Russian Economy General News: #3

Austin wrote:kvs or some one can tell me what happens if Rouble currently pegged against USD/Euro moves to pegging against Yuan/Gold ?

Is that something possible and can be tried as long term solution ?

In few years Russia will have their own gold backing for Ruble without the rest of reserves. The only thing we are actually waiting is Chinese show of real size of Chinese gold reserves and provoking of US to show their real reserves, which are most probably at 0 tons as China buy them all. Than USD and Euro will fall against gold, while Ruble and Yuan will keep their value against gold as they will have gold backing. This will bring an opposite situation, when you will have to pay a lot of USD or Euros for 1 Ruble or Yuan.

Austin wrote:kvs or some one can tell me what happens if Rouble currently pegged against USD/Euro moves to pegging against Yuan/Gold ?

Is that something possible and can be tried as long term solution ?

It all depends. If it was pegged to gold, rubles value would shoot up more than likely but may fluctuate depending on its reserves. Russia has a lot, but quite a bit less compared to speculations on Chinese, German, French and other countries gold reserves. So its value would still be less. As well, having a currency shoot back up with the lower value of oil, will hurt the Russian budget and possibly growth in gdp. As well, it may become too expensive to do trade in that currency. May limit investors to that currency and market too (all depends really).

Peg it to Yuan can be good and bad. It may still be worthless to US and Euro but may be worth it for other countries. Right now, Yuan is at a good spot to Ruble 8rub/yuan and at that point, it becomes cheaper for Chinese enterprises to get into Russian market. Pegging it to Yuan may have little to no difference.

Austin wrote:Ahead of Putin's India visit, US warns not good time for business with Russia

Comment at the end sure sounds like blackmail or open threats. From some perspective, Russian and Indian ties are slowing down and not that good anymore. In this case, it would be India's fault due to them turning to US. It is US that funds Pakistan yet India seeks better relations with a country that did them harm in the recent past. India needs to be real careful. But I hope Modie will fix this. Putin said he will not address Indian parliment when it was requested of him.

sepheronx wrote:

Austin wrote:Ahead of Putin's India visit, US warns not good time for business with Russia

Comment at the end sure sounds like blackmail or open threats. From some perspective, Russian and Indian ties are slowing down and not that good anymore. In this case, it would be India's fault due to them turning to US. It is US that funds Pakistan yet India seeks better relations with a country that did them harm in the recent past. India needs to be real careful. But I hope Modie will fix this. Putin said he will not address Indian parliment when it was requested of him.

What India needs is to through out Lobbistic scum like Modi who are going after money and bring India in jeopardy. It is not that US harmed india in recent past, they are still doing, US is one of the worst military suppliers, they politizes everything, meaning india will cripple down their military capability or they are forced to ass lick again Anglo Saxons arses like India had to do in the past. I don't know how people seem to be pro modi when he is obviously making decisions that are short and long term horrible for Indias security.

Austin wrote:kvs or some one can tell me what happens if Rouble currently pegged against USD/Euro moves to pegging against Yuan/Gold ?

Is that something possible and can be tried as long term solution ?

The ruble is no longer pegged to anything. It is free floating. The government always planned to fully float the ruble in the near future
but was forced to act early because of the NATO engineered speculative attacks. I do not see any pegging to anything in the future.
If the ruble tracks the yuan at some stage it will be because of pure market behaviour (i.e. Russia will be seen to be dependent on
China).

By fully floating the ruble, Russia does not need to deplete its reserve funds to prop up some exchange rate. Russia has removed
the main attraction of speculative attacks on the ruble: the extraction of Russian reserve money. We already see the ruble
settling into a new plateau:

http://www.xe.com/currencycharts/?from=USD&to=RUB&view=1W

Even if the Rouble is fully free floating , it is still pegged to Euro/Dollar basket.

Hence CB is spending its dollar to defend the rouble going above 60 for Euro/Dollar basket.

Free floating simply means that rouble would behave as per its market strength but thats the ideal thing , In real world they still get speculative attack and CB has to burn USD to stabalise rouble.

Austin wrote:Even if the Rouble is fully free floating , it is still pegged to Euro/Dollar basket.

Hence CB is spending its dollar to defend the rouble going above 60  for Euro/Dollar basket.

Free floating simply means that rouble would behave as per its market strength but thats the ideal thing , In real world they still get speculative attack and CB has to burn USD to stabalise rouble.

Your use of the term "pegging" is confusing and incorrect. Also, you are wrong about the the volume of CBR interventions.
You claim that nothing has changed. That is BS and the amount the CBR is throwing in now is vastly less than it was before
the ruble was fully floated.

http://www.cbr.ru/eng/hd_base/?PrtId=valint

kvs wrote:

Austin wrote:Even if the Rouble is fully free floating , it is still pegged to Euro/Dollar basket.

Hence CB is spending its dollar to defend the rouble going above 60  for Euro/Dollar basket.

Free floating simply means that rouble would behave as per its market strength but thats the ideal thing , In real world they still get speculative attack and CB has to burn USD to stabalise rouble.

