Russian Economy General News: #1

flamming_python wrote:
The Western ones at least have proven to be more or less objective.

Standard & Poor's appeals landmark ruling in favour of NSW local councils

One of the world's biggest credit ratings agencies and a European investment bank will begin an appeal in the Federal Court in Sydney today to try and overturn a landmark ruling that they misled local councils.

In late 2012, the court ruled that 13 New South Wales councils were deceived because Standard & Poor's gave complex investments a AAA credit rating, the highest investment ranking.

The councils lost most of their money when the product, a Constant Proportion Debt Obligation (CPDO), plunged in value during the global financial crisis.

The judge, Justice Jayne Jagot, granted them nearly $30 million in compensation.

S&P, ABN AMRO, the European bank which created the investments, and Local Government Financial Services, which sold the product to the councils, are appealing the judgment to the Full Court of the Federal Court.

S&P told the ABC in a statement that it is not responsible for investment decisions and investors need to do their own analysis.

"It is bad policy to enforce a legal duty against a party like S&P, which has no relationship with investors who use rating opinions, yet impose no responsibility on those investors to conduct their own due diligence," the statement read.

"It turns S&P's predictions about the future into guarantees."

Standard & Poor's decision to give the investments a AAA or gold star investment ranking was criticised by Justine Jagot in November 2012.

The judge found S&P made negligent misrepresentations and had misled the councils.

It was the first court ruling of its kind worldwide against a credit ratings agency.

Justice Jagot said a description of the CPDOs as "grotesquely complicated" was accurate.

ABN AMRO and Local Government Financial Services (LGFS) were also found to have behaved in a misleading and deceptive way.

LGFS also was found to have breached its fiduciary duty to the councils.

Litigation funder John Walker, from Bentham IMF, financed the case for 12 of the councils.

He says CPDOs were high risk but were marketed as being as safe.

"It turned out to be very risky. It was simply a bet," he said

Council says any overturn would have significant impact

Bathurst Regional Council was awarded more than $1 million in compensation by the court.

It originally got just $67,043 of its $1 million investment back.

Bathurst Regional Council Mayor Gary Rush says council spending plans will be affected if the judgment is overturned.

"Having to pay that money back would have a significant impact," he said.

"It would mean we have to curtail some of the maintenance opportunities or the development of infrastructure opportunities we are currently looking at."

CPDOs were created by ABN AMRO in 2006 and were described as the "poster child for the excesses of financial engineering" by researchers from the United States Federal Reserve.

In court documents, an ABN AMRO banker described the product as being like a casino.

"If you win you start again. If you lose, double your bet. Repeat. You have a great chance of winning (99.9 per cent) 1 pound, but a chance of losing the lot (0.10 per cent) if you lose 11 times in a row," ABN AMRO's David Poet wrote in an email.

The investments tracked corporate debt but as companies defaulted on their loans during the global financial crisis, the value of the notes was all but wiped out.

Justice Jagot found S&P rating analysts were "sandbagged" by ABN AMRO into awarding the top investment ranking to the product to make it more appealing to investors.

Court documents show S&P debated whether the CPDO was worth a AAA rating.

"You are the wuss for bending over in front of bankers and taking it... you rate something AAA, when it is really A-? You proud of that little mistake?" wrote Sebastian Venus to Derek Ding in May 2007.

Standard & Poor's is also being sued by 90 local councils, churches and charities for rating toxic mortgage bonds sold by the collapsed investment bank, Lehman Brothers, as AAA.


http://www.abc.net.au/news/2014-03-03/standard--poors-appeals-landmark-ruling-in-favour-of-councils/5293740

A $5 Billion U.S. Fraud Case Against Standard & Poor's Enters Critical Phase

Thrilling depositions. Sounds like an oxymoron, right? Not when it comes to civil fraud lawsuits.

The U.S. Department of Justice has scheduled depositions in its potential landmark suit against rating agency Standard & Poor’s (MHFI). The suit, pending in federal court in California, offers one of the last, best hopes for a full accounting of how the major rating companies allegedly inflated their evaluations of mortgage-backed securities in the runup to the 2008 financial crisis. S&P has admitted that its ratings were woefully inaccurate but has denied it committed fraud or any other wrongdoing.

