Russian Economy General News: #5

Maximmmm wrote:Smaller banks are failing left and right though.
The really good thing is that the gov insurance of bank accounts is up to 1.4mil roubles. Our family had some interaction with the insurance process and it works pretty well.
On the one hand the culling of weak banks that don't have their shit together is good, on the other hand the same owners often reopen within a year, sometimes even in the same building. We need stronger criminal laws that target loose bank owners/managers. Otherwise we're just wasting taxpayer money.

PapaDragon wrote:

Project Canada wrote:Russia begins mass destruction of illegally imported food

http://www.rt.com/business/311759-russia-food-embargo-destruction/


I dont know why it is such a big issue for some people in Russia (mostly opposition) when the ruble is trading like 60 per US dollar, I know it's lost its value but why even bother compare it to the US dollar? an Enemy currency, a currency of a nation that has limitless hostilities against Russia! this is the primary reason why Putin should work double time to thrash the US economy and demolish it completely from it's current position as the dominant economic power in the world.

No need to get all dramatic my friend. That petition was on Change.org which is US website so it is only an issue for USA crowd (read Ukrainian)

Contraband burns, mass media trolls, life and business goes on...

Maximmmm wrote:Smaller banks are failing left and right though.
The really good thing is that the gov insurance of bank accounts is up to 1.4mil roubles. Our family had some interaction with the insurance process and it works pretty well.
On the one hand the culling of weak banks that don't have their shit together is good, on the other hand the same owners often reopen within a year, sometimes even in the same building. We need stronger criminal laws that target loose bank owners/managers. Otherwise we're just wasting taxpayer money.

Vann7 wrote:Comparisons between US vs Russia salaries in dollars ,without comparing the needs of each side
are pointless. In US the education system is one of the most expensive shit ever invented.. The average student who study long careers wants to be serious and get a PHD gets in debt for life time. Somewhere i read students gets in debt for near 1 million dollars for its whole education cost,. Such ridiculous cost of educations does not exist In Russia education system is cheap in comparison and there are according to others a lot of help from the government.  The Medical care.. in US is one of the most expensive in the world..  .. The average american ,middle class needs 2-3 jobs work at least 6 days a week, to decently raise a small family living from the minimum hourly wage . unless you have a well paid job. Transportation system and food is also more things people needs to take into account..

So if for example..
is the head of a small family earns in America 5,000 a month..   and in Russia he earns only $1,000.. that means nothing in real practice , if the first one will pay far more for Education ,medical care and housing/rent maintain ,taxes , etc etc etc. Don't know how is Russia taxes operate.. but in America you pay many taxes..federal income taxes ,state taxes, city local taxes ,Urbanization fees ,school fees . the direct taxes of everything you buy and every year you also need to submit a report of your gross income every year  and pay more .. and if you own a property in a rural place with half acre of land for every new extension to your house you need to pay Big tax..  even if you used your own money in your own property and the government did nothing at all . they tax you for improving your house..The you have mandatory this and that that you need to pay if you start a business. they give you a "license" and piece of paper ,that takes seconds to make in printer and charge you $300 to dollars for it. and you need "Renew the license" as they call it.. and pay every year for their blessings.. a piece of paper that takes a second to make.. then pay a certificate for health ,another for this or that. ,they will invent anything to get more money from you.. when you sum all.. you end paying like $thousands a year in certificates and papers ,if you have your own small business. Is no surprise why so many american business moved to China.. to avoid all that endless taxes thing. In short there is endless taxes you pay in the west.. Instead of the Government encourage you to make a business ,they do the opposite ,and makes you pay more for even try.. and dont dare to improve your house of they will tax you for every new meter of construction in your property.

Then you see later they use all that collected money ,to raise themselves their own salaries ,more benefits and free travels ,free food , free hotels..free car and even free housing for the elite , the whole system of capitalism the way is implemented in America needs to implode it sucks.. Is Big irony that in US ,the elite experience life more closer to a communist rich state ,where they are provided with almost everything for free and very luxury life..is for nothing the Senate in USA is called the club of millionaires.  And comparisons between West and Russia without measuring how much cost every thing you will have to spend if you live an average life will not show the real cost of living. So it should be more about how much it really cost living there.. in the place used currency ,instead of how much they  earn.

KoTeMoRe wrote:
Yeah but the problem is that "rationalization" in the long term is even more dangerous for the state. If you have only a few (5/6) huge banks in the country, the risk is big to get one upped by Foreign Banks. Having SOME smaller scattered banks makes a buyout process far more difficult. The Risk of a big default and domino effect rises exponentially.

