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    Russian Economy General News: #7

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    Project Canada

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    Post  Project Canada on Sat Mar 11, 2017 7:21 am

    kvs wrote:
    Kimppis wrote:http://theduran.com/russias-inflation-better-central-bank-target/

    Alexander Mercouris: Russia’s inflation fall exceeds Central Bank target

    Russian inflation rate plunges to 4.5%, opening the way to cuts in interest rates and higher growth this year.

    Rosstat, Russia’s state statistical agency, is reporting that the annualised inflation rate in Russia has now fallen to 4.5%, with Russia recording increasingly frequently weeks of zero inflation during the winter months.

    This is most unusual.  Normally the inflation rate rises in Russia in the winter and falls in the summer.  The fact that Russia is now regularly recording weeks of zero inflation even in winter shows that inflation in Russia is falling faster than anyone (myself included) expected.

    Suffice to say that less than a year ago the Russian Central Bank was predicting that inflation in Russia would not fall to 5% before April and would finally hit the 4% target at the end of the year.  Inflation has instead fallen to 4.5% less than midway through March, with some forecasts now predicting it will hit the 4% target by mid-year.  Indeed there is now a serious possibility that inflation for the whole year could significantly over-shoot the Central Bank’s target and fall significantly below 4%.

    This plunge in inflation is crucial for the economy’s future.  As I have repeatedly pointed out, it is the sky high interest rates (currently 10%) the Central Bank has been imposing to achieve the 4% inflation target which caused Russian economic growth to slow from mid 2012.  Far more than low oil prices it is these high interest rates which are continuing to hold the economy back.  There is a direct historic correlation between the rise of Russian interest rates since the Central Bank began serious inflation targeting in 2012, the decline in inflation in Russia, and the fall in Russia’s GDP growth rate, even if most commentators are blind to it and even if the Central Bank itself downplays it.  I have discussed all this in detail previously here.

    What this means is that the sooner and faster inflation falls, the sooner the Central Bank will start to cut interest rates, and the more Russia’s GDP growth rate will increase.

    If inflation really does fall to an annualised rate of 4% by mid-year then even the inflation hawks in the Central Bank will most probably finally come to accept that a Central Bank lending rate of 10% is too high, in which case interest rates will start to come down faster, and Russia’s economy will start to grow more quickly, than even the most optimistic forecasts have been predicting.

    I like Mercouris but here he is just spouting nonsense.  Faking an inflation rate by brutal credit contraction such as what the CBR has been doing is
    BAD for the economy.   Since it is not a natural, quasi-equilibrium decline, there will be the inevitable overshoot and it will rebound.  So I fully
    expect the inflation rate to start climbing fast as soon as the CBR reduces its rates to let's say 5% (a dream).   Theses f*cks at the CBR are the sole
    source of both the inevitable inflation disaster and the criminal policy of maintaining the prime lending rate at 10.5% even when the inflation was below
    8% for two years.   The prime lending rate should have been 6% during this time.  

    Putin has failed big in dealing with the economic sabotage at the CBR.  He should have organized a regime change at the CBR.  People always talk about
    checks and balances.   Well, the CBR has none.   It has been taken over by monetarist loons who are proving that they are also 5th columnists.

    If forumers like us can see how the CBR is sabotaging Russian economy, im pretty sure Putin and his advisers would notice it too, But why are they not doing anything? confused
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    Post  kvs on Sat Mar 11, 2017 2:28 pm

    Project Canada wrote:

    If forumers like us can see how the CBR is sabotaging Russian economy, im pretty sure Putin and his advisers would notice it too, But why are they not doing anything? confused

    Unlike us, leaders have their hands nearly tied with all sorts of compromises.   In the real world, leaders do not have infinite freedom to do whatever they
    want.  They need to appease factions that lets them stay in power.   The CBR must have support from some quarter of the Russian elites.   Putin chooses
    to accommodate this faction instead accommodating the Russian economy.    So to me this looks like a choice and a seriously mistaken one.  

    One way Putin could have snookered the CBR and its backers is to have launched an information war on them.  They simply can't defend their ludicrous
    policies (even internet forum posters such as us can see through them).   Bringing down the clowns that run the CBR would have weakened their
    backers.   Clearly a desirable objective.
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    Post  miketheterrible on Sat Mar 11, 2017 7:57 pm

    Singular_Transform wrote:
    Kimppis wrote:http://theduran.com/russias-inflation-better-central-bank-target/

    Alexander Mercouris: Russia’s inflation fall exceeds Central Bank target

    ...

