Publication in Russian on the Zen blog
https://dzen.ru/a/ZquIcI6VwQBISjNs
Interest rate in Russia, Russian gold standard and Russian debt to GDP ratio. Why is the Russian ruble and economy entering a phase of rapid decline? And why will the world be better off after the phase of monetary reformatting of the Russian economy.
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Let's talk about the monetary situation in Russia, in particular the interest rate, but I will also touch on the topic of debt and gold, because many people criticize the West for their monetary situation, they call it the collapse of the West, and Russia is much better in monetary terms, and it will not collapse. I will say that the Russian monetary situation is in a difficult situation now. In Russia, the interest rate is 18%. What is the interest rate? What is the intertemporal rate? That is, I prefer present goods to future goods. Everyone does this, it is a psychological phenomenon, we prefer a bird in the hand to two in the bush. There are two interest rates. The natural rate of interest, which is the rate of return on newly created assets, depends on the existence of barter rates of exchange and the bank rate of interest. Which means that if the interest rate in Russia is 18%, then the rate of return must be 18% in order to ensure monetary macroeconomic equilibrium. Because if I want to open a pizzeria, I'm not going to do it at 18% unless I can make 22%. That's the macro monetary equilibrium, where the natural rate of interest, the expected return on capital, is equal to the bank rate, according to economists like David Davidson, Erik Lindahl, Knut Wicksell. They looked at it as a price movement, where when there's disharmony between the natural rate and the bank rate, you get this cumulative process that economists like Ludwig von Mises and Friedrich von Hayek explain in business cycle theory, where when there's a disequilibrium between the natural rate and the effective bank rate, you get an imbalance and everything goes wrong. If you believe in Russia, if you believe that Russia is going to win today's geopolitical event and everything is going to be roses, then maybe you want to invest in that 18% interest rate by buying long-term bonds in Russia. If you believe, you can back up your words. In my humble subjective opinion, Russia has 0% chance of winning, I do not invest in Russia. With a disequilibrium interest rate in Russia, systemic effects occur throughout the economy, affecting the real sector of the economy. Countries like Zimbabwe, Argentina, Venezuela have high interest rates. The US, Canada, Denmark, Great Britain, Switzerland, Iceland have low interest rates. Who do you think is in a better monetary situation? If a country has high interest rates, then this tells me that inflation in the country is very high, in Russia it does not look like the declared 7.24%, this is nonsense from official Russian sources. There can only be two reasons for this: either the government is trying to save a collapsed economy from total collapse, or like North Korea, they are trying to create USSR 2.0, suppressing and destroying private business activity with high interest rates, because no one will borrow at 18%, so Russia is trying to implement a centrally planned system - this is a monetary economy with an interest rate. Well, what about gold? Many people say that Russia is on the gold standard. Remember, Russia is not on any gold standard! Russia has a lot of gold, Ghana has a lot of gold, Brazil has a lot of gold, South Africa has a lot of gold, does that mean that these are great countries? I will tell you who does not have gold: Ireland, Luxembourg, Sweden, Norway, and these countries seem to be quite developed, and then Malaysia, Singapore, many countries do not have gold. Maybe, personally, I am a supporter of the classical gold standard, if you can take a ruble, and go to the bank and take gold, otherwise all the statements about the gold standard are zilch. So the first thing that speaks of serious symptoms for the Russian economy is the interest rate. And I look at the high interest rate, leading to disequilibrium in the market and panic, this is the economic diagnosis for Russia. If you look at people who say that they have gold, understand, it means nothing, gold is a piece of metal, the economy gets richer because people want to make the world a better place, they create value in the real sector of the economy, whether it is manufacturing or growing food, creating happiness for people when people use their minds in creative and positive ways. Okay, what about the debt? They say, oh, you know, the United States, Canada, Iceland, these are such terrible countries, they have a high debt to GDP ratio. Well, yeah, and countries like the Democratic Republic of the Congo, Haiti, Afghanistan with a low debt to GDP ratio. But there is more to economics than just the debt-to-GDP ratio. Adam Smith said that if you believe in free enterprise (capitalism), then you believe that the economy is run by people working positively to create value for each other. Countries like Russia do not have a free economy, instead they have a centralized economy, top down. Russia claims that they have a spending deficit of 350 million dollars. My God, what nonsense and fiction of the Central Bank and the Russian government, telling stories, weaving Russian fairy tales, even mentioning the Russian soul, which