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From what I understand the government and financial institutions have been preparing for worse than we see now when it comes to prices concerning oil and gas. They've been following the squirrels philosophy and getting far more bang for the buck spent on top of that. Stability is everything.
This is correct.
They were running very lean budget for years, explaining to population that all those cuts in welfare were a "necessity" for "successful, bullet-proof development of economy," but since the general population didn't see the same kind of sacrifices from its upper class, people started grumbling, particularly after the pension reforms ( which affected Putin's rating personally.) Medvedev infuriated people on few occasions too, making publicly idiotic statements.)
Besides, the educated part of population was aware that money WERE there, available, sitting safely on American accounts. ( it's not like the government was FORCED to run the lean budget, not spending on infrastructure improvement in rural areas/smaller cities, cutting expenses on medical services, education, and so on for general population.)
So as I've said people started grumbling, the protests were growing and Putin made sure that he was the "messenger of good news" - him personally.
However I already noticed the "tricky part" of the "new plan."
Heaven knows job growth and economic growth are needed, but where is he going to get the money? How's the price of oil and natural gas doing these days, on the global market?
Russia unemployment rate at 4.5% would be the envy of the European Union but, yes, there is a problem with underemployment.
A sovereign currency country (which Russia is), basically completely independent, resource wise, with a highly educated population and industrial infrastructure does not have the problem "where to get the money from"....You create the money needed, money is simply the lubricant of economic activity.
Where the US "got the money" to pull itself out of the 2008 slump?? Did it dig it out of the ground?? No, simply, it created it...how Japan finance its 250% debt to GDP debt load?? It creates the money.
Money is not the problem, a productive society is.
Russia unemployment rate at 4.5% would be the envy of the European Union but, yes, there is a problem with underemployment.
A sovereign currency country (which Russia is), basically completely independent, resource wise, with a highly educated population and industrial infrastructure does not have the problem "where to get the money from"....You create the money needed, money is simply the lubricant of economic activity.
You mean, like--print more money, Soviet-style?
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Originally Posted by saturno_v;
Where the US "got the money" to pull itself out of the 2008 slump?? Did it dig it out of the ground?? No, simply, it created it...how Japan finance its 250% debt to GDP debt load?? It creates the money.
Money is not the problem, a productive society is.
OK, those are good examples (I...guess....), but Russia isn't known for being a booming economic engine. It's known for resource extraction, not for growing its economy. Sorry to break the bad news to you....
So, my question still stands. You're spot on re: the presence or absence of a productive society being one of the main determining factors, though. Possibly THE main determining factor. I still see a LOT of the old attitude in Russia, "the government pretends to pay us, so we pretend to work" playing out. But I've also seen people in business for themselves working incredibly hard, like doing the work of 4 people in the government offices. Heck, doing the work of 10people!
Oh, and btw, some would say the US hasn't finished pulling itself out of the 2008 slump. Reports you've read that it has succeeded in doing so are rumored to be fictional. Just because the stock market recovered, doesn't mean the job market and other indicators have. And just because certain sectors in certain cities are expanding faster than the US can produce workers for those sectors, doesn't mean the rest of the country is enjoying economic recovery.
You mean, like--print more money, Soviet-style?
OK, those are good examples (I...guess....), but Russia isn't known for being a booming economic engine. It's known for resource extraction, not for growing its economy. Sorry to break the bad news to you....
Every modern developed country "prints" money.....the gold standard ended long time ago
Actually growing at 1.6% with the obsession of high interest rates pursued by the Russian Central Bank (Putin should fire Elvira Nabiullina) and such little debt is not bad at all....not booming but no lackluster either. Russia actually gets more growth per every new currency unit of debt compared to the US.
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So, my question still stands. You're spot on re: the presence or absence of a productive society being one of the main determining factors, though. Possibly THE main determining factor. I still see a LOT of the old attitude in Russia, "the government pretends to pay us, so we pretend to work" playing out.
Exactly that is the problem....a productive and educated society...Russia has all the right ingredients (people, resources, market size and know-how) to grow at high rate...they have to find the right recipe and they are working on it.
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Oh, and btw, some would say the US hasn't finished pulling itself out of the 2008 slump. Reports you've read that it has succeeded in doing so are rumored to be fictional. Just because the stock market recovered, doesn't mean the job market and other indicators have. And just because certain sectors in certain cities are expanding faster than the US can produce workers for those sectors, doesn't mean the rest of the country is enjoying economic recovery.
I agree......however the point was that the US printed money to bail out its economy back then...the problem is that the dollars have been "sent" mostly in the wrong places that prevented to have an actual widespread recovery across the country.
