Russian Economy General News: #4

flamming_python wrote:Calm down Sepharonx the man just posed an innocent question. No reason to be touchy about it; if they're clearly wrong than inform them. Jeez.

I would expect better from a forums really, especially one that is gonna be or supposed to be professional. Much like your guys hatred for racism, I have a hatred to re-read the same garbage hundreds of times because every new guy has to post the same thing and then say "but my media said....." when the very same thing was not only saod but disproven before. Eventually, I will get tired of posting, and so will others, and then the threads/forums will be flooded with such BS and then others will not take any of this seriously.

I am already tired of repeating myself. So I will leave it at that. You guys have fun repeating yourselves to every new person who will simply post the same garbage.

http://www.gks.ru/bgd/free/B04_03/IssWWW.exe/Stg/d05/92.htm



There is some downturn in manufacturing. But note the strong annual cycle in the activity. I see many
times month on month comparisons which completely ignore the annual cycle.

The January-April period for 2015 vs. 2014 has gone down 1.5%. The drop in April compared to 2014 is 4.5%.
I would wait until December 2015 to assess the progress.

When it is the January to April, do they account all of april as well, so the 4.5% industrial production drop compared to 2014?  If that is the case, it really isn't so bad especially how badly hit the automotive industry was.

http://top.rbc.ru/economics/20/05/2015/555c6ed59a79478c50888868

So they are saying that monthly decline in manufacturing/production in Russia in 2008/2009 was close to around 8% and that this is quite modest given the circumstances.  They say the biggest hit at them was Dun dun dunnnnn! what KVS was saying this whole time - Interest rates on credit.  And now stronger ruble is hurting manufacturing as well.  So people like Vann whom was praising the ruble increase, is actually praising the wrong thing.  So lowering the interest rates will definately help.

But, they say by Q3 this year, that is when things should really increase cause that is when the current interest rates kick in for producers.  So expect a modest decline or even growth in production/manufacturing.  The other thing also hurting is Russians tightening their belts, as they say real wages are gonna drop by 10%:

http://www.verstov.info/news/inrussia/48279-zato-my-duhovno-bogatye-realnaya-zarplata-rossiyan-sokratitsya-na-10-uzhe-v-etom-godu.html

But I wonder where they define wage drops?  I imagine it is based upon the idea of using inflation as the indicator.

Edit: So looking it over, the hardest hit in manufacturing (they seem to have added manufacturing and production as same thing), is the mining industry dropped by 7.2% being the largest of drops of all of them (next to automotive I presume) but looking over this:
http://tass.ru/en/economy/795236

Norilsk Nickel is looking at expanding greatly as they predict one of the mines have $1T worth of metal in it.  So expect mining to increase.  Value of Copper, Iron ore and the likes have dropped, thus I assume that is the reason for the drop.

sepheronx wrote:When it is the January to April, do they account all of april as well, so the 4.5% industrial production drop compared to 2014?  If that is the case, it really isn't so bad especially how badly hit the automotive industry was.

http://top.rbc.ru/economics/20/05/2015/555c6ed59a79478c50888868

So they are saying that monthly decline in manufacturing/production in Russia in 2008/2009 was close to around 8% and that this is quite modest given the circumstances.  They say the biggest hit at them was Dun dun dunnnnn! what KVS was saying this whole time - Interest rates on credit.  And now stronger ruble is hurting manufacturing as well.  So people like Vann whom was praising the ruble increase, is actually praising the wrong thing.  So lowering the interest rates will definately help.

But, they say by Q3 this year, that is when things should really increase cause that is when the current interest rates kick in for producers.  So expect a modest decline or even growth in production/manufacturing.  The other thing also hurting is Russians tightening their belts, as they say real wages are gonna drop by 10%:

http://www.verstov.info/news/inrussia/48279-zato-my-duhovno-bogatye-realnaya-zarplata-rossiyan-sokratitsya-na-10-uzhe-v-etom-godu.html

But I wonder where they define wage drops?  I imagine it is based upon the idea of using inflation as the indicator.

It does include all of April. Without April the drop would be a fraction of a percent. We'll have to wait and see if this is a serious development.

I am suspicious about the wage drop of 10%. This does not make sense since the running 12 month inflation since last year is under 9%
and dropping. Inflation will not be 10% in 2015. I have heard nothing about people taking any pay cuts now or in the near future.

