Another Economic Doubts

Russian Economy Department

Glazyev’s remarks lack of answers to what, why and with what.

Some doubts about the growth opportunities
From: In the den of hell, February 1st, 22:52

(Click to enlarge)

There would be a giant delay, the business calmed down, the real sector has gained new benchmarks of competitiveness after the devaluation it has become more competitive. We would have stability, and today was economic growth. Not only our calculations but also the recommendations of the business community, “Business Russia”, “OPORA Russia” say that we can now grow with a pace of at least 10% per year.

Everything is great, and even the need for stable ruble is also correct, but in all the statements of Glazyev are confused – he is everywhere limited to the most common words. Sort of correct, but the specific mechanisms are not contained. (…)

(…) It is very convenient. It is difficult to argue, for it would not. The country needs a stable ruble? Well of course Yes! Another issue is stability of the rouble is generally what is and why is it unstable now? His shake speculators? Okay, let’s say. And then what? Speculators violate any prohibitory law? Then why the Prosecutor’s office still has not started on this subject a single case? So with the current level of control over banking operations in autumn 2014 among the five hundred Russian banks at least a couple of violators caught by the hand was possible? Why it is still in the dock empty? Why not one “culprit in speculation,” the Bank is not even named in the category of “suspects”? This will prevent the result? Why is it in such cases does not interfere with the investigation in the US or Europe?

Maybe the silence from that any laws these speculators do not violate? Then the question arises, and whether the boy? Whether the reason is volatility of the ruble is in bad speculators? Over the past 15 years, the Russian financial market has radically changed at least twice, and even thrice. In the zero years he is actually 3/4 belonged to non-residents. But since then, their numbers greatly thinned. It has been repeatedly stated and shown that the lion’s share of financial transactions in Russia is on a small number of the largest banks, primarily Sberbank and VTB. It is they, not the residents?

Or take the position of Glazyev at the expense of speculators on the Moscow exchange. What exchanges need to do something, no doubt. Clearly it is necessary. But that’s what? Disable exchange activities in principle? Or “tighten up” some other individual “regulators”? Because if the exchange allows you to provide a return on capital of, say, 50% per annum, and the real sector, according to Glazyev, can give only 5-7%, the desire to invest in more profitable directions completely natural and logical. To say that it’s bad, like spitting into the wind. Here one should not blame speculators, but to think on this change in system of national economy to the profitability of the business began to exceed the stock and the money will run into the real sector.

However, at least a common project such changes? No? What are you talking about? What measures should be taken by the Central Bank to “protect the ruble”? To tie the ruble to the dollar or some other currency? And how it will protect him from the consequences of, say, the ECB’s QE program? I repeat, to stabilize the ruble is necessary, but this requires a clear understanding of the needed concrete actions at least at the level of the overall economic system. Just kicking the Central Bank – they do not take action! – there is hot air.

And what is really disturbing is the constant repetition of the argument about the possibility of continued growth at an accelerated pace, by 10% per year. We can grow? Falls in world oil consumption and its price. And we “still can” increase the volume by 10% annually? To increase production or to increase sales? In a world of falling volumes of capital construction. It is clear. Sale of industrial goods fails to hold even at current levels. Expansion of production is not necessary, as consumers have no money this additional amount to pay. Turns a simple chain. There is no need in new mills – there are no orders for their construction. No orders – there is no demand for concrete, construction, fittings and stuff. We, however, can increase the volume of production of steel and concrete? For whom? Who, what means, that growth will pay for? Or maybe the idea is to ruble devaluation and the decrease of prices for Russian products, which will allow to organize a global dumping with which to push out other competitors from the market and to grow through them? And on the political implications of such a strategy has anyone ever wondered? Europe, USA or China going to put up with his losing in the global competition and to humbly look at their win Russian manufacturers? Seriously?

These and many other obvious no connections with reality personally I have cast serious doubt on the realism of the whole Glazyev’s program.

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