    If inflation really does fall to an annualised rate of 4% by mid-year then even the inflation hawks in the Central Bank will most probably finally come to accept that a Central Bank lending rate of 10% is too high, in which case interest rates will start to come down faster, and Russia’s economy will start to grow more quickly, than even the most optimistic forecasts have been predicting.

    What was the target of the CB/govrment?

    Redistribution of wealth from the workers to the businesses?

    Kill credit addicted businesses?

    To reduce inflation and to snuff off businesses that rely entirely on credit - or force companies to become more self reliant on their own wealth.

    Problem though is that it hurts businesses on their ability to either start or to expand production which in turn, would (in theory) reduce inflation because price of goods should drop as soon as production increases. Now Russian companies have other options than to just borrow money (Selling stock, seek investment loans or obtain credit from government in the form of venture funds or something else) but that is selective and only works for medium/large businesses whom already have a production running and product that is in demand. For first time business owners, most rely on universities and their venture funds (only works if you have a product in mind that was co-developed by the universities) or the current loans or seek loans from outside. Current loans suck because 10.5% is high and so many small businesses are either taking a big risk or they are simply going to be small for longer than should be.

    I know there is a push for Islamic and Christian banking in Russia where there isn't interest rates. But I have no idea where they are sitting with this at the moment. I know CBR and Sberbank was all for it too. Probably having to do a lot of research into the laws that accompany such a decision.
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    Post  Austin on Sun Mar 12, 2017 3:50 pm

    Trillions for investment: the Stolypin club presented a program of economic recovery

    http://true-news.info/trillions-for-investment-the-stolypin-club-presented-a-program-of-economic-recovery/

    Russia is developing three plans to revive and accelerate the economy. The first of them is written Stolypin club (Institute of Economics growth of a name of Pyotr Stolypin) “growth Strategy” March 1 was sent to the President of Russia Vladimir Putin.

    The draft document was presented to the head of state in the summer of 2016. Then the President instructed the Chairman of the Supervisory Board of the club Boris Titov to modify it — as a substitute for a long-term plan, which is prepared by the Center for strategic research (CSR), headed by Alexei Kudrin. CSR earlier reported that work on the program will end may 1, 2017.

    The third document developed by the Ministry of economic development of Russia. In his December Message to the Federal Assembly, Putin instructed the government to prepare a package of measures to accelerate economic growth, proposals should lie on the table by may of this year . The head of state demanded that by 2019, the economy grew at a rate not below the world.

    TASS answers questions about key points of “Stolypin” programme

    1   What is the main purpose of the document?

    The development strategy sets the following KPI (key performance parameters) that can be called goals: economic growth to 6% by 2020, 35 million highly productive jobs by 2035, and the average life expectancy of 83 years to the same time.

    2  The plan includes five main areas:

       “Comfortable country”. This item involves the creation of a modern high-performance workplaces, to increase the efficiency of health and education by increasing funding and competition between government and private business, as well as stimulate consumption.

       “Diversified (i.e. versatile), sustainable and competitive economy”. A sense of direction — finding independence from oil prices, the development of sources of state revenue in those sectors of the economy that are not associated with fuel exports, development of small and medium enterprises (SMEs), the legalization of self-employed people, use of advanced technologies to improve labor efficiency.

       “Modern infrastructure”. Active construction of roads, improvement of cities, the existing infrastructure — all of which should lead to the fact that in different regions of the country will live with equal comfort. The mass construction of housing, including rental. Bandwidth improvement of intercity transport for mobility.

       “The transition to innovation economy”. The introduction of technology to upgrade industry and the development of the Russian scientific centers. Active investments in different field of science. The use of “electronic money”, installation in factories samebecause robots, the development of genetic engineering.

       “Russia is a key link between Europe and Asia”. The final point involves the use of the geographical position of the country, the attraction of European and Asian capital, technology and talents. You need to become the infrastructure and financial center, to Orient foreign policy to achieve economic development goals.