I have been following the Russian economy actively since the late 1990s and media coverage both inside and outside Russia has been
absurdly negative. Serious problems in western economies are glossed over, but any little thing in Russia is puffed up beyond all reason.
This wage drop forecast is of the same smelly nature as Moody's prognostication that Russia's GDP will drop by 5.5% in 2015 but
Ukraine's will drop by only 2%. This one forecast underscores my point: Ukraine is now part of the happy western family and it's
getting only good forecasts and systematic avoidance of coverage of real crisis conditions. But the Russian sky is falling all the time.

As for the ruble, the CBR can kill two birds with one stone. Drop the interest rates and that will lower the ruble at the same time.
The interest rate drop will stimulate Russian production in addition to the forex stimulus.

kvs wrote:

sepheronx wrote:When it is the January to April, do they account all of april as well, so the 4.5% industrial production drop compared to 2014?  If that is the case, it really isn't so bad especially how badly hit the automotive industry was.

http://top.rbc.ru/economics/20/05/2015/555c6ed59a79478c50888868

So they are saying that monthly decline in manufacturing/production in Russia in 2008/2009 was close to around 8% and that this is quite modest given the circumstances.  They say the biggest hit at them was Dun dun dunnnnn! what KVS was saying this whole time - Interest rates on credit.  And now stronger ruble is hurting manufacturing as well.  So people like Vann whom was praising the ruble increase, is actually praising the wrong thing.  So lowering the interest rates will definately help.

But, they say by Q3 this year, that is when things should really increase cause that is when the current interest rates kick in for producers.  So expect a modest decline or even growth in production/manufacturing.  The other thing also hurting is Russians tightening their belts, as they say real wages are gonna drop by 10%:

http://www.verstov.info/news/inrussia/48279-zato-my-duhovno-bogatye-realnaya-zarplata-rossiyan-sokratitsya-na-10-uzhe-v-etom-godu.html

But I wonder where they define wage drops?  I imagine it is based upon the idea of using inflation as the indicator.

It does include all of April.   Without April the drop would be a fraction of a percent.   We'll have to wait and see if this is a serious development.

I am suspicious about the wage drop of 10%.  This does not make sense since the running 12 month inflation since last year is under 9%
and dropping.  Inflation will not be 10% in 2015.  I have heard nothing about people taking any pay cuts now or in the near future.  

I have been following the Russian economy actively since the late 1990s and media coverage both inside and outside Russia has been
absurdly negative.   Serious problems in western economies are glossed over, but any little thing in Russia is puffed up beyond all reason.
This wage drop forecast is of the same smelly nature as Moody's prognostication that Russia's GDP will drop by 5.5% in 2015 but
Ukraine's will drop by only 2%.   This one forecast underscores my point: Ukraine is now part of the happy western family and it's
getting only good forecasts and systematic avoidance of coverage of real crisis conditions.   But the Russian sky is falling all the time.  

As for the ruble, the CBR can kill two birds with one stone.  Drop the interest rates and that will lower the ruble at the same time.
The interest rate drop will stimulate Russian production in addition to the forex stimulus.  

It was mentioned in one of my other posts that they do expect to drop interest rates soon again.  I guess they are waiting for ruble to increase further in value before they do it again.

That said, I edited my post above: Apparently the drop in largest in April is 7.2% for mining industry.  Mining industry though seems to be going through some changes like I posted about Norilsk metal and their expansion.  Also, it was mentioned that month on month drop in 2008/2009 was common to see 8% drop in production/manufacturing so this is clearly nothing compared to those days.

Here is a quote in the article I posted:

"In the coming months I expect the same level", — told RBC Deputy Director of the Institute "development Center" HSE Valery Mironov. Collapse 8%, as in 2009, he did not foresee: "there were large reserves and strong overheating of the economy, now reserves are not enough" — said the expert.

So this gives us an idea that production is actually under compared to being overproduction in 2008/2009.  That is what I am understanding from this, I could be wrong. They are expecting to see similar numbers in drops in the next couple of months too, but are only speculating, as they say it will take a couple or more months in order for current interest rates changes to show itself. So Q3 expect growth (well, or small decline).

Wait, I am curious....Do they account Crimea as well into their measurements?

It will drop the value of the ruble, but that is what the government wants. Why do they take so long to do it? I dont know. They seem to be more punctual than anything so they are probably waiting for the ruble to go to something bigher then dropping rates. I just recall in an article I posted this month that they want to do it again soon. Last time, they increased money supply to help drop ruble but I think lowering interest rates were far better. Maybe they are testing waters or they are trying to increase money supply to increase future lending.