Whether the feds can prove the purposeful deception needed to clinch a fraud case—and billions of dollars in damages—will turn on whether government lawyers can get current and former S&P analysts to concede that they knew they were rubber-stamping doomed securities as worthy of AAA ratings. The venue for this showdown will be not the open courtroom but the bland conference rooms in which depositions occur. This case, you see, is unlikely ever to result in a full-dress trial. Instead, once the opposing sides see what the Justice Department can come up with in depositions, a settlement will probably ensue. So depositions are really the main event.

“As many as nine current and former employees of McGraw Hill Financial Inc.’s Standard & Poor’s unit may be questioned by U.S. Justice Department lawyers as part of a fraud lawsuit against the ratings company. The government has scheduled depositions of six current collateralized-debt obligation analysts, according to a status report filed in federal court in Santa Ana, California. The U.S. is also scheduling depositions of another employee and two ex-employees, according to the joint filing. New York-based S&P has yet to schedule its own depositions. …

“The Justice Department last year accused S&P of lying about its ratings being free of conflicts of interest and may seek as much as $5 billion civil penalties. S&P has said it will seek evidence that the lawsuit was political retribution by the government because S&P was the only rating company to downgrade U.S. debt in 2011.

“The company is scheduled to seek to compel the U.S. to hand over internal documents about its decision to sue S&P and not Moody’s Corp. (MCO), which S&P says gave the same ratings as the company did for residential mortgage-backed securities and CDOs backed by those securities. A hearing is scheduled for March.”



All this bears close attention by anyone concerned about the continuing centrality of rating agencies on Wall Street and in the economy at large.

http://www.businessweek.com/articles/2014-01-16/5-billion-u-dot-s-dot-fraud-case-against-standard-and-poors-enters-critical-phase

flamming_python wrote:Well obviously none of them are perfect. They will ostensibly have their own problems with favouritism, corruption, etc...

But evidence of them being part of the Western media-info-financial blitzkrieg network used by the US and pals to bludgeon and smear the economy and perception of anyone they don't fancy - I have found not.

At the very least, they haven't been conscripted into war effort thus far, and have avoided getting their work corrupted by politics.

Nothing wrong with Russia setting up their own agencies in theory, it's just that they won't be as objective - they will deliberately paint Russia's situation in a better light than it actually is, this is how people/investors will perceive them too and that makes this entire project a worthless waste of resources. Better for Matvinenko to focus her energy on something instead that will bring clear benefits.

MOSCOW, March 27. /ITAR-TASS/. If capital outflow from Russia reaches $100 billion, GDP growth will be around 0.6%, Russian Minister of Economic Development Alexei Ulyukaev stated on Thursday.

He recalled that, according to the ministry’s estimates, capital outflow is estimated at $60 billion in the first quarter of 2014.
“If we take it as a single capital outflow wave, we will reach a moderate capital outflow volume at around $100 billion annually. In case of this scenario, the economic growth forecast is reduced to 0.6% of GDP,” he said.

In this case, investments will drop by 1.3%.

At the turn of the century credit market debt outstanding in the US was about $27 trillion, and we’ve not been slouches attempting to borrow our way to prosperity. Total credit market debt is now $59 trillion—-so America has been burying itself in debt at nearly a 7% annual rate.

But move over America!  As the 21st century dawned, China had about $1 trillion of credit market debt outstanding, but after a blistering pace of “borrow and build” for 14 years it now carries nearly $25 trillion.  But here’s the thing: this stupendous 25X growth of debt occurred in the context of an economic system designed and run by elderly party apparatchiks who had learned their economic from Mao’s Little Red Book!

Austin wrote:No he means -ve 1.6 %

Comparision between Chinese and US Debt

http://davidstockmanscontracorner.com/2014/03/28/chinas-monumental-ponzi-heres-how-it-unravels/

At the turn of the century credit market debt outstanding in the US was about $27 trillion, and we’ve not been slouches attempting to borrow our way to prosperity. Total credit market debt is now $59 trillion—-so America has been burying itself in debt at nearly a 7% annual rate.