    3  What you need to do to achieve these results? What industry?


    For the start of the Stolypin club is run for about 100 projects-“locomotives” and invest in them. For example, industrial parks for the production of goods of daily consumption around the major cities. As well as agricultural cooperation for food production, storage centers and implementation in Metropolitan areas. Or clusters to create medical equipment and pharmaceuticals, systems for the collection and processing of associated gas and production of electricity in Western and Eastern Siberia, IT and tourist complexes. At the same time to start the changes in the banking segment.

    4  How to change the banking system?

    Here the authors of the “Strategy growth” suggest several directions at once. First, they want to reduce the key rate of the Central Bank to 7-8% (now 10%). This should lead to lower interest rates on loans, and thus to the increase in demand from both businesses and ordinary consumers. In the future, the key rate should stay at the level of “inflation + 2%”.

    It is impossible to prevent a strong ruble, that is, its rise in price against the dollar. This will provide an opportunity to strengthen import-substituting and export-oriented industries. Here is an example: in the “expensive” dollar, Russian buyers prefer to buy a car assembled in our country, not a foreign car, because the latter is expensive. In turn, the foreign buyer the price of the car “made in Russia” will also be low. The exchange rate should be stable. With the development of economy and growth of competitiveness of Russian companies the ruble can be and strengthen.

    The loans must “climb” the state, it is necessary to set a limit on the level of the budget deficit to 3% of GDP (this year, according to forecasts, the deficit will amount to 2%), and the maximum level of public debt at the level of 30-35% of GDP (now about 13%, and by the end of the year, according to Finance Ministry forecasts, will amount to 14.7% of GDP).

    In addition, the Central Bank, according to representatives of the Stolypin club, shall cease to revoke the licenses of financial institutions and to a policy of warnings. By analogy with the deposits of natural persons need to insure Bank deposits of legal entities in the amount of 1.5 million rubles.

    A large company the strategy proposes to support, starting the market of corporate bonds (i.e. debt securities, the holder of which is entitled some time to get their money back with a profit). This same profit is not taxed and fees.

    Finally, you must implement a special program of the Central Bank of the Russian Federation and the government of the Russian Federation for support of economic growth for a period of 5 years and a total amount of about 1.5 trillion rubles a year. The money is necessary to invest to the existing development institutions (industrial development Fund, Vnesheconombank, the development Corporation small and medium enterprises, the Fund of development of monotowns and others) and create new ones, to restructure the debts of industrial enterprises are SMEs, and to refinance the leasing company.

    5  Where to get so much money?

    The money is there, sure the creators of the strategy. Rather, they appear due to the economic growth. Each percent of GDP — is not less than 300 billion rubles of the consolidated budget. In addition, the authors of the plan propose to use the assets of the state banks and the Central Bank to implement projects in the field of public-private partnerships (PPPs) to privatize the assets of the country and to borrow from the public and financial investors using bonds. In total, the restart of the economy will need 7.7 trillion rubles.

    6   Will this not lead to inflation?


    Result. But experts of the Stolypin club, I assure you that in all the countries at the stage of “explosive” development of the economy, it abruptly flew up to a double digit number. And fear is not necessary, because the rise in prices of goods and services will be temporary. All this has not led to the ruin of the population and business, the strategy proposes to fix the tariffs of infrastructure monopolies and fee for technological connection to 2018-2019 at the level of 2017, to give a function for establishing network tariffs for transmission of electricity from the regional level to the Federal and equalize the electricity tariffs for enterprises and population. And they are expected to decline by 27.8% due to networking.

    7  The industry will develop. Who will buy all these goods?

    We are with you. “Growth strategy” involves a program of stimulating consumption. Will build housing — it is necessary to reduce the rate on mortgages to 5%. Will begin to produce products and medicines — it is necessary to provide subsidies for socially unprotected citizens (up to 170 billion a year) on their purchase. The plan involves the continuation of programs to encourage the purchase of vehicles, machinery and other industrial goods of a domestic production. Finally, the first step is to run programs create export oriented industries in the field of military industry, agriculture, IT, deep processing of raw materials (gas, grain, diamonds, wood, fish), second — go to export high-tech equipment, aircraft and spacecraft, machines.

