All times are UTC




Post new topic Reply to topic  [ 4 posts ] 
Author Message
 Post subject: Central Bank of Russia and Russian economy
Post Number:#1  PostPosted: 05 Jan 2015 06:38 
Offline
Admin
User avatar

Joined: 28 Oct 2008
Last Visit: 30 Dec 2020 14:27
Posts: 3641
Location: Surrey UK
Gender: Male
Status: Married
Her/His Country: Russia
RW_here_since: July 2008
Times_to_FSU: Too many to remember
Image
    Pravda, Правда; ("Truth") is a Russian political newspaper associated with the Communist Party of the Russian Federation.
    The newspaper began publication in 1912 and emerged as a leading newspaper of the Soviet Union after the October Revolution. The newspaper was an organ of the Central Committee of the CPSU between 1912 and 1991. During the Cold War, Pravda was well known in the West for its pronouncements as the official voice of the Communist Party of the Soviet Union.

Image

The Western community has been putting a lot of pressure on Russia lately. At this time of history, Russia needs to take efforts to support the real sector of economy. It is the Central Bank that should play the key role at this point. However, as economists note, it is the Central Bank that shows extremely negative influence on the Russian economy, accelerating inflation and weakening the roubble ...

What has the Central Bank been doing to the Russian rubble lately? It would seem that the CB has been supporting the national currency, although there is nothing positive about it. Chaotic currency interventions could only trigger speculations on currency exchange rates. At the same time, the Central Bank has spent billions of dollars to support the rate of the Russian rubble. To be more precise, Russia's gold and currency reserves have lost $100 billion in 2014, with the greatest losses taking place in October, when $27 billion was spent to support the rubble. The result of that is zero. The rubble is still rolling down the hill.

At the Moscow Economic Forum, held in Moscow on Tuesday, State Duma deputy Oksana Dmitrieva said that the strengthening of the Russian currency, which we could see during the year, was demonstrative. The ruble was not strengthening, and the attempts of the Central Bank to keep the exchange rate led to further devaluation of the Russian currency. Earlier, some experts predicted that the ruble would be traded on the level of 60 rubles per one dollar by the spring of 2015. It is now obvious that this is going to happen even before the new year. To crown it all, foreign exchange interventions provided for the increase of the ruble volume in economy, which boosted the inflation rate.

"The Central Bank intervenes often in a chaotic way, trying to keep up the rate of the currency at the time when there is no opportunity to keep it up at all. At times, the CB conducts the demonstration of the strengthening of the ruble, as it was in March-April 2014. If we look for opportunities for currency speculation, then we can find it where certain players have access to insider information, - says Oksana Dmitrieva. - It should be clearly understood that attempts to strengthen the ruble and spend gold and currency reserves on these efforts, as was the case in 1998 and then in 2008, may lead to the collapse of the ruble value."

According to Oksana Dmitrieva, small percentages of industrial growth that Russia has seen in recent months is the effect of the devaluation of the ruble.

Indeed, the biggest problem lies in the fact that the Central Bank shows no reaction to the new course of economic development of the country, which President Vladimir Putin and Prime Minister Dmitry Medvedev have announced before - the policy of industrialization and the development of the real sector. However, the refinancing rate of the Central Ban, still remains extremely high, and the reasons are understandable, because the high rate serves the main mechanism to contain inflation. With all these manipulations, the real sector of economy, which, in the context of growing financial and energy isolation of Russia, can improve economic performance, remains bound hand and foot.

Chairman of the National Union of Milk Producers, Andrei Danilenko, said that the Central Bank should revise its approach to priority industries in terms of import substitution. The rates for agriculture and industry should be reduced. One could probably go even further and proceed to interest-free loans, taking into consideration the fact that an adequate draft law has already been prepared and submitted to the government.

Yet, there are other mechanisms. IMF Japan Executive Director (2007-2010) Daisuke Kotegawa told of Japan's experience in dealing with postwar hyperinflation. Noteworthy, despite the current decline of the Japanese economy, a little more than 50 years ago, the country of the Rising Sun made a huge industrial breakthrough, which was called the great economic miracle. In a nutshell, the Japanese central bank strictly limited sectors for financing.

Thus, it was industry that received the inflow of funding. The industrial boom and the high-tech status of the production sector of Japan appeared as a result of the course targeting the development of production in lending, when loans to other sectors were purposefully limited. Why can't Russia do the same today?

