Russia - General Discussion.

[Karl Franz]

In some similarities, US and Russia administration responsible to each nation inflation rate due to artificially increase money supply. Both to keep prepping up consumer spending to combat crisis effect. US mostly to covid crisis and Russia to war crisis.

Eventough the scope is hugely different, but the effects cause shown similarities. Even Fed need two year adjustment and even now Fed still not want to decrease interest as much as Trump demand. Russia with less price elasticity means the inflation get higher due to sudden influx of money supply, but Russia with 50%+ of GDP being reflect by consumer spending, has no other choices to bite down high interest rate and keep pumping money to maintain consumer spending. There's limit that Government project (including war related production) and commodities export can support growth, if the domestic consumption production is not also increase.

Seems this is why Russia also increasing their domestic consumption production as part of import substitution. They have to keep increase the production to level up with real income increase. Soft landing will not be gain if the level of production not reach parity with the money supply increase. It is game of chicken and egg. Any high inflation means the economy is overheating. Thus soft landing need to be achieved. That's what Fed's do (no matter what Trump demand) and that's what Russia need to achieve.

Agreed, both sides have similar problems stemming from money oversupply.

Increasing domestic production is generally a good thing and particularly in these circumstances. Russia still has some ways to go to match the goods and services on its market to the money supply, particularly important are imports of consumer goods from China primarily and other countries which serves as a cushion for inflation not allowing it to get in a runaway territory.

Russia does have some breathing room due to its extremely low debt which will allow it to borrow and then pump money into the economy for a longer time than a typical European country would be able to, however I don't believe they will go overboard with this and will instead focus on trimming inflation along the lines of Russia's central bank's position which is really hawkish when dealing with the inflation.

 

[Karl Franz]

They don't have the right to use this thematic when parading in Russia. If they want to parade with war criminals, it's their right. But they shouldn't tell us about "victory over nazism" because it's disgusting.
Yes, exactly as you put it. On top of other considerations.
LOL
According to the ideology at the Kremlin, Ukraine should be part of it. Indeed.
Thanks for pointing that out.
The most idiot idea is to think that they had a minute of silence for those who fell fighting the Nazi.

I think you are trolling here so not really interested in responding.

Estimation in USD have no meaning whatsoever. Actually, the Russian economy is disconnected from the dollar. As KipPotapych said, The Russian National Wealth Fund consists of two parts: liquid and “not so liquid”. Only 32% of it liquid. Almost all the liquidities are in Rubble, a little part in Yuans and an very small part in other currencies. And everything is calculated in Rubble.
Of the non-liquid assets, only gold has tangible, convertible value. And, as KipPotapych, again, was right to point out, it contributed to the fund revenues and to the overall economical sustainability. The rest of the non-liquid assets is valued abstractively as it has no market equivalent. It goes without saying that it's much much less than reported. The international exchange rate for the Rubble is also completely artificial.

When we talk about economic growth in Russia, it's growth in Rubble. The Russian government is spending the money in Rubble to pay for the war in Ukraine and defence spending. The money is spent in activities which are wasting the money with no economic return. They spend money to make bombs. The bombs explode, and nothing is left out of if. They spent money on salaries for soldiers to stay somewhere in Ukraine, then they return home without having made any productive activity. In other words, it's like paying people to do nothing. Such economic model is not sustainable.

So much to unpack here, actually never mind it would take too long so i will divide the response in two categories, the first concerning you ruble problem and the second concerning your growth problem.

Your claim that estimations in USD have no meaning is, well, meaningless. I seriously don't understand what you mean by that. Russian government calculates its budget in rubles because it is currency of the land just as the Indian government calculates in rupees and so on with different countries. The exchange rate then allows us to calculate it in US dollars, your claim that that the exchange rate is artificial is again meaningless because every exchange rate is artificial as each government monetary policy affects its currency exchange rate. Just to add, I don't know if you know this, but you can get on the plane in, for example, Istanbul, and land in Moscow with your USD or EUR and then exchange them in an exchange office for rubles using the exchange rate.