    8  What to do with the taxes?


    Team “Stolypina” insists on reducing the burden for entrepreneurs: to start to introduce a “vacation” for 5 years for the new and fastest growing industries. A key objective is the reduction in the average level of fiscal “pressure” for business up to 35% of commercial profit. Moreover, the decrease in fees is necessary not only for Russian business, but for foreigners they need to set the rate of income tax and the property tax level offshore.

    9 The concept refers to “the alignment of the regions”. But as small areas to compare with Moscow?


    The project assumes that the measures of state support needs to a small town with a population of 250-500 thousand people (and for regions with low concentration of population 100-250 thousand). To concentrate on measures of state support. These cities will become markets for surrounding rural areas and smaller municipalities. Around the need to form industrial clusters. Their centers have become the company of major state-owned companies, natural monopolies and commodity around which it is possible to create chains of related industrial small and medium enterprises. The state’s participation in funding can vary from 75% to cover the cost of partial guarantees on loans. The most attractive funding scheme large-scale projects, PPPs and project Finance.

    10  What other suggestions are contained in the “growth Strategy”?


       It is necessary to carry out judicial reform, to expand the powers of the Supreme court on cancellation of entered into force decisions and to increase the number of world and arbitration judges in Metropolitan areas.

       It is necessary to adopt legislation regulating the turnover of cryptocurrency, and to equate their status to foreign money, and also to allow banks to open accounts in these units and exchange them for rubles.

       It is impossible to raise the retirement age, while life expectancy in Russia reaches 75 years, and lower rates of insurance payments in the Pension Fund and health insurance Fund.
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    Post  Austin on Sun Mar 12, 2017 3:56 pm

    ^^ What does member think about Stolypin club proposal for Long Term Economic Development of Russia ?

    I quickly read the whole proposal , It seems they are are targetting high GDP Growth , even if it means Deficit , Public Debt of max 35 % currently its at 13 % and Deficit of Budget not more than 3 % , Inflation Rise will be temporary they say.

    They want CBR to print 7.5 trillion rouble in next 5 years to stimulate growth , They want immediate rates of interest to come down to 7 % and in future Interest rate will always be inflation + 2 %


    Remind me of Trump Economic Strategist Interview last week I saw , He said Lets Target GDP growth first even if it means more Debt , Their argument is you can only pay of debt if you have Growth , else it will lead to stagnation.
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    Post  kvs on Sun Mar 12, 2017 4:17 pm

    Austin wrote:^^ What does member think about Stolypin club proposal for Long Term Economic Development of Russia ?

    Alexei Kudrin is also working on his own proposal and will be submitted by May , Some how I dont trust Alexei , I think he want to make Russia an appendage of West

    These people are clueless as well. They want the prime rate to be inflation + 2%. They do not understand the nature of inflation
    in Russia and of the rate policy in other countries. Western central banks have been using the formula inflation - 2% (minus not plus)
    for almost 30 years. For example, as the CPI hit 2% the prime rate was set at zero in many countries or 0.5%. Even Russia's CBR
    applied a similar policy over the 2000s where the prime rate was below the CPI. The CBR had a rate of 8.5% when the inflation was
    over 10%. The CPI was in a long term decline then and it would have continued to decline.

    Instead Nabiullina and the monetarist 5th column that took over the CBR, used the late 2014, early 2015 forex rate induced inflation
    spike to jack up rates and keep them high. Since the weekly inflation rate returned to normal in March of 2015 (yes, that early)
    there was no reason to maintain them sky high. Such a rapid dissipation of the inflation spike proves that Russia was not in an inflation
    sensitive regime. As evidenced by the experience of countries around the world, real inflation instability cannot be eliminated with
    high rates on demand (e.g. Paul Volcker's futile fight against inflation during the late 1970s, early 1980s.)

    http://www.economist.com/blogs/freeexchange/2010/03/volcker_recession

    The best policy for Russia is not stimulus spending, but to clean house at the CBR. The CBR is the sole reason for the current
    sluggish recovery and these scumbags are seriously risking to destabilize the inflation regime in Russia. It will be extremely
    ironic that Russia entered an unstable inflation regime after surviving one of the worst depressions in history of the planet with
    a quasi-stable inflation regime. Putin needs to wake the f*ck up and not wait for these academic windbags come up with inane
    "solutions" to Russia's economic problems which do not address the main cause of its ailment; the CBR.