That said, interest rates in Iran are something like 18%, but they have this program where they put some hard money down on a venture fund, meant for businesses/corporations to use, and 3% of the miney used to pay back + interest (something like 3% interest) goes back into the venture fund as to increase it.

Smart idea really.

Previous economic issues, 2008/2009 (which was way worst then than now), various companies had set up things like pawnshops that were fronts for a "small, private, loan company" and were charging interest rates of 5% when they were 15% in 2009. Apparently that worked very well too. I can see new Russian NGO's, if funded right by the right groups, they could probably work around the CBR and use them as a method to create a venture fund or loan mechanism for small companies.

I was reading a segmant on Russia-Insider about lives of villagers in Siberia and how it isnt easy, how multiple villages dont have health clinics except for a hospital 50km away, etc. Then it occured to me: that villages have been mostly deprived, poorly maintained and has not changed in 50 years.

While villages for the most part in Canada are dead/thing of the past, the ones that do exist are really poor and decrepid as well. Mozt are abandoned though.

In the article, it stated that they had no econony since 2000, after farms/ranches were privatized, and they make no money. And if this is quite common amongst most villages, then that needs to change. How many people usually live in a village? How much does it cost to maintain the infrastructure? Etc.

So one way to deal with these is how we dealt with them here. Expand towns closer by. Or they could simply map out various villages and build a town between them to relocate everyone. it will make maintaining infrastructure cheaper, allow an economy to actually develop, since more people in 1 area meens more demand for services, means more small businesses and more ideas/workforce for developing industry (agriculture).

Neutrality wrote:

sepheronx wrote:Wait, I am curious....Do they account Crimea as well into their measurements?

That is a good point. If they don't, the West will be all over it like hawks and put their propaganda machine in full motion to report something along the lines of: "Russian economy doesn't consider Crimea to be part of it".

Back on-topic: As I understand, everyone here supports the idea of dropping interest rates. So if there are only benefits, why is the Central Bank holding it off? Maybe they are scared it will accelerate the rouble's depreciation again?

Kudrin wasn't the only monetarist in the Russian financial system.   The CBR has many true believers whose whole reference frame
was created by the Harvard Boys (e.g. Jeffrey Sachs) back during the 1990s.   They really swallowed the monetarist koolaid even
though the ones peddling it don't believe in it.  

So the CBR sees inflation where there is none and sees risk of inflation under every bed.   In the process it is stifling the Russian
domestic investment capacity.  

By now it is clear that the rouble is not going to collapse.   The fall to over 70 to the dollar was a hysterical spike created by
speculators trying to milk the CBR intervention money.   Once the CBR floated the rouble and stopped wasting money propping
up the exchange rate, this whole racket just died.   I think a good target for the ruble exchange rate is 60:1 to the dollar.  This
can be achieve easily by dropping the interest rates.

I the CBR had more than paranoia to back up its interest rate policy, then we would have seen a sustained bout of inflation starting
after the rouble devaluation.   But the inflation spiked and then fell back to March 2014 levels in March of 2015.   Clearly there is
no inflationary pressure in Russia that needs to be combated.   The rouble has not gone back to 35:1 to the dollar yet the inflation
has disappeared.  The CBR justifies its whole policy based on inflation rates, so these inflation figures are real.   Too bad the CBR
is too blinded by monetarist voodoo thinking to get the hint.

Manov wrote:I guess the key to that its to improve communications (road, railway, airstrip, internet broadband, phone, etc.) I mean develop a program for developing small villages across the country. Those are "making motherland duty" so they need respect and basic services. I think using renewable energy resources, better gas and oil transit and start a program to fix the houses and stores, put clinics with medics making shifts across those villages with a monetary incentive and including more activities between the closest cities and the villages. The key for that is to "maintain the good of the countryfield and get them the modernity of the city"

This is a really challenging problem. The villages are dying out for natural reasons and not due to state failure. Unless the clock
is wound back to the pre 1917 period, these villages have no reason to exist and will disappear as people die of old age and younger
generations move out. The same process happened in Canada and the USA. But they were never called villages but "towns".
There are ghost towns all over the place even in not particularly remote locations. I believe that the Soviet system also introduced
a distortion that kept these villages alive artificially.

Of course the collapse of the Russian economy during the 1990s and the very slow recovery in the hinterland up until the present
has accelerated the village die off. Unfortunately people have few job options in the vicinity and just migrate to the larger population
centers. I don't think it is possible to create regional centers of prosperity without a Soviet style system. There is no reason for
jobs to migrate to some town in the middle of nowhere. Either there has to be some local set of conditions such as mining which
create jobs, or industry has to be transplanted by government edict. In Canada it is popular for this sort of "command economy"
technique to be applied to government departments. For example, tax processing centers are moved to remote regions. But
it is just too expensive to engage in this sort of economic-social engineering on a mass scale.