Your use of the term "pegging" is confusing and incorrect.    Also, you are wrong about the the volume of CBR interventions.
You claim that nothing has changed.   That is BS and the amount the CBR is throwing in now is vastly less than it was before
the ruble was fully floated.

http://www.cbr.ru/eng/hd_base/?PrtId=valint

Thats true partly because Rouble has depriciated more beyond 50 and partly because due to free floating the currency intervention is not predictable as was before.

I strong feel they should have made Rouble Free Floating 6 months back would have saved CB many 10's of billion dollar.

But then in this week CB did intervene atleast spending $2-3 billion on propping Rouble.

Lets see this week how it goes , When the intervention becomes predictable then speculation becomes more , Right now it seems CB is defending Rouble going past 60 for Euro/USD basket hence the intervention has become predictable and so is speculation.

I see no reason why the rouble should not stabalise as Oil price is stabalised between 60 and 70 USD , Unless these Speculation are engineered by external factors and powers.

I found out how much 1 billion barrel of Oil would cost at todays rate of $70 it would be around USD 70 billion.

Considering Russia sells around 525 Million Tons of oil around 3.7 bbl of Oil around $ 260 Billion at current low rate.

This is probably the lowest rate for Oil .....lets see how it goes.

Rosneft says its proved reserves are at 122 bboe

On rising costs:
“I want to remind you that, by its production and financial results, Rosneft is one of the leaders of the global oil and gas industry. We have the best resource base -- our reserves by Russian classifications are 122 billion barrels of oil equivalent.

http://www.rosneft.com/news/Rosneft_in_the_Media/03102014.html


Thats around $8.5 Trillion worth of oil for Rosneft alone and for current proven reserves.

Free floating does give another potential ,you need less $ to defend your currency the more offset it is , eg. its less demanding on reserves to defend 60ruble/dolar then 45ruble/dolar.
It gets harder to speculate and perform devaluation the more artificialy unbalanced the rate is comapared to reality.
And after that certain point the speculation only works if the population starts panicking and goes after $$$... thats why media hype all over place...thats why its important that people dont fall for it ,and have confidence. Russia is a net exporter it will have forex reserves income always.

Falling oil price would devaluate ruble on its own maybe 20% max and sanctions on western credit 5-10% ,the rest is speculation. 45rub/$ would be more realistic today.

the very reason that currency line rub/doll , is flatlining , is a sign that at least some of the speculators got burned.

The best defense is attack. Russia must work with China, India and the likes to dethrone the dollar and establish yuan as the dominant currency.
Then they can divide Europe as the spoils of war. Europeans are already slaves for decades they will fill no difference.
Of course Russian people pay the mistakes of the past. When eg complying with USSA for Iran or complying with the Jews in every single genocide they committed
or letting Serbs get raped it was just a matter of time for the Zionists to attempt the very same tricks against them.
But is never late, Chinese economic might is unstoppable and nukes can guarantee that West can't go completely off hand before the East gain the decisive momentum.
It will be a wild ride for the next 10-20 years but all the strategic factors are towards their side. You just need to think big and be dedicated.

http://finance.yahoo.com/news/russias-economy-shrunk-much-now-191000983.html

Now Russian GDP has shrunk so much it is no longer the world's eighth largest economic power, according to The Telegraph. Instead, Putin's Russia is now carries roughly the same economic weight as ... Spain

Hilariously inane "news" spewed by retards. Actually, f*cktards.

The nominal value of the GDP is a meaningless number and that is trivially obvious. This why actual economists and not
two bit hacks in the yellow press use PPP (purchasing power parity) GDP for comparison. There is such a thing as the
physical economy, it consists of people going to work and goods and services being delivered. None of these have shrunk
by the nominal exchange value of the ruble against the dollar. The forex rate does not determine the value of the size of the
economy. It can have negative effects such as inflation and disruption of import chains in manufacturing but these effects
are not on the 50% scale of the forex change.

To be honest for taking an accurate estimation of gdp is better to take into consideration both nominal and PPP simultaneously because in a way both coexist when you try to measure the total yield of an economy compare to an other one. Curiously when you compare your economy with your own previous performances taking only PPP into consideration is more adequate.
In other words Russia's economy is as big as ever was but her global weight decreases, let us put it like this.

Hannibal Barca wrote:To be honest for taking an accurate estimation of gdp is better to take into consideration both nominal and PPP simultaneously because in a way both coexist when you try to measure the total yield of an economy compare to an other one. Curiously when you compare your economy with your own previous performances taking only PPP into consideration is more adequate.
In other words Russia's economy is as big as ever was but her global weight decreases, let us put it like this.

How is the nominal value relevant? Canada's exchange rate went down against the US dollar but the GDP did not decline.
So fluctuations of the nominal value of the GDP based on the exchange rate are meaningless. If you are going to
use nominal values then use rubles and not dollars.

Russia goal should not be to dethrone USD or Euro but to protect it self from USD and Euro risk.

So if pegging against gold or yuan reduces that risk then its worth to protect its economy and bring stability to it.

USD and Euro will fall on its own shortcoming no one has to do any thing either way to make it fall or rise.