But move over America!  As the 21st century dawned, China had about $1 trillion of credit market debt outstanding, but after a blistering pace of “borrow and build” for 14 years it now carries nearly $25 trillion.  But here’s the thing: this stupendous 25X growth of debt occurred in the context of an economic system designed and run by elderly party apparatchiks who had learned their economic from Mao’s Little Red Book!

Wonder how much is Russias total credit market debt

Austin wrote:No he means -ve 1.6 %

Comparision between Chinese and US Debt

http://davidstockmanscontracorner.com/2014/03/28/chinas-monumental-ponzi-heres-how-it-unravels/

At the turn of the century credit market debt outstanding in the US was about $27 trillion, and we’ve not been slouches attempting to borrow our way to prosperity. Total credit market debt is now $59 trillion—-so America has been burying itself in debt at nearly a 7% annual rate.

But move over America!  As the 21st century dawned, China had about $1 trillion of credit market debt outstanding, but after a blistering pace of “borrow and build” for 14 years it now carries nearly $25 trillion.  But here’s the thing: this stupendous 25X growth of debt occurred in the context of an economic system designed and run by elderly party apparatchiks who had learned their economic from Mao’s Little Red Book!

Wonder how much is Russias total credit market debt

sepheronx wrote:Kurdin expects $150B outflow and .6% growth

And

Expect growth of 1.8-1.9%

Kinda odd wouldnt you think to say growth then mention negative? Hence why I think ria may have gotten it wrong.

flamming_python wrote:

sepheronx wrote:Kurdin expects $150B outflow and .6% growth

And

Expect growth of 1.8-1.9%

Kinda odd wouldnt you think to say growth then mention negative? Hence why I think ria may have gotten it wrong.

Well, there is at least one thing you can say about Kudrin and his predictions and that's that -

At least the reality is never worse, than what Kudrin predicts

Quite frankly, I'd be satisfied with 0.6%, considering that Russia basically just swipped the Crimea and made it part of its own territory! I still maintain that's it a bit of an economic deadweight without the rest of East Ukraine, but nontheless it's worth a lot more than a couple percentage points in GDP growth for a year or two; with some investment some decent industries could be revived there, not to mention tourism of course. And then there are the gas fields in the Black Sea, they will take a lot of money and time to exploit but potentially they are worth their weight in gold-gas. But the main thing is not their economic value, but that they will be denied to Western majors  

magnumcromagnon wrote:

Austin wrote:No he means -ve 1.6 %

Comparision between Chinese and US Debt

http://davidstockmanscontracorner.com/2014/03/28/chinas-monumental-ponzi-heres-how-it-unravels/

At the turn of the century credit market debt outstanding in the US was about $27 trillion, and we’ve not been slouches attempting to borrow our way to prosperity. Total credit market debt is now $59 trillion—-so America has been burying itself in debt at nearly a 7% annual rate.

But move over America!  As the 21st century dawned, China had about $1 trillion of credit market debt outstanding, but after a blistering pace of “borrow and build” for 14 years it now carries nearly $25 trillion.  But here’s the thing: this stupendous 25X growth of debt occurred in the context of an economic system designed and run by elderly party apparatchiks who had learned their economic from Mao’s Little Red Book!

Wonder how much is Russias total credit market debt

David Stockman has "0" credibility, and that goes for any economist from the Reagan era for that matter, he wont tell you that the repeal of FDR's New Deal regulations of securities and derivatives under Reagan, George Bush Sr., and Bill Clinton administrations are the source of all of the instability in the world economy. When securities were regulated Americans had far better economics circumstances, but since the repeal of regulations in the Early 80's Americans have had to live with recessions at the beginning and end of every decade! We had a recession in the late 80's - early 90's, then we had a recession in the late 90's - early 00's, and now were dealing with the most severe recession since the Great Depression in the late 00's - early 2010's and we see little evidence of the world economy recovering before the end of the decade and it wont recover until we reverse the repeal and roll-back of the New Deal regulations!!!

Austin wrote:

magnumcromagnon wrote:

Austin wrote:No he means -ve 1.6 %

Comparision between Chinese and US Debt

http://davidstockmanscontracorner.com/2014/03/28/chinas-monumental-ponzi-heres-how-it-unravels/

At the turn of the century credit market debt outstanding in the US was about $27 trillion, and we’ve not been slouches attempting to borrow our way to prosperity. Total credit market debt is now $59 trillion—-so America has been burying itself in debt at nearly a 7% annual rate.

