believe that if this policies continue for longer they will grow further. Economic policies of modern communist party in Russia are more akin to social democracy of Europe than real communism.
Also, nationalists might grow stronger.

ALAMO wrote:

TMA1 wrote:I find it strange that a nation with a surplus would not use that for public infrastructure and other things. Then again I'm not a genius and am pretty ignorant on economics.

Russia has a non existing unemployment.
Official ratios are close to the natural level, which means you don't have labor to work on new processes.
If you locate assets on major infrastructural projects that are nongeneric - it means that those would accumulate additional GDP increase - it will start troubles.
Inflation is only one of them, and actually at the end of the road.
The most important is a price hike in all the businesses that will get access to those assets.
Sure you can order the construction of a road via all of Russia, but what would be the purpose?
They are investing infrastructure like there would be no tomorrow.
Only announced a road connection of Kamchatka to the main road system.
It makes in total about 5000 km of the new ducts, in harsh environment.
Second BAM line.
All the infrastructure with oil&gas ...
That is a bloody monster project altogether.

Infrastructure costs are connected with price of commodities and there's nothing much you can do about it. Good thing is that when there is an commodity inflation, Russia profits much more through exports. Just mark contracts higher for inflation and get them done. They will bring more benefit down the road.
This situation in world economy with commodity inflation is beneficial for Russia as a whole, as it builds up their current account. Just by stopping completely CBR purchases they would make ruble stronger and rein in inflation faster. Also, population purchasing power would be higher. Current mechanism they have is very bad.

The post 2014 sanctions "anemia" is mostly GDP accounting nonsense. I have posted on this more than once. Russian companies
paid off massive amounts of foreign debt. The total (private and government) external debt went from $740 billion US to $400 billion
in the span of several years. This all by itself hid the actual GDP growth induced by import substitution. The PPP factor does not
come into play here since the number of rubles required to pay off the dollar debt is fixed by the exchange rate. And it is those rubles
that are used to calculate the Russian GDP.

All foreign debt repayment is counted as a negative GDP contribution while any borrowing is counted as a positive. Borrowing on the
domestic market is also considered a GDP stimulus. This is why the west is a debt Ponzi racket where endless borrowing is used to drive
GDP "growth".

The CBR and the Russian financial press still corrupted with monetarists and Berezovsky maggots (e.g. Kommersant) calls debt retirement
"capital flight". Pure Orwellian newspeak. GDP accounting is a joke when debt tribute is counted as a positive thing. Foreign borrowing
should never be counted as a positive since it is the long term negative from debt payments offshore that matters. It is always bigger
than the initial borrowing amount. By the same token, debt retirement should not be considered a negative. The point here is that the
money flow cannot be assumed to come at the expense of value generating economic activity in the country. Not all saved money is
actively flowing through the economy as purchases and sales. This would render the concept of savings meaningless. Banks lending
out money is not literally recycling people's and companies' bank accounts. Banks create money from nothing in the fractional reserve
system and it is interest rates and obligation to repay the loans that pull this money back to the banks instead of just generating inflation.
(There is some inflation generated by this system but it is not a big deal, ultimately the macroeconomy does not conserve the money
supply). Also, Russian companies would have borrowed domestically to pay off their foreign debt. So the "capital flight" is not even
proper GDP accounting.

@kvs
I've never even mentioned anything about foreign debt repayment or capital flight. It still exists, but not in the amounts it used to. Cancelling tax agreements with offshore tax havens should put a lid on it further. What i am talking about is excessive purchases of foreign currency by CBR and austerity budget. One of the original premises of crearing a sovereign debt was a way to manage ruble exchange rate. That's according to Kudrin, whose team created it.
This scheme depletes economy of liquidity and gives outsized strength to the government in running economy.
You're trying to conflate what i wrote to something else. Russia doesn't need to borrow. Government needs to start spending more and suspend or limit CBR purchases.

Agreed. CBR though takes its orders from the IMF. The economic minister and banks have already told the CBR to take a hike over crypto. So I think CBR is losing its grasp.

miketheterrible wrote:Agreed.  CBR though takes its orders from the IMF.  The economic minister and banks have already told the CBR to take a hike over crypto.  So I think CBR is losing its grasp.

Nabiulina did a good job in the banking sector. They closed many shady bank and closed some offshoring options. Otoh, her monetary policy is very conservative. Big capital likes that.

The main point is that the exchange rate is manipulated by western bankers. Every time the russian economy grows by 5% the Ruble gets weaker by at least the same rate.

caveat emptor wrote:@kvs
I've never even mentioned anything about foreign debt repayment or capital flight. It still exists, but not in the amounts it used to. Cancelling tax agreements with offshore tax havens should put a lid on it further. What i am talking about is excessive purchases of foreign currency by CBR and austerity budget. One of the original premises of crearing a sovereign debt was a way to manage ruble exchange rate. That's according to Kudrin, whose team created it.
This scheme depletes economy of liquidity and gives outsized strength to the government in running economy.
You're trying to conflate what i wrote to something else. Russia doesn't need to borrow. Government needs to start spending more and suspend or limit CBR purchases.

It is about time that Russia and China reduce their dependency on the US dollar; I don't understand why Russia continued to buy US treasury notes to finance their major enemy's military to threaten them:

https://www.unz.com/proberts/russia-and-china-should-go-their-own-way/

andalusia wrote:

caveat emptor wrote:@kvs
I've never even mentioned anything about foreign debt repayment or capital flight. It still exists, but not in the amounts it used to. Cancelling tax agreements with offshore tax havens should put a lid on it further. What i am talking about is excessive purchases of foreign currency by CBR and austerity budget. One of the original premises of crearing a sovereign debt was a way to manage ruble exchange rate. That's according to Kudrin, whose team created it.
This scheme depletes economy of liquidity and gives outsized strength to the government in running economy.
You're trying to conflate what i wrote to something else. Russia doesn't need to borrow. Government needs to start spending more and suspend or limit CBR purchases.

It is about time that Russia and China reduce their dependency on the US dollar; I don't understand why Russia continued to buy US treasury notes to finance their major enemy's military to threaten them:

https://www.unz.com/proberts/russia-and-china-should-go-their-own-way/

Yeah, it was a real messed up plan by the CBR.

I think Russia would benefit by issuing its currency interest free like Guernsey:

https://www.michaeljournal.org/articles/social-credit/item/guernsey-s-monetary-experiment




Russia should strong consider the Chicago Plan to replace the poisonous Neoliberal monetary policy:


https://goldsurvivalguide.co.nz/the-chicago-plan-the-final-assault-in-the-war-on-cash/