How long can the party last? Mr Putin’s attempts to blunt interest-rate rises will lead inflation to rise higher, and last longer, than it would have otherwise. At some point, people may get angry about the rising cost of living. He also cannot run budget deficits for ever. At current rates, Russia’s financial reserves will be exhausted in five years or so; meanwhile, the government faces high borrowing costs. But for now, Mr Putin has a war to win. And so the party goes on.
Parroting things without actually thinking about them doesn’t generally produce any interesting insights. As long as a country’s debt is denominated in its own currency and it has control over issuing that currency, it can create more of it to cover any outstanding obligations. This means there’s no risk of default because the government can simply print money to pay off its debts. That’s how US is able to have national debt of $34.4 trillion right now. If The Economist thinks that Russia’s financial reserves will be exhausted in five years or so, then they have some explaining to do regarding the US.
This means there’s no risk of default because the government can simply print money to pay off its debts. That’s how US is able to have national debt of $34.4 trillion right now. If The Economist thinks that Russia’s financial reserves will be exhausted in five years or so, then they have some explaining to do regarding the US.
The US is able to have a national debt of 34.4 trillion because people are still willing to lend them money. They aren’t just printing money, they are selling securities, which is similar to taking out a loan.
Printing more money in your own currency without backing it with some sort of security is just going to devalue your buying power and increase inflation. The Russian government is currently utilizing their reserves to sustain their spending, but if they run through those reserves they’re going to have to stop spending, or start selling securities. Either way, deficit spending cannot be solved via printing press.
The US is able to have a national debt of 34.4 trillion because people are still willing to lend them money. They aren’t just printing money, they are selling securities, which is similar to taking out a loan.
They’re very much printing money, meanwhile the demand for US bonds globally is in fact dropping.
Printing more money in your own currency without backing it with some sort of security is just going to devalue your buying power and increase inflation. The Russian government is currently utilizing their reserves to sustain their spending, but if they run through those reserves they’re going to have to stop spending, or start selling securities.
There’s absolutely nothing preventing Russia from backing its currency with securities as well. In fact, Russia is in a much better position to do so because they’ve been stockpiling gold.
Either way, deficit spending cannot be solved via printing press.
I mean the fact that it can is literally the premise behind MMT. That aside however, the very nature of currency is that it’s just a social contract. What actually matters is whether the country is able to allocate its productive forces effectively. As long as a country can continue to produce the things people need then the economy will be fine.
They’re very much printing money, meanwhile the demand for US bonds globally is in fact dropping.
Lol, I mean money is being printed in the literal sense. But, it’s still backed by securities.
As far as bond demand goes, it tends to dip and surge in popularity based on its yield.
There’s absolutely nothing preventing Russia from backing its currency with securities as well. In fact, Russia is in a much better position to do so because they’ve been stockpiling gold.
Securities are only valuable if the buyer believes they will be paid out once they have matured. Russia could start borrowing and utilizing securities, but they don’t exactly have a wide market to borrow from. Basically they’d have to borrow from China or maybe India, and those two likely wouldn’t be interested in gold reserves.
Gold isn’t a currency or even like a currency, it’s value declines the more it moves. It’s not exactly the best thing to back securities with, it’s more geared for purchasing when you have currency instabilities. More than likely they would have to back their securities with interest in oil/natural gass. However, that wouldn’t really help their problems too much, as that’s how they find their National Wealth Fund.
mean the fact that it can is literally the premise behind MMT.
Borrowing money is not the same as “printing money”.
very nature of currency is that it’s just a social contract. What actually matters is whether the country is able to allocate its productive forces effectively.
Yes, currency is a social contract, one that’s based on trust. How that currency performs and what it represents can influence that trust. Currency is not completely insulated from material realities, and the gap between the stated worth of the currency and the material realities of the country that determine that worth can determine how people outside the country will value it.
What actually matters is whether the country is able to allocate its productive forces effectively. As long as a country can continue to produce the things people need then the economy will be fine.