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    Post  Austin on Sun Mar 12, 2017 4:44 pm

    That long term solution of +2 % markup is for the Saving Class , If the interest rate is less than the inflation then the Saving class would be burning their money.

    It will force them to put their money from Banks to more riskier Stock Market to earn money in order to make it inflation proof.

    I think the Russian Government is keen to preserve the wealth of Savers who might want to invest in Safer Government Securties without risking their life saving to the mood of stocks
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    Post  kvs on Sun Mar 12, 2017 5:00 pm

    Austin wrote:That long term solution of +2 % markup is for the Saving Class , If the interest rate is less than the inflation then the Saving class would be burning their money.

    It will force them to put their money from Banks to more riskier Stock Market to earn money in order to make it inflation proof.

    I think the Russian Government is keen to preserve the wealth of Savers who might want to invest in Safer Government Securties without risking their life saving to the mood of stocks

    We are talking about lending rates and not savings rates. The banks never give you the same percentage for loans and savings.
    The problem is in the lending rate. Here in Canada I need a GIC to get in the 2% range for savings. The savings account
    has nearly zero interest. Meanwhile mortage and lending rates are over 4%. So I can't even get the prime Central Bank lending
    rate in a private bank. In Russia that means that lending rates at banks are likely over 13%. This is insane.
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    Post  Austin on Sun Mar 12, 2017 5:05 pm

    Yes but the same bank has to also make profit , If you Give Savers say 8 % they cant lend at 5 % how will they make profit unless some one subsidises them ?

    Even in india the interest rate for savers is around 6-7 % but if you want to go for home loan be it Government bank or Private the interest rate is 9.5 %

    If you want to go for Car loan or Personal loan the interest rate is as high as 14-15 %
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    Post  Austin on Mon Mar 13, 2017 5:43 pm

    Russia will take away money from the United States

    https://www.gazeta.ru/business/2017/03/10/10568591.shtml

    Prime Minister Dmitry Medvedev has instructed the Ministry of Finance and Ministry of Economic Development with the participation of JSC "Russian export hub" (REC) to develop proposals to ensure competitive conditions of crediting of foreign buyers of goods and services produced in Russia, including the use of foreign currency government financial assets.

    For Russian banks providing export financing (Eximbank, VEB), there is no cheap funding sources, which means that they provide expensive resources and competitive.


    At the same time the Ministry of Finance reserves placed on Libor rates and even lower in the US and European debt securities. Source "Gazety.Ru" notes that part of these funds could be redirected to the funding of domestic credit institutions that support exports.

    At the end of December 2016 Russia held US treasury bonds for $ 86.1 billion. In comparison with December 2015, this portfolio decreased by $ 6 billion, or 6.5%, according to the RNS news.

    At the same time Russia in terms of investments in US government securities lags behind Japan and China, which by the end of December last year belonged to the bonds by $ 1.09 trillion and $ 1.06 trillion respectively.

    The policy of keeping money in US debt regularly criticized the "left" economists, such as presidential adviser Sergei Glazyev. They believe that the way Russia is financing the development of American, not Russian economy.

    Now the government aims to increase the share of non-commodity exports. Prime Minister Dmitry Medvedev even said recently about the "export expansion."

    "Our industry needs to be competitive, the goods produced by our industry should demand both in the domestic and foreign market. We must create all conditions for the so-called export expansion. To do this, the product must be of high quality and affordable - both domestic prices and export markets ", - said the Prime Minister.


    Russia actively uses the mechanism for providing loans to foreign buyers of domestic goods and services. For example, many nuclear power plants are being built in the Russian loans.

    India provided a loan of $ 3.4 billion for the construction of NPP "Kudankulam". Egypt for 13 years will be given $ 25 billion for the construction of the first nuclear power plant in the country, Bangladesh approved a credit line of $ 11.38 billion.

    Iran last year agreed to provide a loan of $ 2.5 billion for the electrification of the railway line Garmsar - Ince-breaker and construction of thermal power plant in Bandar Abbas. These works will lead the Russian company.

    The amounts are large, and the opportunities for expansion of such operations a little. Free money to increase the volumes of export credits in the federal budget is not, in the next three years it will be typeset with a deficit. This year is expected to exceed budget deficit will amount to about 3% of GDP.