I'll probably surprise you, but it's not necessary.. Russia's budget is bursting with extra money.. But the government, for some unknown reason, does not want to spend it..
Russia has been setting up a sovereign wealth fund to buffer against declines in oil and gas revenue. They've also entered into barter agreements to bypass the US dollar.
US has printed money to boost markets and the economy for a long time and to a much larger degree than any other nation. Their only rivals are Europe, Japan, and China, and the liquidity there is also intended to boost US assets to boost exports. It wasn't until the 50's that they formally rescinded the mandate to support debt issuance by the Treasury. There've been off-and-on printing activity in the 60's, 90's, 00's, and 10's, and now the 20's. They not only print directly, but have entered into arrangements with foreign central banks in allied states to do large-scale asset purchases in equities as well as bonds. Switzerland's central bank owns US equities equal to about 16 percent of its GDP.
Every modern developed country "prints" money.....the gold standard ended long time ago
Actually growing at 1.6% with the obsession of high interest rates pursued by the Russian Central Bank (Putin should fire Elvira Nabiullina) and such little debt is not bad at all....not booming but no lackluster either. Russia actually gets more growth per every new currency unit of debt compared to the US.
Exactly that is the problem....a productive and educated society...Russia has all the right ingredients (people, resources, market size and know-how) to grow at high rate...they have to find the right recipe and they are working on it.
I agree......however the point was that the US printed money to bail out its economy back then...the problem is that the dollars have been "sent" mostly in the wrong places that prevented to have an actual widespread recovery across the country.
I'm enjoying this exchange.
I'm not so sure the US pulled itself out of the 2008 recession by printing more money. Printing more money causes inflation, i.e. worthless money. This is something the USSR never understood. The US seems to solve economic problems by going further into debt. In fact, this has been an acceptable economic strategy since FDR (Roosevelt, during the Great Depression). Balanced budgets are for suckers, I guess...
Yes. It's not only about the productivity of the people, and "trimming the fat" in some public sectors (where would all those museum workers go, who currently spend most days playing solitaire on the computer, if their jobs were cut? The economy isn't able to absorb laid-off workers. The paper mill at Baikal, for example. 150 people out of work with nowhere to go). It's also about cutting back on bureaucratic obstacles to starting new businesses.
These reasons are why Russia is still dependent on resource extraction, see? But definitely, Russia is very strong in the human resources department. There's a lot of potential there. Oh, and that reminds me of another obstacle; so much creativity gets crushed for political reasons. There needs to be more freedom of expression, more freedom of creativity. Also, less xenophobia. When foreigners organize tour companies to Russia's more distant regions, they tend to run into obstacles sooner or later. Tourism is very good for the economy; it causes a positive cycle of stimulating local initiatives to meet the needs of tourists: small local businesses.
In some ways, Russia is still run like the USSR, and as a result, the economy is still languishing at a level not much above those days. Sure, there have been improvements, bright spots, but so much remains to be done. It's been 30 years already, for heaven's sake! There could have been much more progress. I think another part of the problem, is that the government (and its associates) tend to think in terms of grandiose projects, and don't understand the importance of supporting the creation of a lot of small businesses.
In some ways, Russia is still run like the USSR, and as a result, the economy is still languishing at a level not much above those days. Sure, there have been improvements, bright spots, but so much remains to be done. It's been 30 years already, for heaven's sake! There could have been much more progress. I think another part of the problem, is that the government (and its associates) tend to think in terms of grandiose projects, and don't understand the importance of supporting the creation of a lot of small businesses.
Russia faces things that other countries do not. It appears the vastness of the country is one of those obstacles. If you want to build a highway system it has significant challenges that stand in the way even west of the Urals and those obstacles get bigger the further east you go. Don't forget, once you build it you have to maintain it too. It's all but insane to do it. Russia just needs to stick to air infrastructure, riverine commerce and railroads. As for the citizens they'll have to conform. There's no point in building a road 300 miles for 50 families living in some small village out in the sticks. It's self defeating.
They are working on it though, the technology has to be invented to make things doable in a practical manner.
If you have foreign central banks in key US trade partners buy US treasuries, it boosts US financial assets and the US dollar which boosts exports to the US and holds down commodity prices. It stimulates inflation in goods and services consumed by the top 1 percent. That's why you see very high prices for high quality goods, but junk quality for low- and moderate-priced goods and food. They shifted the QE from the Fed to Japan and Europe just as crude oil hit $110-115 in 2014. The stronger dollar in addition to the ramp up in shale production caused crude oil to lose about two-thirds. You don't have central banks buying up crude oil to prop up the price.
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But the government, for some unknown reason, does not want to spend it..