But move over America!  As the 21st century dawned, China had about $1 trillion of credit market debt outstanding, but after a blistering pace of “borrow and build” for 14 years it now carries nearly $25 trillion.  But here’s the thing: this stupendous 25X growth of debt occurred in the context of an economic system designed and run by elderly party apparatchiks who had learned their economic from Mao’s Little Red Book!

Wonder how much is Russias total credit market debt

David Stockman has "0" credibility, and that goes for any economist from the Reagan era for that matter, he wont tell you that the repeal of FDR's New Deal regulations of securities and derivatives under Reagan, George Bush Sr., and Bill Clinton administrations are the source of all of the instability in the world economy. When securities were regulated Americans had far better economics circumstances, but since the repeal of regulations in the Early 80's Americans have had to live with recessions at the beginning and end of every decade! We had a recession in the late 80's - early 90's, then we had a recession in the late 90's - early 00's, and now were dealing with the most severe recession since the Great Depression in the late 00's - early 2010's and we see little evidence of the world economy recovering before the end of the decade and it wont recover until we reverse the repeal and roll-back of the New Deal regulations!!!

He has far better credibility than any American MSM commentator who covers Economy and he has always put facts and figures on the table unless you can dispute those and prove other wise.

Stockman resigned from the Reagan administration in 1985 when he disagreed with his economic policies

De-regulation has been done under every adminstration till date

India has a lot to lose since they rely on Russian military tech.

sepheronx wrote:Russia will now have to concentrate on domestic demand and increase standards of living, as their population will need to keep Russia afloat. Obama right now is trying to convince India and China for sanctions. So any country willing to deal with Russia and to say to hell with USA, should get total economic and military support from Russia. That includes North Korea. All the while pushing NK to ease a change in their country to create rights for NK citizens, so that could be another F U to the west.

India has a lot to lose since they rely on Russian military tech.

• Economy expanded at an estimated 1.3 percent in 2013, well below the projected rate of 3.6 percent.
  
• The ruble came under increasing pressure, triggered by the ongoing deterioration of the current account and by higher volatility in capital outflows.
  
• Frail domestic demand dragged the Russian economy close to stagnation.
  
• Lack of growth-supporting structural reforms and decreasing profit margins weighted heavily on business sentiments and pushed down industrial and investment activities.
  
• The contribution of fixed investment to GDP growth turned negative in 2013, compared to 1.4 percent in 2012.
  
• Consumption remained the main growth driver, supported by fast credit and wage growth, yet its pace of expansion more than halved compared to 2012.
  
• External demand recovered as expected in the second half of 2013, while exports grew strongly.
  

• The low-risk scenario assumes a limited and short-lived impact of the Crimea crisis and projects growth to slow to 1.1 percent in 2014 and slightly picking up to 1.3 percent in 2015.
  
• The high-risk scenario assumes a more severe shock to economic and investment activities if the geopolitical situation worsens and projects a contraction in output of 1.8 percent for 2014.
  

• Consumption growth is forecast to decrease to about 2 percent for 2014-2015 in the low-risk scenario, compared to 3.4 percent in 2013 and 6.9 percent in 2012
  

• Structural reforms will need to be started in the coming years.
  
• Inefficiencies in factor allocation across the economy will need to be addressed, so that larger private investment is attracted in a sustained manner and on a larger scale.
  
• The quality of regulatory and market institutions will have to improve, so that rules are implemented evenly.
  

Austin wrote:World Bank Russia Report March 2014

Fully Report Link ---> http://www.worldbank.org/content/dam/Worldbank/document/eca/RER-31-eng.pdf


How did Russia’s economy fare in the past year?

• Economy expanded at an estimated 1.3 percent in 2013, well below the projected rate of 3.6 percent.
  
• The ruble came under increasing pressure, triggered by the ongoing deterioration of the current account and by higher volatility in capital outflows.
  
• Frail domestic demand dragged the Russian economy close to stagnation.
  
• Lack of growth-supporting structural reforms and decreasing profit margins weighted heavily on business sentiments and pushed down industrial and investment activities.
  