It appears that the fear of the Central Bank administration is the only obstacle on the way to the great future of the Russian industry. It appears that the Central Bank of Russia fears losing money on the foreign exchange market. There is such a risk indeed, if nothing is done to adjust the volume of cash flows, to create an attractive environment for investment in the real sector, but make it inaccessible and uneconomic with the help of high rates.

Well-known journalist and political adviser Anatoly Wasserman believes that one should not blame only the Central Bank for the fall of the economic growth.

"The whole economic block of the Russian government, including the Central Bank, is guided by one and the same block of economic theory that stems from one and the same concept, namely, libertarianism - the movement about benefits of unlimited economic freedom of individuals, disregarding society. It is clear that this complex of theory is destructive for the society, and it does not make sense to blame the Central Bank, turning a blind eye on other factors that destroy our economy.

"The concepts that the Central Bank officially declares are strange to a certain extent. Firstly, the Central Bank says that one should limit inflation by raising the refinancing rate. However, as I understand it, raising the refinancing rate means that anyone, who raises a loan in a bank for industrial trade, should set the final price of their product to be able to compensate the lending rate. That is, a high lending rate does not cut, but rather raises prices.

"Secondly, the Central Bank is guided by the politics of full redundancy. In principle, this means that foreign exchange reserves of the Central Bank shall at any time be sufficient to pay off all debts of the Russian Federation. However, when an urgent need appeared to repay the loan debt, simply because we have stopped receiving new loans, the Central Bank is sitting on its reserves, like a dog in the manger, offering those that owe something to the West to obtain their own currency. Technically, though, the Central Bank can redeem all foreign debts, take the debts of economic entities and repay them with the money that they had borrowed in the West and sold to the CB for rubles."

According to Anatoly Wasserman, actions of the Central Bank indicate that its management strictly follows the theory developed by developed countries for developing countries, so that the latter do not become developed ones. Thus, the cure is to change the economic theory for the entire economic bloc of the government. If someone in this economic block does not consider it possible to proceed to another theory, it means they will have to go.

By Maria Snytkova - Pravda.Ru 11.12.2014

_________________
.
Image


 Profile  
 
 Post subject: Re: Central Bank of Russia and Russian economy
Post Number:#2  PostPosted: 05 Jan 2015 07:54 
Offline
Admin
User avatar

Joined: 28 Oct 2008
Last Visit: 30 Dec 2020 14:27
Posts: 3641
Location: Surrey UK
Gender: Male
Status: Married
Her/His Country: Russia
RW_here_since: July 2008
Times_to_FSU: Too many to remember
Image


The dollar and the euro have been growing rapidly against the Russian ruble lately. Some experts see the positive side of the ruble devaluation. According to them, the current situation may trigger the rise of the Russian industry. Yet, the factor of the plummeting ruble is not enough against the backdrop of sanctions.

Dmitry Miroshnichenko, independent economic expert said:

"In my view, the ruble devaluation creates a certain window of opportunity, but devaluation alone is not enough to launch import substitution in Russia. This requires a lot of factors that, unfortunately, our country doesn't have. Devaluation is like icing on the cake. The situation is that we do not have the cake - the factors that make business in Russia profitable and predictable. This means that if you develop your business, then you will not have unfair competition on the part of regional leaders, whose business you may disturb."

Experts refer to the example of Belarus. This country has also experienced recession and currency devaluation. Many believe that these factors helped the country develop its production. However, Minsk could also count on subsidies from Moscow.

"Russia has been sponsoring the Belarusian economy for many years, if not decades. Roughly speaking, every Russian citizen gives Belarus 100 rubles a year. If someone wishes to start sponsoring Russia, it will be possible to do what Belarus did, although I doubt that there will be countries that may wish to sponsor Russia."

Published on 19 Dec 2014 by PravdaTV

_________________
.
Image


 Profile  
 
 Post subject: Re: Central Bank of Russia and Russian economy
Post Number:#3  PostPosted: 05 Jan 2015 08:22 
Offline
Admin
User avatar

Joined: 28 Oct 2008
Last Visit: 30 Dec 2020 14:27
Posts: 3641
Location: Surrey UK
Gender: Male
Status: Married
Her/His Country: Russia
RW_here_since: July 2008
Times_to_FSU: Too many to remember
Image

Image

Russia's Central Bank raised its key interest rate sharply from 10,5% to 17% on 16 December. A message posted on the website of the financial regulator says that "the decision was made due to the need to significantly restrict devaluation and inflation risks."