Neutrality wrote:You can see the potential of the country by simply looking at it on a map. The huge amount of space is screaming to be built on. The country can sustain dozens of multi million cities, easily. Siberia is obviously a rough climate to live in but there's so much else. The development of the Far East should be a priority #1 for the government.

It even depends what part of Siberia. Southern part like Krasnoyarsk City is apparently quite beautiful and modest in winters (it is about as cold as it gets here in Calgary). Some say they call it the St.Petersburg of Siberia.

Too many villages with hundreds of people, that are not really functioning.

sepheronx wrote:

Neutrality wrote:You can see the potential of the country by simply looking at it on a map. The huge amount of space is screaming to be built on. The country can sustain dozens of multi million cities, easily. Siberia is obviously a rough climate to live in but there's so much else. The development of the Far East should be a priority #1 for the government.

It even depends what part of Siberia.  Southern part like Krasnoyarsk City is apparently quite beautiful and modest in winters (it is about as cold as it gets here in Calgary).  Some say they call it the St.Petersburg of Siberia.

Too many villages with hundreds of people, that are not really functioning.

Habitability is the prime factor. Most of Canada has few people living away from the US border because of a very long cold season and
poor soils. Russia is the same in this regard. Comparing sizes of different countries can be very misleading. Primorsk and a few regions
on the southern border in the Siberia sector are not too bad. But it's just not appealing living in locations that can hit minus 80 Celsius.

kvs wrote:

sepheronx wrote:

Neutrality wrote:You can see the potential of the country by simply looking at it on a map. The huge amount of space is screaming to be built on. The country can sustain dozens of multi million cities, easily. Siberia is obviously a rough climate to live in but there's so much else. The development of the Far East should be a priority #1 for the government.

It even depends what part of Siberia.  Southern part like Krasnoyarsk City is apparently quite beautiful and modest in winters (it is about as cold as it gets here in Calgary).  Some say they call it the St.Petersburg of Siberia.

Too many villages with hundreds of people, that are not really functioning.

Habitability is the prime factor.  Most of Canada has few people living away from the US border because of a very long cold season and
poor soils.   Russia is the same in this regard.   Comparing sizes of different countries can be very misleading.   Primorsk and a few regions
on the southern border in the Siberia sector are not too bad.  But it's just not appealing living in locations that can hit minus 80 Celsius.

No I understand, but other regions like where Krasnoyarsk is, doesn't get to be that cold and I imagine the areas around it are perfect for farming. And such a beautiful looking city too. Novosibirsk much like the same too.

But it is true not all areas are habitable especially for any type of farming. Ranching to be exact.

Austin wrote:A bit dissapointed Reserve Fund and National Welfare Fund is depleting....I was hoping higher oil price would increase it.

Reserve Fund http://old.minfin.ru/en/reservefund/statistics/amount/index.php?id_4=5817

National Welfare Fund :  http://old.minfin.ru/en/nationalwealthfund/statistics/amount/index.php?id_4=5830

Roughly both the fund hold about $152 Billion as of 1st May

Holy molly, that is a lot of money. Of course they are depleting it though, as both are being used to prop up development and investments. That is where they are getting the money to up domestic investments (up to 22% from previous 15% or so ).

I guess it is a way to subside from using the foreign reserves.

Austin wrote:Please make sure you keep 20-30 % of your saving in Physical Gold ( not ETF Paper Gold ) and dont keep Physical Gold In Bank else they will confiscate it.

In the coming crisis and post it Gold will play a major role.

For us none Indians or poor people, Silver will also count too. Not to the wealth level of Gold, but silver will work as a currency as well. It should be noted that buying silver currently is far easier/more affordable. Unless one is willing to spend a few, they can still obtain gold in terms of 1/4 ounces or 10 grams. Which still cost quite a bit (10g being roughly $150 and 1/4 roughly $300-400). Also, avoid buying coins as the coins could be debated as to terms of wealth and harder to trade compared to bullions (bars). Bars are also cheaper too.

Austin wrote:Silver Buy Should also be good , Keep a certain percentage of Gold and Silver

Wish I could buy gold atm but cannot due to debt. But once I have that settled, I will start a semi savings fund specifically for buying gold.