Russia Could Introduce a Gold Ruble Tomorrow

kvs wrote:

Hannibal Barca wrote:To be honest for taking an accurate estimation of gdp is better to take into consideration both nominal and PPP simultaneously because in a way both coexist when you try to measure the total yield of an economy compare to an other one. Curiously when you compare your economy with your own previous performances taking only PPP into consideration is more adequate.
In other words Russia's economy is as big as ever was but her global weight decreases, let us put it like this.

How is the nominal value relevant?  Canada's exchange rate went down against the US dollar but the GDP did not decline.
So fluctuations of the nominal value of the GDP based on the exchange rate are meaningless.   If you are going to
use nominal values then use rubles and not dollars.  

Problem is that your national economy is not a closed system which means that interacting with other economies you have to take into account exchange rates.
You can nominate with dollar or not but since so far international interactions of Russia take place in dollars, dollar is the currency with which you have to nominate.
Nominating in Ruble means that you practically end up with a PPP measure all over again, well sort of. Which means that for USA PPP and nominal is practically the same.
Problem with this is that for someone who is not interacting in Ruble with Bulgaria or Romania or Phillipines or etc nominating in ruble has zero econometric importance...
one of the pluses of having the reserve currency.

The EU and US, along with Japan are the most air inflated of national currencies. I'd add Australia and a few others.

If Russia is to reorientate Eastward, then it makes perfect sense to have a lower currency.
Because thats who it will buy and sell with.

All the rest is US-centric drama bullshit.

kvs wrote:http://finance.yahoo.com/news/russias-economy-shrunk-much-now-191000983.html

Now Russian GDP has shrunk so much it is no longer the world's eighth largest economic power, according to The Telegraph. Instead, Putin's Russia is now carries roughly the same economic weight as ... Spain

Hilariously inane "news" spewed by retards.   Actually, f*cktards.

The nominal value of the GDP is a meaningless number and that is trivially obvious.   This why actual economists and not
two bit hacks in the yellow press use PPP (purchasing power parity) GDP for comparison.   There is such a thing as the
physical economy, it consists of people going to work and goods and services being delivered.   None of these have shrunk
by the nominal exchange value of the ruble against the dollar.   The forex rate does not determine the value of the size of the
economy.   It can have negative effects such as inflation and disruption of import chains in manufacturing but these effects
are not on the 50% scale of the forex change.

I like how they mention they dont know what the number is at the end of the article. People at the telegraph are not very smart. To mention, Russian gdp growth stands ar 0.7%. If their gdp dropped, it would show a contraction.

As for gdp ppp, it makes more sense for Russia to use PPP than nominal simply because of import substitution, minerals and energy are from the country. Hard to even do nominal now since Russia signed agreements to have trade done in respective currencies.

http://www.finmarket.ru/news/3884138
Russia's GDP may remain in negative territory in the next 2 years - Gref

Thats a bold prediction. I doubt he may be right as the ministers all have a different opinion.

http://www.finmarket.ru/news/3884169

Same guy. Saying it isnt speculators fault for currency devaluation.

sepheronx wrote:http://www.finmarket.ru/news/3884169

Same guy. Saying it isnt speculators fault for currency devaluation.

Gref is a monetarist 5th-columnist, he needs to be jettisoned out of the airlock asap! Rouble devaluation is clear-cut work of hedge fund speculators such as George Soros (who's openly anti-Russian, and who financially supports anti-Russian groups btw).

magnumcromagnon wrote:

sepheronx wrote:http://www.finmarket.ru/news/3884169

Same guy. Saying it isnt speculators fault for currency devaluation.

Gref is a monetarist 5th-columnist, he needs to be jettisoned out of the airlock asap! Rouble devaluation is clear-cut work of hedge fund speculators such as George Soros (who's openly anti-Russian, and who financially supports anti-Russian groups btw).

You may be right. Sberbank is owned by CBR and this guy is saying questionable things. GDP drop would have been evident this year as Russia was caught unprepared, yet it is still growing. While next year, many enterprises will be churning out the new production (import substitute) as well new agriculture industries as well as new harvest. So I have no idea where they get their figures from.

The current oil price drop and consequently rouble devaluation is a short and temporary phase , 3 months down the line I see Oil Prices going up and rouble to be in better shape.

Maybe. Im not putting my bucks into that prediction. We in canada are about to be hit hard now that Canadian Heavy Crude is below $50bbl.

That said, Putins initiative is aimed at small companies and tax evaders.

http://m.rbth.com/business/2014/12/08/putin_declares_amnesty_for_returning_capital_tax_breaks_for_small_bu_42055.html

If so, the proposel for small business is definately on the right track. I have also read that it also means if the business for the first 3 years shows transparency in its audit, then no further audits are needed. This saves thousands of Rubles. So in other words, less government control.

Lower oil prices are good for Russia in long run I believe. As the aim is to push export of finished products to the open market. Devaluation of ruble is also good to keep production costs down, without forcing people to work for next to nothing. But fighting inflation needs to be done. If they can reduce inflation through more internal competiton, then that will benefit Russia.

As one professor stated in moscow in the article I posted, they are moving to an internal demand economic structure.