given all the inputs over the past few days I am behind on smoothieX12 and must get quickly caught up
simplicius76.substack.com
Now, let’s cover one other major segment. There’s been a lot of talk about the Russian ruble and economy in general. Firstly, the central bank upped rates from 8.5% to 12% yesterday, which seems to have reversed the ruble’s crash for now:
But there’s an important thing which Andrei Martyanov highlighted in his new post as well. He mentions how Russia has dedollarized dramatically since 2010, implying the crash of the ruble matters even less now than ever. Furthermore, the Russian economy is currently booming, certainly supercharged by the defense industry which is on a massive hiring spree.
Many outlets report that Russia suffers a historic worker shortage currently. That’s true, Russia is having its worst labor shortage in “25 years” with ~40% of industrial enterprises suffering shortages. But the reason for this is overlooked: because Russia has too much of a good problem. Their unemployment is so low that almost everyone that can possibly be employed is already employed. If that was the U.S. or any other country, it would be reported with the fanfare of a major societal triumph.
Also, one has to be careful of what ‘shortage’ means. It doesn’t mean the businesses have no personnel at all, it simply denotes some form of staffing issues but in most cases those issues are not critical and are in fact minor inconveniences.
Martyanov’s post was in response to Larry Johnson’s own good post refuting an NYTimes hit piece on the Russian economy.
I’ll add to the discussion the following from a well-known Russian finance expert Pavel “Spydell” Ryabov, who explains the ruble situation in far more intricate terms. I’ll paste one section at a time and fill in the explanations, as I see them:
"The problem with the ruble is structural. The trade balance in Russia in foreign currencies (unfriendly and neutral countries) went into deficit for the first time since Q2 1998 - a symbolic $ 300 million per quarter, but a year earlier there was a surplus of $ 72 billion.
Before the start of its second quarter, the foreign trade surplus was about $ 40 billion.
This is big and good news. That means for the first time since 1998, Russia uses less foreign currency (deficit) in trade than its own ruble. Last year, according to these statistics, Russia used $72B more of foreign currencies.
At the same time, the trade surplus (goods + services) in the ruble has sharply increased, which in dollar terms amounts to $ 16 billion, both for Q1 and Q2 2023. The accumulated surplus from January 2022 to June 2023 in settlements with the ruble is almost $ 110 billion.
Now almost 40% of all Russian exports for Q2 2023 pass in rubles, compared with 14% in Q2 2021, in the currencies of unfriendly countries exports are about 34% vs 85% in 2021, and in the currencies of neutral countries exports increased to almost 27% vs 1% in 2021.
This is huge news. Not only does is Russia now using $110B more in ruble terms but 40% of all Russian exports for the current quarter are in rubles compared to 14% for the same quarter in 2021. In other words: last year, in all its trades, Russia used the ruble only 14% of the time to settle those trades. Now it’s using it 40% of the time.
Likewise, last year Russia used foreign currencies of unfriendly countries (presumably dollar and euro) in trade settlements a whopping 85% of the time and now uses them only 34%. The currency of friendly countries (presumably yuan, rupee, etc.) was used only 1% of the time and is now used 27%.
Putting the numbers together, this means that currently 67% of all trades are done in either the ruble or friendly currencies (yuan, rupee, etc.), while the remainder of trade—33-34%—is done in unfriendly currencies like dollar and euro.
About 30% of the turnover takes place in the ruble (29% before SVO), in the currencies of unfriendly countries – 36% (67% in 2021) and 35% in the currencies of neutral countries, compared with 4% in 2021.
Formally, foreign trade in foreign currencies is balanced (exports are equal to imports), but Russia was not ready to trade in rubles, not technically, but structurally.
Liabilities are formed in foreign currency on interest payments on foreign currency obligations, and the external debt itself is almost entirely concentrated in the currencies of unfriendly countries.
The outflow from the financial account is also mainly in foreign currency, with the exception of trade loans and funding advances for external counterparties of the positive balance of the trade balance in rubles.
To reduce the long-term pressure on the ruble, it is necessary to restructure the foreign currency debt, and these are years. Or to agree on the repayment of obligations in foreign currency in rubles, but they tried in 2022 and failed.
With a zero trade balance in foreign currency, any outflow of currency will destabilize the ruble, i.e., currency control measures are inevitable until the moment of "splitting" foreign debts."
This gets into complicated territory. But the gist of it is that there are certain thorns in Russia’s financial haunch in the form of some of its debt being financed in unfriendly foreign currencies. And since such debt typically has a long term maturation attached to it, it can’t easily be converted back or refinanced into rubles, and all its attendant interest payments have to be made in the foreign currencies. This can destabilize the ruble when it’s sold off on foreign exchange markets to purchase the foreign currencies needed to pay off this debt.
Long story short: once the current dollar-denominated bonds are paid off eventually, the problem could be resolved as in the future Russia could choose to not issue such bonds anymore. But for the time being it has to pay them off via foreign currencies.
I don’t care to get into the specifics, but anticipating questions on it I’ll answer it briefly. For those wondering why Russia has dollar-denominated debt of this sort to begin with: to fund the federal/national budget in a time of deficit the Russian gov’t can issue either dollar-denominated bonds or its own “OFZ” (ruble bonds) which are purchased by various investors (both domestic and foreign). The money from these purchases funds the government budget, or the portion of it which was in deficit. The Russian gov’t now has to pay off those purchased bonds. The OFZ ones are paid off in rubles but the others have to be paid in foreign currencies as Western countries maliciously refuse to let Russia refinance them in different currencies for the simple reason of deliberately creating headaches for Russia.
But the overall point is that the east/west crisis of the past two years has allowed Russia to vastly dedollarize (I use that as a blanket term for all unfriendly currencies) which has some ‘growing pains’ associated with it, but which will eventually lead to unprecedented independence, particularly when coupled with the coming BRICS-led initiatives which will hopefully allow countries to grow progressively bolder in settling in their own currencies, if not entirely redesigning the system with a new BRICS currency of their own, which is the hoped-for long shot.
In the below chart from the same Pavel Ryabov post above, we see total Russian trade balance (goods + services) in billion dollars per quarter. Yellow represents rubles, orange is unfriendly currencies, and the white line is neutral currencies:
Ironically, a new ‘bombshell’ Business Insider article making the rounds today says that Russia added $600B in total wealth over the past year while the combined West lost “trillions”:
Not to cheer on the bourgeoisie getting richer, but this has parallel ramifications for society at large:
Russia added $600 billion of total wealth, the Swiss bank found in its annual Global Wealth Report, published Tuesday.
The number of Russian millionaires also rose by about 56,000 to 408,000 in 2022, while the number of ultra-high-net-worth individuals — people worth over $50 million — jumped by nearly 4,500.
But the US lost more wealth than any other country last year, shedding $5.9 trillion, while North America and Europe combined got $10.9 trillion poorer, UBS reported.
There were also 1 million fewer American millionaires by the end of 2022, although the US still accounted for over 50% of the world's ultra-high-net-worth individuals, the bank said.
And in the meantime, Americans continue to be gaslighted and sandbagged by the cruel cretins of the financial state. Listen hear as Yellen crudely doublespeaks her way through a series of unbelievable mental gymnastics which flips the opening proposition:
The official statistics say the vast majority of Americans disapprove of the economy, but according to her, while that may be true, they remain perfectly happy with their own finances. Huh?
On this note, the eminent economist Sergei Glazyev had an interesting series of predictions in a report from a couple months ago:
I recommend reading it in its entirety for those interested insightful prognostications for the future of the world order. |
