Karl Haushofer wrote:
There is also lack of spending within the country. Consumer confidence has increased in end of june and July. And I doubt those numbers as I am searching for it on other sites. If you want economic news, Trading Economics is where to look at.
So we have to wait for the August numbers.
What? You got that backwards.
Shale oil needs high prices to survive. Cheap prices means that shale oil wont survive.
Yeah, too tired to think straight now (4 hours of sleep last night!)
What I was trying to say is that the shale oil can be only "destroyed" if the producers increase the production to halt the oil prices, but this will hurt the producers like Russia and Saudi Arabia more than it hurts the Americans, because Americans actually benefit from low oil price (and they get to keep their shale oil under ground for future use).
Rising up oil production to "kill the shale" would be stupid for Saudis and Russians imo. It would be like shooting yourself in the foot.
Reason why Russian government was stating that they will see growth by Q4 this year or Q1 next year is not due to oil prices, more so that consumer confidence have increased in the last month or so and they are basing it off of that trend. Russian consumers are number 1 for Russian economic growth. No one is trying to kill off shale (maybe Saudi Arabia, I am not sure) by lowering prices. Russia isn't doing it at least.
Here is what I gathered from the times of reading Zerohedge and the likes:
The world is in an upcoming economic crisis. Countries like Russia, whom have a more "real" economy than most, are going to see a brunt of it in the beginning. Why? because of lack of cheap credit. But, with them not having cheap credit, they dont owe anyone anything (well, they currently still do and a lot of this money owed is to foreign entities). Growth through many parts of the world has been quite artificial and even a huge part of Russia's in the recent past was also artificial. All of this is due to cheap credit that Maximmmm or whatever his name is believes is key here to growth. It is key to growth. But not the growth one should expect and one should want.
Let me ask this simple question, in relation to the trawler comment from Maximmm: What happens, if these fisherman buys a brand new boat on credit, and then has a bad year, or two? They will go bankrupt and still end up owing money to someone else.
What credit has done is effectively made people assume they are rich, so they spend more. But this is more that they don't have or own. This is now property of the bank until you pay off that debt. But what happens if things go wrong and you cannot pay that debt off? The bank will take your property or assets of value, and you are left with nothing. Now two issues arise: You and what little you have left (with now 0 access to credit anyway (or cheap ones at least) and or still owing money to the bank even though you have nothing (depends on the terms of the bankruptcy)) and the bank now has assets they paid hands over fist for in terms of a loan, and will either have to sell it to reduce their loss, or take the whole loss.
What happens if that fisherman pays for a cheap trawler, even if it is from abroad, used? Well, if they have a bad year, at least they wont lose their trawler unless they have to try to make up the loss when/if they move onto some other industry. But they wont owe anyone money.
I agree that Russian government should be concentrating more on development for domestic equipment needed for development of agriculture and food products. We are already seeing increases in exports of Rostelsmash as an example. But that isn't enough. It needs to be aimed directly at the domestic economy. Still, people fall for propaganda and will purchase that overtly expensive dutch tractor that was assembled in Russia but all parts imported. In the end, does it actually run better? I don't know as I find it real hard to get the data. So that is why it seems to be more myths than facts involved in purchasing industrial goods.
Lack of cheap credit is hurting industries that are needing the money to expand or new enterprises trying to start. But the question is, is the foreign loans a good idea? No, as evidence points to now, as the industries become too tied with the foreign entities and now you can lose your lively hood due to politics of foreigners. Russian CBR should be the ones providing the cheap loans actually. And they could easily do it. But they wont, as they live in Austerity land, which never proven to work, but cause more trouble.
So, growth is now coming from peoples pockets, and people spending real money, on real products made internally. At least in agriculture sense they are (as I have pointed out). But it will take years till many agriculture industries really thrive from all of this and they make their money back from their own investments.
What does the future withold? Who knows. Maybe crowedfunding as a means of obtaining loans will become a thing and individuals can invest in whatever they want, easily through profile funding. Will it happen? Maybe not. Should it happen? Why not. CO-OPS could be a thing for Russia that will bring it to a new generation of real economic development.
And whom is a living example of all of this? Iran. Their inflation is high, their investments are low from government, yet they still grew in the 30 years of sanctions and their banks/economy was untouched by the 2008 crisis.