• The contribution of fixed investment to GDP growth turned negative in 2013, compared to 1.4 percent in 2012.
  
• Consumption remained the main growth driver, supported by fast credit and wage growth, yet its pace of expansion more than halved compared to 2012.
  
• External demand recovered as expected in the second half of 2013, while exports grew strongly.
  

What is the economic outlook for Russia going forward?


Weaker growth prospects and stabilizing consumption at a lower rate decrease the economic mobility outlook. Recent events around the Crimea crisis have compounded the lingering confidence problem and exposed the economic weaknesses of the economic growth model, which is based on large investment projects, continued increases in public wages and transfers.
Given the higher risk environment -- since political uncertainties around the Crimea crisis in early March 2014 led to an increase in market volatility, the World Bank developed two alternative scenarios for Russia’s 2014-2015 growth outlook.

• The low-risk scenario assumes a limited and short-lived impact of the Crimea crisis and projects growth to slow to 1.1 percent in 2014 and slightly picking up to 1.3 percent in 2015.
  
• The high-risk scenario assumes a more severe shock to economic and investment activities if the geopolitical situation worsens and projects a contraction in output of 1.8 percent for 2014.
  

Impact on economic mobility and continued middle-class formation in Russia:

• Consumption growth is forecast to decrease to about 2 percent for 2014-2015 in the low-risk scenario, compared to 3.4 percent in 2013 and 6.9 percent in 2012
  

Russia’s long-term outlook will depend on a sustained positive shift in investors’ and consumers’ confidence.

• Structural reforms will need to be started in the coming years.
  
• Inefficiencies in factor allocation across the economy will need to be addressed, so that larger private investment is attracted in a sustained manner and on a larger scale.
  
• The quality of regulatory and market institutions will have to improve, so that rules are implemented evenly.
  

MOSCOW, March 31. / ITAR-TASS /. Russian Ministry of Finance has the negative consequences of sanctions against Russia and believes that in these conditions the concentration of efforts on all fronts, said the TV channel "Russia 24" Finance Minister Anton Siluanov.

"We see that the negative of this is - recognized Siluanov. - The question is - what will happen next sanction measures. Nevertheless, in these circumstances we in any case should not slacken their positions on monetary policy, the budget, on the contrary - need to focus and mobilize. "

"Sanctions have already been announced and are - reminded the minister. - The most annoying thing is that this list may change, and there is nervousness as to what measures can be taken." According to the finance minister, has already closed credit position on Russia, investors have been slow to invest in Russian bonds, investment projects on the territory of the Russian Federation.

"We're seeing some pressure on our trading partners are redefining relations with Russia - said Siluanov. - All this adversely affects the Russian economy and the economy of those countries with which entrepreneurs have been agreed." Also increased yield of Russian securities, which means additional risks that investors felt because of the sanctions.

Speaking about Russian readiness of banks to changes in the situation on the foreign market and their willingness to attract liquidity in the domestic market, Siluanov noted that "we have enough foreign reserves we have the means significant enough government funds. At the most extreme case we have again 2008-2009 years, when we helped our businesses pay on foreign loans, currency helped aid included in Tier II capital. " "The experience we have this, if necessary, will use these mechanisms, and this time," - said the Minister.


The Ministry of Finance is ready to fall in world oil prices

Ministry is ready to fall in world oil prices if the U.S. begins exporting strategic reserves of oil, said Siluanov.

"The pressure on the country's exporters, printing U.S. reserves - all of which can lead to the fact that prices will fall, he said. - But the question is - how long and to what level?" "We need to be ready for it," - said the Minister.

Siluanov recalled that major oil exporters such as Saudi Arabia and other Arab countries, "in recent years increased their spending budget and have a balanced budget (with the price of oil - Ed.), About $ 90 per barrel." However, he noted that the federal budget of the Russian Federation in 2014 was calculated at a price of $ 101 per barrel, the budget 2015-2016 - $ 100 per barrel.

The Finance Ministry of the Russian Federation is no reason to believe that Ukraine will not pay for the debts

According Siluanova, the Finance Ministry has no reason to believe that Ukraine will not pay their debts.

"We believe that the grounds for saying that Ukraine will not pay for the debts, not yet, - he said. - We hope to timely payment of obligations."