    Redirecting part of the resources of the American securities on the funding of our institutions in a foreign currency loans, on the one hand, solves the problem, on the other - does not violate the principles of macro-economic, the source says "Gazety.Ru".


    It is unknown to what extent the funds that can be withdrawn from the US Treasury bonds in question. Ministry of Finance, Ministry of Economic Development and the RECs should submit their proposals by April 5 this year.
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    Post  Austin on Mon Mar 13, 2017 5:44 pm

    $86 billion in US Tressury is huge money

    What if they says reduce that to half and buy $40 billion worth of Chinese & BRICS country bond , whats the harm these are government securities and as good quality paper as any one can get
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    Post  Austin on Mon Mar 13, 2017 6:17 pm

    "Gazprom" has agreed to implement a number of European Commission requirements

    https://lenta.ru/news/2017/03/13/gazpromek/
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    Post  Viktor on Mon Mar 13, 2017 7:17 pm

    Austin wrote:$86 billion in US Tressury is huge money

    What if they says reduce that to half and buy $40 billion worth of  Chinese & BRICS country bond ,  whats the harm these are government securities and as good quality paper as any one can get

    It started with the offshore accounts. Russian money is coming home Very Happy
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    Post  Viktor on Mon Mar 13, 2017 7:55 pm

    Puting gave Russian companies - Iran // 45 bin per year !!

    http://www.vestifinance.ru/articles/82460
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    Post  Austin on Thu Mar 16, 2017 6:19 am

    Far East received a two-year $ 25 billion investment

    https://ria.ru/economy/20170315/1490030253.html

    "In the Far East created unprecedented conditions for the economic development of the territory, such as the territory of priority development (TOP), a free port of Vladivostok, state targeted support investment projects, preferential financing fund development of the Far East. This has allowed for two years to attract $ 25 billion investment, and with taking into account the large-scale projects for gas processing and petrochemicals, which are considered by the government, this would amount to 60 billion, "
    - are reported quote from the speech of Deputy Prime Minister Yuri Trutnev at the" round table "with representatives of the Vietnamese business in Hanoi.
    According to Trutnev, as part of new development tools in the Far Eastern Federal District, running 500 investment projects. In this case more than 30% of the total investment - is an investment of foreign investors.

    As Minister for Development of the Far East Alexander Galushka previously noted, in the macro-region to create competitive conditions for economic development in comparison with Asia Pacific countries.

    "With new support measures for investors - the top, the free port of Vladivostok, the target state support of investment projects, preferential financing fund of the Far East - are already creating new factories, new businesses, new infrastructure," - said Galushka.
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    Post  Regular on Fri Mar 17, 2017 8:59 am

    Number of dollar billionaires up 11% in Russia last year, at the same time, the number of billionaires in Europe declined by four percent


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    Post  kvs on Sat Mar 18, 2017 12:04 am

    Regular wrote:Number of dollar billionaires up 11% in Russia last year, at the same time, the number of billionaires in Europe declined by four percent



    This is a valid economic indicator and does not support the notion that Russia's economy is struggling. I suspect some sort of shenanigans
    or serious errors in the GDP growth estimate. GKS uses a GDP deflator based on the CPI and PPI which are estimated by the CBR. The
    CBR does not know what inflation is. Inflation can only be properly defined under an equilibrium pricing regime. Believe it or not but Russia
    is still undergoing pricing transitions after 1991. It is 26 years later and the prices have not reached equilibrium yet. For example take
    the price structure in military industry: six Project 636.3 boats for the price of one Japanese Soryu. The 636.3 is not six times cheaper
    or less capable than the Soryu by an stretch of the imagination. Soviet style quid pro quo economic activity which was aggravated by
    barter during the 1990s (due to massive payment arrears) has not completely disappeared. This is yet another price transient since replacing
    these free services (like companies engaged in community support) will produce massive "inflation" in this sector.