Maximmmm wrote:

KoTeMoRe wrote:
Yeah but the problem is that "rationalization" in the long term is even more dangerous for the state. If you have only a few (5/6) huge banks in the country, the risk is big to get one upped by Foreign Banks. Having SOME smaller scattered banks makes a buyout process far more difficult. The Risk of a big default and domino effect rises exponentially.

For sure, there definitely needs to be some happy middle where there's enough smaller banks to provide ample competition and risk to keep the market healthy. I was just saying that as it stands now, the situation is a bit skewed towards the other side of the spectrum.

sepheronx wrote:

Maximmmm wrote:

KoTeMoRe wrote:
Yeah but the problem is that "rationalization" in the long term is even more dangerous for the state. If you have only a few (5/6) huge banks in the country, the risk is big to get one upped by Foreign Banks. Having SOME smaller scattered banks makes a buyout process far more difficult. The Risk of a big default and domino effect rises exponentially.

For sure, there definitely needs to be some happy middle where there's enough smaller banks to provide ample competition and risk to keep the market healthy. I was just saying that as it stands now, the situation is a bit skewed towards the other side of the spectrum.

well, pray it doesn't happen like here with TD, CIBC, RBC and BMO.  Maybe Russia could go the way of allowing credit unions which do operate somewhat differently.

Anyway, seems like every day there is a bank name I never heard of from Russia.  Must be ridiculous amount of banks.

A worrying lack of understanding of economics in this article. "Although expenditures on national defense jumped in 2015 by almost 33%, up to $52.29 billion, the weakening national currency decreased the real value of this money almost by half".....if all the items procured were entirely sourced from within the Russian economy, then the real growth in Russia's military expenditure presumably remains at 33%. The issue for the West is whether the budget has remained the same in constant rubles. In a TASS article published on 15 April, Deputy Defense Minister Tatiana Shevtsova said that Russian spending on arms would hit 2 trillion rubles this year, against 1.7 trillion rubles in 2014, an increase of 18%; whereas as recently as October 2014, the head of the State Duma's defense committee, Admiral Vladimir Komoyedov, said (Interfax press release) that the 2015 national defense budget would reach a record 3.3 trillion rubles. So the fall against plan in real terms, in just six months, was 40%. Before the oil price crash and western sanctions began to bite late last year, fully one half of Russia's state expenditure was funded by oil sales; so, taking into account inflation (currently 16%), the real outcome for this year and next must be a collapse in defence expenditure. Despite the posturing, Russia is toast.

Janet Yellen’s comment last week at the International Monetary Fund headquarters in Washington, D.C., that stock prices are “quite high” hardly captures the frothiness in U.S. financial markets. The Federal Reserve chair’s admission also stopped short of acknowledging the role of free money in inflating the price of stocks—as well as the price of bonds, houses and every other financial asset.

At Morgan Stanley Investment Management, we have analyzed data going back two centuries and found that until the past decade no major central bank had ever before set short-term interest rates at zero, even in periods of deflation.

To critics who warn that pumping trillions of dollars into the economy in a short period is bound to drive up inflation, today’s central bankers point to stagnant consumer prices and say, “Look, Ma, no inflation.” But this ignores the fact that when money is nominally free, strange things happen, and today record-low rates are fueling an unprecedented bout of inflation across asset prices.

The Fed’s defenders quibble that houses are less pricey than in the bubble of 2007, or that stocks are less pricey than in 2000, which misses the difference this time around. In the past 50 years, valuations of U.S. stock prices have been higher than they are now for less than 10% of the time, and similar figures hold for bonds and houses. This kind of synchronized boom has never happened, not even before the last two major meltdowns. My research team’s composite valuation for the three major financial assets in America—stocks, bonds and houses—is currently well above levels reached during the bubbles of 2000 and 2007.

Faith in the Fed’s easy-money policies has encouraged a dangerous complacency. The mantra on Wall Street is that good economic news is good news for the markets, but that bad news is also good news, because it will encourage the Fed to keep rates lower for longer. This has led to one of the longest rallies the U.S. stock market has ever experienced, without even a 10% correction. Returns since 2012 are the highest for any three-year period in recorded history, after adjusting for the risk of holding stocks.

The Fed’s approach has spread to central banks in Europe, Japan and China, creating a new world in which investment decisions are guided by the availability of easy money, not opportunity. Over the past three years, global stock prices have risen rapidly despite tepid economic growth. Oh well, the central bank responds: We target consumer prices, not assets.

