7-7
Living Standards of Russians Will Twofold Deteriorate
Authors: Alexey Fedorov
Number of views: 470
After having attended the Moscow Economic Forum I was surprised
to find that among a vast number of participants I failed to meet at least
one who would share the opinion that the government of Russia has
an elaborate economic policy. The majority of participants are sharing
the opinion that the authorities are enthralled by illusions. There was a
belief that oil prices would not fall below 80 dollars per barrel, but they
have fallen; that after accession of Crimea the West would not impose
any sanctions, but they have imposed ones; that after imposition of
sanctions we would obtain credits in Asia and the Chinese investments
would flow in Russia, but there is no such flow; that after devaluation
there would be no price rising, and the prices have risen, and etc. It
stands to reason that onset of any crisis should be followed by increase
in borrowings, interest rates reduction and cuts in taxes; the government
of the Russian Federation increased taxes, interest rates were sent skyhigh
and borrowings absolutely paralyzed; and the regions, such as the
Rostov Region, which dared to make a try for to get themselves out of the
crisis classically by increasing budget deficit, such politicians as Evgeny
Bushmin, Chairman of the Budget Committee of the Council of the
Russian Federation, by the way, Senator from the Rostov Region, were
threatened with “public flogging” and obstruction. However, contrary
to general opinion, I respectfully disagree with the majority opinion.
To the best of my belief, the government has got an elaborate plan of
actions, but this plan as distinguished from the opinion of the majority of
population of Russia is aimed to decline living standards of Russians and
the Cabinet is dealing successfully with this task. I would like to explain
my reasons. If we would consider the GDP breakdown, in simplified form,
net exports will make 5-7 %, supply expenditure will make 10-12 %, fixed
asset formation - 20 % (this ratio has already fallen to 10 %) and net
consumption and services will make 60-70 %. It has been proven that
fixed investments should make about 40 % for sustained development
of any country. For this indicator China is the world leader; as regards
CIS countries, Belarus which is in the lead is followed up by Kazakhstan
where this index makes 27-28 percent. And now we shall consider sources
for increasing fixed assets formation in Russia. Neither net exporting nor
army and state employees can generate such sources. At our disposal
remains only net consumption. Under existing investments at the rate
of 10 per cent, there is only one possibility to achieve 30 %: twofold crash
of living standards of Russians, from 60-70 % to 30-35 %, in other words,
to cut per head consumption in half and, as a result, to cut the service
sector by as many. But it’s unlikely that population unaccustomed to live
in conditions of mobilization development without any extraordinary
events will support such actions of the government and, therefore,
“a war” is necessary. The authorities manipulate the environment of
international process in their favour, for purposeful, for its own ends,
fall of living standards (consumption standards) of population. A great
many of people failed to pay attention to the fact the Central Bank of
the Russian Federation has got a right “to crash” the Rouble only since
January, 2015, but the Bank made it two months earlier. Why? Because it
was an ideal window of opportunities – the West imposed sanctions, and
oil prices have fallen in half – these are “objective” reason and “enemy”.
Actually, there were no reasons for the Rouble crash as, according to the
applicable comprador model, the Rouble stock in hands of population
(without notice of state corporations) in Russia is still in line with
currency holdings. And even if all inhabitants of Russia brought their
Roubles for exchange on dollars at the exchange rate which was actual
in November, there would be plenty currency for everyone. But what did
the government do? Let’s put the case that you have $100, on security
of this sum you are issuing 100 Roubles. It is obvious that at any time
these Roubles can be exchanged for dollars at the rate of 1:1. But if the
issuer declared that he has no intention to exchange more than $50,
the remaining $50, so to speak, “will disappear”. The rate of exchange
will make 1:2 and the issuer will keep both $50 and 100 % of the Rouble
supply. That’s what the Russian monetary authorities did when they
abandoned exchanging Rubles for dollars upon their availability,
and determined a new equilibrium point. According to this logic,
the released Rouble supply should be brought to the real sector of
economy, and for this purpose institutes of project financing which
are distributing loans according to formula “public funds + own costs”
are necessary but not the banks which formula includes interest on
principal. As a result, closing the majority of commercial banks and
merging of the rest of the bank in several state-owned megabanks
and the state-owned banks of “bad debts” (unrecoverable loans) is
expected in the coming days. A positive note is that the production
sector will grow! And this is a closing idea.
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