    The bottom line is that the CBR grossly overestimates the CPI and PPI by treating transition pricing as inflation. This is obvious nonsense
    since Soviet prices and free services are not a valid reference point to define the price change. When the CBR was measuring an inflation rate
    of 15% it was likely that the real inflation was 8% and the current 7% is more like 4-5% (the spread is shrinking, slowly). An overestimation
    error in the PPI and CPI will introduce an error in the GDP growth:

    The real GDP in year X is GDP in nominal rubles divided by 1+(w1*CPI+w2*PPI)/100, where w1 = 1-w2 are the fractions of consumer and industrial
    sectors. If the CPI=PPI=10% according to the CBR but in reality CPI=PPI=7% then we have:

    GDP/1.1 instead of GDP/1.07 or an error of 1.1/1.07 = 1.028 so the real GDP estimate is almost 3% smaller than in actuality; if the
    GKS GDP growth is -1% then it actually +2%.

    The GDP is really bound to the physical economy. Treating zero price activity as zero GDP is wrong. You have to estimate a price for
    these transitioning sectors which reflects their market value and physical volume. If the physical volume decreases then the GDP contribution
    shrinks and vice versa. So the adjusted price can be kept constant and adjusted year to year based on production or service volume.
    This is a challenging thing to do, but that's just life. Pretending that the transition prices are inflation is simply wrong since under equilibrium
    conditions price shifts reflect relative production volume contributions (same production, higher price => CPI/PPI increase which then offsets
    GDP increase since GDP is about production and not price) while transition price increases do not indicate any production volume decrease.

    The problem is that different parts of the economy have reached different levels of equilibrium and a single CPI and PPI is being used for
    all these parts. If every price transition was on the same curve then the CBR methodology would be fine. But by using a globally derived
    CPI and PPI which treats transition price increases as inflation, it overestimates real inflation in sectors closer to equilibrium. Even weighting
    these different parts of the GDP by their size will not hide the distortion.
    Kimppis
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    Post  Kimppis on Sat Mar 18, 2017 11:41 pm

    Well, they just changed their "methodology" and GDP growth rates for the last few years improved quite a bit. For 2015 -2.8% vs. the older estimate of -3.7% and for 2016 -0.2% vs. -0.6%. So if they keep the same adjustments into the future, this years should also be considerably better than their forecasts. Previously they were talking about a growth of around 1.5% (lately they have been talking about 2%), so it's possible the growth could reach something like 2.5% this year. But we'll see...
    kvs
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    Post  kvs on Sun Mar 19, 2017 5:03 am

    Kimppis wrote:Well, they just changed their "methodology" and GDP growth rates for the last few years improved quite a bit. For 2015 -2.8% vs. the older estimate of -3.7% and for 2016 -0.2% vs. -0.6%. So if they keep the same adjustments into the future, this years should also be considerably better than their forecasts. Previously they were talking about a growth of around 1.5% (lately they have been talking about 2%), so it's possible the growth could reach something like 2.5% this year. But we'll see...

    Those are not changes in methodology, they are minor adjustments. The -0.2% or -0.6% GDP growth estimate for 2016 is simply not credible. Millionaires and billionaires
    don't increase by 10% if the economy is contracting.
    Singular_Transform
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    Post  Singular_Transform on Sun Mar 19, 2017 10:18 am

    kvs wrote:
    Kimppis wrote:Well, they just changed their "methodology" and GDP growth rates for the last few years improved quite a bit. For 2015 -2.8% vs. the older estimate of -3.7% and for 2016 -0.2% vs. -0.6%. So if they keep the same adjustments into the future, this years should also be considerably better than their forecasts. Previously they were talking about a growth of around 1.5% (lately they have been talking about 2%), so it's possible the growth could reach something like 2.5% this year. But we'll see...

    Those are not changes in methodology, they are minor adjustments. The -0.2% or -0.6% GDP growth estimate for 2016 is simply not credible. Millionaires and billionaires
    don't increase by 10% if the economy is contracting.

    It makes sense, the middle / poor people getting poorer, the wealthier receiving more money and more wealth.

    It is wealth distribution, take away from the poor and give it to the rich.

    Past three years was about it, check the portion of wages/salaries from the GDP.
    kvs
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    Post  kvs on Sun Mar 19, 2017 2:17 pm

    Singular_Transform wrote:
    kvs wrote:
    Kimppis wrote:Well, they just changed their "methodology" and GDP growth rates for the last few years improved quite a bit. For 2015 -2.8% vs. the older estimate of -3.7% and for 2016 -0.2% vs. -0.6%. So if they keep the same adjustments into the future, this years should also be considerably better than their forecasts. Previously they were talking about a growth of around 1.5% (lately they have been talking about 2%), so it's possible the growth could reach something like 2.5% this year. But we'll see...