In the morning of December 16, playing a key rate increase, the dollar went nearly six rubles down to 58.59 rubles, and the euro slipped to 72.9 rubles, RIA Novosti reports. However, by noon of the same day, the dollar reached almost 65 rubles, the euro climbed to 81 rubles, and the ruble has thus completely lost the growth that it had showed after the Central Bank of Russia raised the key interest rate. Afterwards, the rate of the US currency went up to 69 rubles per one dollar after Brent oil dropped below the level of $60 per barrel.

The decision from the Central Bank was a reaction to the events of "Black Monday," when, on December 15, the ruble fell by almost ten percent in one day. Until that day, the Russian ruble was second only to the Ukrainian hryvnia in terms of the devaluation pace. Since the beginning of 2014, the ruble has lost about 40% of its value in dollar terms, while the hryvnia - 46%.

Some experts believe that the decision of the Russian Central Bank symbolizes the move to rescue the financial system of the country to the detriment of the economic growth. The first priority today is not economy per se, but the efforts that can stop the collapse of the Russian ruble.

Russia sees another "Black Monday" as ruble collapses

After the collapse on Monday, December 15, the loss of the ruble since the beginning of the year has amounted to about 48%, which made the Russian currency the leader of the world decline. Following the trading on Monday, the dollar and the euro soared up 5.3 and 6.1 rubles respectively, the Kommersant said. The Russian currency fell amid expectations of new sanctions from the US and declining oil prices.

The Russian currency market lives under the conditions of panic that spurs speculative interest on the part of investors. At the time when the ruble loses a few percent of its value daily, many banks and companies begin to profit from it, pushing their the main activities into the background.

The Bank of Russia needs to reduce lending to force banks and corporations sell currency, ex-chairman of the Bank of Russia, Chairman of the Supervisory Board of VTB Bank, Sergei Dubinin, told TASS. commenting on the fall of the ruble. "Right now, one is left to restrain ruble liquidity, to push banks, corporations and individuals, who need to spend money in rubles, towards selling foreign currency," said Dubinin.

According to him, the ruble has been "clearly oversold." "We can see the lack of foreign currency in exchange offices, which indicates that indicates enormous amount of currency that has been bought," he said. According to Dubinin, against the backdrop of the ongoing devaluation of the ruble, the balance of payments will be corrected, but imports will become so expensive that it will make purchasing from abroad pointless. "What can one spend this currency on then? Shall one expect another wave of speculations? One should not take currency risks so recklessly," said Dubinin.

Nothing can be done to stop the Russian ruble from falling

"In a short-term perspective, nothing will be able to stop the ruble from falling, unless the Central Bank decided to raise the rate to 20 percent," the chairman of the board of directors of MDM Bank, Oleg Vyugin said. Until recently, the ruble has been losing 4-5 percent of its value in a week. The Central Bank rate should set the rate on the level of 20 percent to prevent market members from playing against the ruble. However, the main problem is that "the Central Bank has printed a lot of money during the recent years, and it seems that the bank is not going to stop this policy. One needs to either take tight monetary actions or wait until imports stop. As long as there's import, one can not see the bottom, to which the ruble can fall," he said.

Commissioner for Entrepreneurs' Rights, Boris Titov, believes that rescuing the ruble to the detriment of economic development is not reasonable at all.

"Production becomes a big question in such circumstances... In President's recent Address to the Federal Assembly, we all heard him speaking about the need to develop business, new technologies, investment and import substitution, then the decision of the Central Bank is strongly against it," said Titov on Kommersant FM radio.

"The rate of the Central Bank means that the refinancing of commercial banks is conducted under 17% per annum. Therefore, all business plans will have to include this burden on the cost price. Every year, one will have to return 17 percent of investment resources to banks. The percentage can be even higher, as banks will take their margins. In fact, the real rate today is higher than 20%. Therefore, any project should be 20% more competitive than, for example, imports," says Titov.

Meanwhile, Russian banks already start ordering five-digit electronic displays for exchange offices. The first orders for the new displays arrived from the banks that work with foreign exchange retail, the Izvestia wrote. The currently used four-digit displays will not be able to display foreign currency rates higher than 99.99 rubles. A five-digit display contains three digits before the decimal point and two after.

The ruble has been falling so fast that Russian sellers start revisiting the practice from the 1990s, setting prices in a foreign currency equivalent, i.e. a conventional unit, known in Russia as y.e. Formally, this is prohibited under amendments to the Law on Consumer Protection from 2004, but the rapid devaluation of the ruble forces entrepreneurs to "turn back time."