This job description is outdated, because the task is largely done. In emerging nations, the average annual growth of consumer prices now hovers around 5%, down from a peak of 116% in 1994. Add in the rich countries, which are generally more stable, and global inflation has fallen to 2% today from near 20% in the early 1970s.

Central bankers are still fighting to control consumer prices, only now for the opposite reason. Rather than raising interest rates to contain consumer spending and inflation, they hold rates down to encourage spending and induce inflation, because the global inflation rate of 2% is dangerously low in their view. The fear is that slowly rising prices will tip into falling prices. The boogeyman is not hyperinflationary Germany of the 1930s, but deflationary Japan of the 1990s, when the country fell into a downward spiral of falling prices, weak demand and stagnant growth.

Japan taught the world two lessons: that consumer price deflation is bad for growth and that it is hard to shake. Both are inaccurate. Before World War I, many nations experienced deflation, sometimes driven by weak demand and leading to weak growth, but as often driven by rising productivity and accompanied by strong growth.

A recent Bank for International Settlements study on the postwar period found that long bouts of deflation were exceedingly rare, but short bouts were common. More important, average annual GDP growth was roughly the same regardless of whether prices were rising or falling. The upshot: Consumer price deflation is not necessarily bad for growth.

One problem is that the world changed faster than the Fed. Trade has jumped to 60% of global GDP from 40% in 1980, and increasing competition puts downward pressure on consumer prices. The forces of expanding supply from China to Mexico are pushing the global average inflation rate down to a level that looks scary low only when compared with the 1970s highs. In fact, consumer price inflation is still above the long-term average, dating to the year 1200, which is 1%.

But global competition wields the opposite effect on asset prices. The opening of financial markets means that many more buyers are bidding up prices for stocks in New York, or real estate in Miami or bonds in Chicago. The result is that central banks are unleashing easy money to fight an imaginary villain, consumer price deflation, at the risk of feeding a real monster, asset price inflation.

Every major economic shock in recent decades has been preceded by an asset bubble: housing and stocks both before Japan’s meltdown in 1990 and before the Asian financial crisis in 1998; stocks before the U.S. dot-com bust in 2000; housing again before the crisis in 2008. Strikingly, even as asset prices were climbing before the busts of 2000 and 2008, the Fed kept monetary policy loose because consumer prices were rising only moderately. That is the same excuse we hear now, amid a price boom in stocks, houses and bonds.

It is true that bubbles are most dangerous when people are borrowing heavily, and are buried by debt when the bubble collapses. Because U.S. households have been cutting debt, Ms. Yellen says the situation is not unduly risky. But U.S. corporations are borrowing heavily, and not all bubbles are fed by rising debt.

The Fed now leads a culture of central bankers who see their job as reducing unemployment and stabilizing prices for consumer goods only, come what may in the markets. This needs to change. In a world in which high trade and money flows tend to restrain consumer prices but magnify asset prices, central banks need to take responsibility for both. After all, asset price inflation is as dangerous as consumer price inflation.

Mr. Sharma is the head of emerging markets and global macro at Morgan Stanley Investment Management and the author of “Breakout Nations: In Pursuit of the Next Economic Miracles” (Norton, 2012).

Austin wrote:http://aviationweek.com/defense/economy-casts-shadow-russia-s-military-plans

I was looking at the only comment , can some one post on the comment section with factual information

A worrying lack of understanding of economics in this article. "Although expenditures on national defense jumped in 2015 by almost 33%, up to $52.29 billion, the weakening national currency decreased the real value of this money almost by half".....if all the items procured were entirely sourced from within the Russian economy, then the real growth in Russia's military expenditure presumably remains at 33%. The issue for the West is whether the budget has remained the same in constant rubles. In a TASS article published on 15 April, Deputy Defense Minister Tatiana Shevtsova said that Russian spending on arms would hit 2 trillion rubles this year, against 1.7 trillion rubles in 2014, an increase of 18%; whereas as recently as October 2014, the head of the State Duma's defense committee, Admiral Vladimir Komoyedov, said (Interfax press release) that the 2015 national defense budget would reach a record 3.3 trillion rubles. So the fall against plan in real terms, in just six months, was 40%. Before the oil price crash and western sanctions began to bite late last year, fully one half of Russia's state expenditure was funded by oil sales; so, taking into account inflation (currently 16%), the real outcome for this year and next must be a collapse in defence expenditure. Despite the posturing, Russia is toast.