As far as Russia's economic growth is concerned people have already written here that it is multi factorial of which defense related expenditures are only a part but even that part is not wasted, as you would call it, and I will explain it to you using your bomb analogy. Depending on what type of "bomb" we are talking about, to produce it you would need an alloy of which the bomb is made. As Russia is reaching alloys it would be domestically sourced which means its mining industry is working and its refining industry is working refining the mined alloy into the usable one. Next the explosive factory producing the explosive is working as well as depending on the type of the bomb various electronics are either produced or imported, again contributing to an overall economy. All of these factories and mines are paying salaries, paying taxes, and acquiring profits due to high demand of their products in defense industry. Even the bomb factory itself while making a final product and delivering it to the Russian military, along with paying all their taxes and salaries and suppliers, is using that profit to either expand its production, thus making more profit or investing in RND to make better (more efficient) bombs.

Once the war is over there will inevitably be a reduction in necessary defense products, however this can be alleviated to a point by foreign exports, but on a flip side Russia gets a robust defense industry capable of successfully competing in the worlds arms market.

 

[Fredled]

your claim that that the exchange rate is artificial is again meaningless because every exchange rate is artificial as each government monetary policy affects its currency exchange rate.

No, that's not true. Hard currencies are fluctuating freely with the exchange market. They are not limited by the amount in which these currencies can be sold.

If you use the exchange rate at an Istambul exchange counter to estimate the value of the Russian Sovereign Fund or of the Russian Central Bank Reserve, you will be off by quite a large margin. LOL.

Depending on what type of "bomb" we are talking about, to produce it you would need an alloy of which the bomb is made. As Russia is reaching alloys it would be domestically sourced which means its mining industry is working and its refining industry is working refining the mined alloy into the usable one...

Exactly. And instead of using these precious resources for something useful, they are using them for something, not only useless, but that draws sanction on their country.

They produce expensive bombs or expensive missiles which will not only be destroyed a few days later, but will destroy something in another country, making Russia liable for damage and war crime.
By doing this, Russia has already accumulated a debt of over one trillion dollars toward Ukraine.
Sorry, but there is no more stupid use of resource.

I think you are trolling here so not really interested in responding.

Saying that you are not interested in a certain topic is fine. But as I'm not saying that you are trolling, I expect the same from you.

 

[Ananda]

Russia does have some breathing room due to its extremely low debt which will allow it to borrow and then pump money into the economy for a longer time than a typical European country would be able to, however I don't believe they will go overboard with this and will instead focus on trimming inflation along the lines of Russia's central bank's position which is really hawkish when dealing with the inflation.

Those economies who has lesser access and depth financial market attractiveness will always have to maintain lower level of financial debt. Nation who maintain good global financial market depth access, can maintain debt ratio close to their GDP level and some even more than their GDP. How depth their financial market shown how big debt ratio can be maintain.

The level of Sovereign fund and asset will act as backed to market possition. However it is also means their Sovereign assets has to be liquid to the market. The more government assets availability in financial market and sound Investment practice by government Investment arm, the more Investor assurance to buy your debt instruments.

Singapore as example has more than 170% debt to GDP, but government of Singapore already have many Investment on global market through their Investment arm Temasek. Temasek asset value in the market is around two third of Singapore GDP. That's also with Temasek sound Investment results, provide assurance in the Global market on Singapore financial market depth.

Russia still have more assets to back their debt, however at this moment their access to Global Financial market limited to mostly China, India, and Gulf market. Thus raising more debt in that condition means their Financial market consider to be thin, thus not provide good debt elasticity pricing. That's not providing much leverage for Russia Central Bank on raising more money in Global Financial market.

So yes, Russia Central Bank will then have to continue accumulate reserve to finance their imports and rebalancing domestic productivity after the sanctions. So far they are doing in line on that. Russia switching market to Global South, more precise Asian Global South. That's where Russia rebalancing their trade, thus external income. But they have to use their own reserve and not relied on Debt as their financial market attractiveness still thin. As long as they can maintain their domestic consumption and productivity plus accumulate enough reserve to support their trade, they still in stable condition despite Western sanctions.

 

[Ananda]

But they shouldn't tell us about "victory over nazism" because it's disgusting.

Some will say parading those who glorified Stepan Bandera which fights under Nazi cause, in Euro victory day, also disgusting to spirit of those who fight Nazi. Seems you are conveniently avoid that.

History is clear that USSR main factor to defeat Nazi and Eastren Front is significant cause on Nazi demise. Russia is main Republic and basically USSR main strength. Your emotional despise to Russia is your own right, but can not change the fact they are big part of Nazi demise. Russian have more rights to have VE day then those who still glorified Stepan Bandera.

So don't talk Russia doing in VE day is disgusting, while EU doing that. It is hypocrite saying only one side has the right for VE day.