the West does not understand. Adequate people do not understand the Russian budget, how people believe that they have such a low budget and such low spending. What Russia is - it is a centralization of power, like in Panem from the Hunger Games, in the capital. This is when some bloggers say that everything is fine, but it is fine for them, not for you or for a country where the debt to GDP ratio is on the same level as Haiti and Congo, where there is no trust in the fabricated numbers coming out of Russia. Russia has high interest rates which create imbalances and a cumulative process based on the ideas of Knut Wicksell, Friedrich Hayek, Erik Lindahl, Ludwig von Mises, David Davidson, which leads to monetary disequilibrium which creates systemic effects throughout the economy. Russia has a lot of gold, like South Africa and Ghana, but it is not a gold standard, it is called the resource curse, and it is better to do without such gold. It is better to have no resources, then you have to use the greatest resource in the universe, the human brain. The problem is that the economic situation and the monetary situation are not transparent enough, and if you want to make an argument that you believe in the future of Russia and in the monetary power of the Russian economy, then invest and invest in Russia. It is better to stay with the euro, dollars, pounds sterling, Swiss franc, and even better to stay with the developed countries where the interest rate is low, not 18%. The symptom, the warning sign, the red flag for Russia is the high interest rate, which tells us that Russia is in a dire monetary situation and that the Russian economy is about to collapse. Everything looks good and rosy before the collapse. But you know, I don't mind, because the good news is that if it does happen, it will speed up the healing process, when there is a chance to replace the bad actors with transparency and free democracy, honesty and kindness, and then the world we live in will be a better place. Instead of trying to survive, can we start living in harmony and love, living a real life and focusing on the good things in this life? Life becomes so much better with freedom, when you don't have to hang your head and live in the shadows.
Money is a store of value, representing the work a person does to create value. Money is created when you add something real and tangible to society, including valuable services.
I don't understand the Russian budget. In fact, I don't think Russia has a budget. The accounting standard is Putin declaring the numbers and the Central Bank declaring them as fact.
Russia is doing well because it is steadily and inexorably striving to return to the old Russian centralized state, where peasants died by the tens of thousands to build and complete the great projects of Russian society, yes, everything goes according to plan, where the individual is a nobody in the service of the Russian state.
It's funny that those who promote Russia keep their money in US dollars (or other Western currencies), not rubles. Russian propagandists don't put their money in rubles. Their money is in offshore accounts in the hated West. All of Russia's leaders and oligarchs have their money in the West. "Where your treasure is, there your heart will be also." The Russian economy has one foot in the grave and one foot on a banana peel.
Russia can move people and resources at gunpoint. The tip of a gun can move goods and services long after their numbers have deteriorated. I think that's how North Korea survives. "Power and nothing else" didn't work very well in Nazi Germany, Italy, Spain, 1930s Japan, etc. Power works while it works, but it is ultimately a very fragile system prone to catastrophic failure. The Soviet Union was very powerful, but when the basic economy collapsed, the collapse was massive and rapid. The system simply collapsed. I think the same is true of Russia today. It will probably hold out for the next 12-18 months, maybe longer, but the system will break nonetheless. When that happens, I predict that the Russians will turn to their leadership. There will be no "loyalty"; there will be "You ruined us." When that happens, Western businesses will be slow to react. Why should they? Western corporations have suffered greatly in Russia. What would a future Russian government say? "The next time we invade a sovereign neighbor and start a war, we will not nationalize all your assets?" For example, BP spent $24 billion to leave Russia. The companies that leased passenger jets to Russia lost billions; Russia simply stole the planes. Why would any company come back? Even the Saudis are hoping for the end of oil. It is coming, albeit in the future. No major oil company will ever want anything to do with Russia in ten years or two. Russia has no great future. Forget empire, I don't think the country will exist in its current form in 30 years.
Людвиг фон Мизес - философ и преподаватель, актуальный австрийский экономист, труды которого востребованы сегодня как никогда.
Фридрих фон Хайек - величайший социальный мыслитель 20 века, блестящий австрийский экономист, лауреат нобелевской премии по экономике.
Адам Смит - шотландский экономист и философ-этик, один из основоположников экономической теории как науки. Считается основателем классической политэкономии.
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Publication in Russian on the Zen blog
https://dzen.ru/a/ZquIcI6VwQBISjNs