Austin wrote:http://aviationweek.com/defense/economy-casts-shadow-russia-s-military-plans

I was looking at the only comment , can some one post on the comment section with factual information

A worrying lack of understanding of economics in this article. "Although expenditures on national defense jumped in 2015 by almost 33%, up to $52.29 billion, the weakening national currency decreased the real value of this money almost by half".....if all the items procured were entirely sourced from within the Russian economy, then the real growth in Russia's military expenditure presumably remains at 33%. The issue for the West is whether the budget has remained the same in constant rubles. In a TASS article published on 15 April, Deputy Defense Minister Tatiana Shevtsova said that Russian spending on arms would hit 2 trillion rubles this year, against 1.7 trillion rubles in 2014, an increase of 18%; whereas as recently as October 2014, the head of the State Duma's defense committee, Admiral Vladimir Komoyedov, said (Interfax press release) that the 2015 national defense budget would reach a record 3.3 trillion rubles. So the fall against plan in real terms, in just six months, was 40%. Before the oil price crash and western sanctions began to bite late last year, fully one half of Russia's state expenditure was funded by oil sales; so, taking into account inflation (currently 16%), the real outcome for this year and next must be a collapse in defence expenditure. Despite the posturing, Russia is toast.

The Russian government's published 2014 military budget is about 2.49 trillion rubles (approximately US$69.3 billion), the third largest in the world behind the US and China. The official budget was set to rise to 3.03 trillion rubles (approximately US$83.7 billion) in 2015, and 3.36 trillion rubles (approximately US$93.9 billion) in 2016.

Austin wrote:Nice post Shepheronx.

I think inflation is something they need to be worried about more than any thing else.

With devaluated rouble defence export should be more aggressively targetted

kvs wrote:

Austin wrote:http://aviationweek.com/defense/economy-casts-shadow-russia-s-military-plans

I was looking at the only comment , can some one post on the comment section with factual information

A worrying lack of understanding of economics in this article. "Although expenditures on national defense jumped in 2015 by almost 33%, up to $52.29 billion, the weakening national currency decreased the real value of this money almost by half".....if all the items procured were entirely sourced from within the Russian economy, then the real growth in Russia's military expenditure presumably remains at 33%. The issue for the West is whether the budget has remained the same in constant rubles. In a TASS article published on 15 April, Deputy Defense Minister Tatiana Shevtsova said that Russian spending on arms would hit 2 trillion rubles this year, against 1.7 trillion rubles in 2014, an increase of 18%; whereas as recently as October 2014, the head of the State Duma's defense committee, Admiral Vladimir Komoyedov, said (Interfax press release) that the 2015 national defense budget would reach a record 3.3 trillion rubles. So the fall against plan in real terms, in just six months, was 40%. Before the oil price crash and western sanctions began to bite late last year, fully one half of Russia's state expenditure was funded by oil sales; so, taking into account inflation (currently 16%), the real outcome for this year and next must be a collapse in defence expenditure. Despite the posturing, Russia is toast.

Oh God not this devaluation crap again.   The expenditures are in rubles and the forex rate means f*ck all.   Military production and
deployment are not based on imports.    As for the numbers being floated they are clearly wrong.    There is no indication that the
Russian defense budget is being slashed by 50% in ruble terms.    Looks to me like a tail chasing pile of BS where the US dollar value
is being used.   So the defense expenditures are being devalued by 50% because of the forex rate.  

The Russian government's published 2014 military budget is about 2.49 trillion rubles (approximately US$69.3 billion), the third largest in the world behind the US and China. The official budget was set to rise to 3.03 trillion rubles (approximately US$83.7 billion) in 2015, and 3.36 trillion rubles (approximately US$93.9 billion) in 2016.

http://www.sputniknews.com/military/20131008/184004336/Russia-to-Up-Nuclear-Weapons-Spending-50-by-2016.html

http://www.themoscowtimes.com/business/article/russian-defense-budget-to-hit-record-81bln-in-2015/509536.html

The fraudulent budget numbers are cited here:

http://www.businessinsider.com/russias-military-upgrade-wont-be-stopped-2015-3

There is no source for the 1.7 trillion rubles in 2014.   The Russian GDP in 2014 was 71.4 trillion rubles.   The defense spending was 3.4% of
this which translates into 2.4 trillion rubles.    Clearly the Business Insider figures are trash and so are the ones in the comment.

Austin wrote:Russia overtook Germany GDP

http://www.sdelanounas.ru/blogs/66262/

Fresh recount data from The World Bank (1 July 2015). It showed that Russia overtook Germany last year, and despite sanctions, falling oil prices and the Ukrainian conflict, Russia's economy has steadily ranked fifth in the world in terms of GDP.