Pravda.Ru 16.12.2014

_________________
.
Image


 Profile  
 
 Post subject: Re: Central Bank of Russia and Russian economy
Post Number:#4  PostPosted: 05 Jan 2015 08:41 
Offline
Admin
User avatar

Joined: 28 Oct 2008
Last Visit: 30 Dec 2020 14:27
Posts: 3641
Location: Surrey UK
Gender: Male
Status: Married
Her/His Country: Russia
RW_here_since: July 2008
Times_to_FSU: Too many to remember
Image
Image

The Central Bank of the Russian Federation does not have to support the Russian economy. There is no paragraph in the Constitution of the Russian Federation (written during the 1990s) that would tell the Central Bank to act so. For what purpose did the Central Bank set the Russian ruble free? Pravda.Ru asked expert opinion from State Duma deputy Yevgeny Fyodorov.

"All countries of the world are divided into two large groups. One group is called developed countries, and the other group - developing, or underdeveloped countries, better to say. In the past, underdeveloped countries were called colonies. Economies of all developed countries have one common feature - low interest rates. This is a key point. All underdeveloped countries - there are 90 percent of such countries in the world - have very high interest rates. The essence of high interest rates, including in Russia, is not to allow national currency onto national market. In order to let the Central Bank issue rubles in Russia, so that we could go to stores to spend them, the Central Bank needs to buy US dollars first. This rule is common for underdeveloped countries.

"The Russian Constitution says that the ruble should keep up rates. To this end, the Central Bank should keep up rates too, and the Central Bank has foreign exchange reserves for the purpose - $450 billion to date. This amount exceeds cash ruble assets 2,5 times.

"In other words, Russia is not even a ruble country de jure. Russia is a dollar country. The Russian ruble takes a small share in the country. The whole segment of investment is based on dollars and euros. The Constitution protects that, and the Central Bank of the country should keep the rate. Now, we have the situation when the Central Bank does not abide by the Constitution, because it raised the key rate and reduced the ruble rate. From the point of view of the Constitution, the Central Bank is obliged to keep the rate. The Central Bank violated the Constitution and Putin's numerous instructions, but it was an absolutely logical move. The charter of the Central Bank does not contain a word about the Russian economy. It should not support the Russian economy. The law says that the Central Bank is governed by international agreements. The bank signs agreements that the Ministry of Justice does not even register. The administration of the Russian Central Bank is based outside Russia.

"There is no other central bank in the world that would not be allowed to support the national economy. The Russian Central Bank is the only exception. This is a specific peculiarity of the Russian Central Bank. The law even says that the bank is a branch of foreign companies in Russia. For example, the Russian Central Bank is a depositary of the IMF. The law of the Central Bank does not have a word about the Russian economy. Yet, it contains detailed instructions on how to follow and execute instructions from abroad. The law was made during the 1990s. Putin tried to amend it in the 2000s, but it did not work out. As a result, the Central Bank of the Russian Federation works for a foreign country under the Russian Constitution. This state imposes sanctions on Russia. The Russian Central Bank is obliged to execute instructions from the USA - the Americans set an official task to weaken the Russian economy.

"All of us - the people, the government, the Central Bank, the government, MPs - we all work on the basis of the Constitution and laws. Our laws say that we have no sovereignty. The Central Bank works for a foreign country - this is an official norm of the Constitution.

"If you have low interest rates in developed countries, free rate works for you. If you have high interest rates, as in underdeveloped countries, free rate works against you. The free rate is good when you have a free country. When a country is a colony with high stakes, then the free rate, on the contrary, is pumping money out of the country.

"All our factories were built on foreign loans. If you want to build something, you have to raise a loan in a bank. Tractors, processing, refrigerators, logistics - everything is on loan.

"Naturally, all of this is connected to the ruble exchange rate, which the Central Bank refused to keep. The mechanism of price growth works through the credit system. The government, no matter how good or bad it could be, can show five or ten percent of its influence on economy. Ninety percent of influence on economy of any country is about the fiscal policy that state banks determine. A government is a regulator and a little bit a budget. The changing rate of the Central Bank stops financial flows that move economic life."


Interview conducted by Inna Novikova - Pravda.Ru 30.12.2014

_________________
.
Image


 Profile  
 
Display posts from previous:  Sort by  
Post new topic Reply to topic  [ 4 posts ] 

All times are UTC


Who is online

Registered users: No registered users


You cannot post new topics in this forum
You cannot reply to topics in this forum
You cannot edit your posts in this forum
You cannot delete your posts in this forum
You cannot post attachments in this forum

Jump to:  
cron
Powered by phpBB