    Those are not changes in methodology, they are minor adjustments.   The -0.2% or -0.6% GDP growth estimate for 2016 is simply not credible.  Millionaires and billionaires
    don't increase by 10% if the economy is contracting.

    It makes sense, the middle / poor people getting poorer, the wealthier receiving more money and more wealth.

    It is wealth distribution, take away from the poor and give it to the rich.

    Past three years was about it, check the portion of wages/salaries from the GDP.

    But there is no evidence of such a change in the income curve.   The bitching about it in the anti-Russian media was over the last
    15 years related to the relative increase of the rich vs. the lower income brackets.  All segments of the population were
    getting wealthier.   And your "makes sense" actually doesn't since it would be a pure catabolic process where the "1%" was
    reducing the wealth of the "99%".  This would accelerate GDP contraction.

    And just what sort of catabolic processes do you propose to explain this alleged inequality spreading?  

    http://www.tradingeconomics.com/russia/wage-growth

    There was no contraction in real wages in 2016 and they actually started to grow over the last
    six months.  So there is no catabolic income redistribution.
    Kimppis
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    Post  Kimppis on Sun Mar 19, 2017 7:02 pm

    Exactly, they made methodological adjustments, the same thing...

    Yes, Russia's GINI index is quite normal by global standards. Worse than in Western Europe, but pretty much exactly the same as the US. Although there are a lot of billionaires in Russia vs. the overall number of millionaires.

    HOWEVER, isn't the number of (dollar!) millionaires highly related to the exchange rate? So the number of millionaires probably fell by quite a bit in 2015 and now it's simply recovering, especially when the ruble strengthened.
    kvs
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    Post  kvs on Sun Mar 19, 2017 7:40 pm

    Kimppis wrote:Exactly, they made methodological adjustments, the same thing...

    Yes, Russia's GINI index is quite normal by global standards. Worse than in Western Europe, but pretty much exactly the same as the US. Although there are a lot of billionaires in Russia vs. the overall number of millionaires.

    HOWEVER, isn't the number of (dollar!) millionaires highly related to the exchange rate? So the number of millionaires probably fell by quite a bit in 2015 and now it's simply recovering, especially when the ruble strengthened.

    You are right, the exchange rate is a factor. But 10% is too much for it to be the only factor. Most billionaires are not sitting at 1.0 billion but have several. The same is true for millionaires as well. This due to the hyperbolic income distribution curve. The "rich keep getting richer".



    https://www.theguardian.com/business/2014/nov/13/us-wealth-inequality-top-01-worth-as-much-as-the-bottom-90

    Russian Economy General News: #7 - Page 19 7200feb5-69a6-43f2-a5ee-9f7251941be4-bestSizeAvailable

    Americans have not recovered after the 2008 recession but the US rich have.

    Singular_Transform
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    Post  Singular_Transform on Sun Mar 19, 2017 11:02 pm

    kvs wrote:

    But there is no evidence of such a change in the income curve.   The bitching about it in the anti-Russian media was over the last
    15 years related to the relative increase of the rich vs. the lower income brackets.  All segments of the population were
    getting wealthier.   And your "makes sense" actually doesn't since it would be a pure catabolic process where the "1%" was
    reducing the wealth of the "99%".  This would accelerate GDP contraction.

    And just what sort of catabolic processes do you propose to explain this alleged inequality spreading?  

    http://www.tradingeconomics.com/russia/wage-growth

    There was no contraction in real wages in 2016 and they actually started to grow over the last
    six months.  So there is no catabolic income redistribution.

    Click on you link to the "5Y" button and you will see the evidence.
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    Post  Austin on Mon Mar 20, 2017 7:47 pm

    Watching the Senate Intelligence Hearing on Russian Interfering in US Election is an Epitome on Putin and Russian bashing Exercise.

    Putin is the big Devil and Russia the bad player in Global Scene and hostile to US.

    Makes me wonder why do the Idiot Russian even buy US Bonds which is worth $80 billion Today , Are they stupid or naieve or both.

    Why not buy bonds of friendly country like China or India or other nations , Why Reward the US even half a percent by buying their bonds ?

    Sponsored content

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