1. In the first quarter, Russia was fed to the brim with foreign money. This fact is recognized even by the American Forbes:
Russia’s positive current account balance against the backdrop of rising prices for exported raw materials in the first quarter amounted to a record $58 billion. By the end of the year, the figure may exceed $200 billion – imports will decline, and exports, even in the event of a decrease in physical supplies, will be supported by high energy prices .
The positive current account balance of Russia in the first quarter of 2022, according to the Central Bank, amounted to $58.2 billion. For Russia, this is a record quarterly figure, it is 2.6 times higher than at the beginning of last year ($22.5 billion). The trade surplus (a positive difference between exports and imports of goods and services) amounted to $66.3 billion (a year earlier – $25.8 billion). The volume of exports amounted to $156.7 billion (a year ago – $104.8 billion), imports – $90.4 billion ($14.4 billion more than in the first quarter of 2021).
Russia does not really need such an influx of dollars. Firstly, the US and the EU are trying to create a situation where they will continue to buy us oil and gas, but we will be able to buy little from them with the proceeds due to sanctions, that is, this money will lie in our accounts like a dead weight. Secondly, the threat of dollar hyperinflation is growing rapidly, so in any case it must be spent somewhere promptly.
Right now, it is important for Russia to show that despite the sanctions, foreign currency continues to flow into the country. But already in the very near future, our foreign trade will probably be balanced – we will buy exactly the same amount as we sell.
2. It will be possible to take a preferential loan for the redemption of the assets of Western runaway companies:
The Central Bank has made it easier for commercial banks to lend to the buyout of assets of companies leaving Russia, according to a statement on the regulator’s website.
Until January 1, 2023, preferential terms will apply to borrowers who are going to buy out the assets of enterprises that have stopped working in Russia. In particular, such loans will not be subject to the increased risk factors used in the calculation of the capital adequacy ratio.
3. Professor of Economics Alexander Skorobogatov analyzes the dubious theories of Western economists about the ruble:
Paul Krugman, who won the Alfred Nobel Memorial Prize in Economics for articles thirty years ago, has long since switched from the scientific to the ideological and informational front, telling New York Times readers about Russia’s failures even where it is supposedly succeeding. The strengthened ruble, it turns out, is a harbinger of a catastrophic recession.
He explains this based on the idea of the “impossible trinity” in international finance. The stability of the domestic currency, an open capital market, and a free monetary policy are three desirable conditions that no country can achieve at the same time. But the fulfillment of any two of these conditions is essential for the proper functioning of the economy.
Krugman cites the UK with a volatile pound, the EU with the rate nailed to the floor, and China with high barriers to capital movement as examples. In all three cases, the economy is able to balance between financial stability and economic growth.
In Russia, according to Krugman, there is only one of three conditions – a stable currency, while the capital market is tightly locked, and the rate is screwed to the ceiling. As for the latter condition, Krugman believes that the Russian Central Bank does not have the slightest freedom of maneuver and simply has to raise the rate beyond measure, because otherwise, even with the capital market locked, the ruble will inevitably collapse.
He concludes his discourse with a gloomy prediction that, in the end, Russia will only have a strong ruble and the economy will suffocate from a lack of liquidity. Interestingly, in this part of his reasoning, he is in tune with the aspirations of some heavily indebted oligarchs, such as Oleg Deripaska, who say that with such a monetary policy, the Russian economy is a khan.
However, the easing announced on Friday from the Central Bank clearly demonstrated that it has a free hand to simultaneously fight inflation and unemployment. Lowering the rate by 300 basis points at once – is this not proof of his complete freedom of maneuver?!
In fact, the barriers to the movement of capital were more than enough to stabilize the foreign exchange market. The rate is maneuvered for the sake of price stability, setting it approximately at the level of inflationary expectations.
Krugman believes that we keep the rate at an impossibly high level, unable to lower it. Meanwhile, if we turn to our recent history, we will see that back in 2015 the rate was at the same level as now, at the turn of the century it was three times and four times higher, in 1998 it reached 150%, and several years earlier exceeded 200%. And by the way, at that time, Western experts spoke approvingly of this policy, saying that it provides us with financial stability.
Thus, both recent history and current events show that in Russia, along with a stable currency, there is freedom of maneuver in monetary policy, i.e. There are two “impossible trinity” conditions for financial stability and employment.
As for these two conditions themselves, in this we turned out to be similar to China: a stable currency and free maneuvering of the rate with a closed capital market. So rumors about the death of the Russian economy, even if they come from a Nobel laureate who is not very competent in our affairs, are premature.