I mean… That’s a neat theory, but it kinda is easily disputed by nearly all economic collapses of the 19th century and onwards. If this is true, then did the Soviet Union’s economy explode simply due to an inability to allocate productive forces accordingly?
Has there been an economic collapse outside of a major war that was caused simply by a country losing its production capacity?
As far as bond demand goes, it tends to dip and surge in popularity based on its yield.
It’s very obviously shrinking in the long run given that now there’s a whole alternate world economy forming around BRICS that’s entirely outside the dollar. As trade outside the dollar continues to grow the demand for dollar naturally starts to drop. That in turn shrinks US economy as well, so prospects for returns on the securities continue to diminish as a result.
Securities are only valuable if the buyer believes they will be paid out once they have matured. Russia could start borrowing and utilizing securities, but they don’t exactly have a wide market to borrow from. Basically they’d have to borrow from China or maybe India, and those two likely wouldn’t be interested in gold reserves.
BRICS is literally a bigger economy than the G7 already, and it’s only growing. Russia is also one of the biggest commodity exporters globally, hence why sanctions against Russia failed in the first place. So, it’s pretty clear that Russia would have no problem backing their security with tangible stuff that countries need. Frankly, Russia is in a far better position than US here.
Gold isn’t a currency or even like a currency, it’s value declines the more it moves. It’s not exactly the best thing to back securities with, it’s more geared for purchasing when you have currency instabilities.
It’s an example of a tangible asset Russia can back securities with. Russia also produces a lot of things, such as titanium, that even the west can’t get by without.
Borrowing money is not the same as “printing money”.
Borrowing money in a currency you yourself issue is a nonsensical concept.
Yes, currency is a social contract, one that’s based on trust. How that currency performs and what it represents can influence that trust. Currency is not completely insulated from material realities, and the gap between the stated worth of the currency and the material realities of the country that determine that worth can determine how people outside the country will value it.
There is a difference between domestic market and international trade. The value of the currency domestically is not directly related to its trade value. My point was that as long as Russia is able to allocate labor and resources in a way that meets people’s needs then it doesn’t actually matter how much currency the government chooses to issue. Not only that, but currency being valued lower internationally actually plays in favor of the government in a country that’s primarily an exporter of goods.
I mean… That’s a neat theory, but it kinda is easily disputed by nearly all economic collapses of the 19th century and onwards. If this is true, then did the Soviet Union’s economy explode simply due to an inability to allocate productive forces accordingly?
These collapses all directly relate to the decline in material conditions. So not sure how that’s disputed in your mind. Meanwhile, the dissolution of USSR was primarily political in nature. The economy of USSR was certainly in a far better shape than US is today where millions of people are currently starving, unable to get healthcare, or even afford housing.
Has there been an economic collapse outside of a major war that was caused simply by a country losing its production capacity?
Collapses aren’t caused by loss of production capacity, they’re caused by misallocation of resources that leads to an unacceptable decline in the standard of living for the majority. Very much like what we’re seeing happening in US at this very moment incidentally.
It’s very obviously shrinking in the long run given that now there’s a whole alternate world economy forming around BRICS
If US debt is growing at an ever faster past, that logically demands that us securities are being sold at an ever higher pace…
China is one of the largest buyers of US securities. Having a large foreign exchange reserve is beneficial for export economics whose government mainly relies on vat taxes for revenue.
hence why sanctions against Russia failed in the first place. So, it’s pretty clear that Russia would have no problem backing their security with tangible stuff that countries need.
Sanctions failed because oil is still 80$ a barrel and the vast majority of governments are run by people wanting to line pockets.
It’s an example of a tangible asset Russia can back securities with
The whole point of buying securities is that they are liquid assets that can be traded as or like currency.
Borrowing money in a currency you yourself issue is a nonsensical concept.
It’s not really a radical concept…? Especially considering that every major economy does some form of debt monetization.
There is a difference between domestic market and international trade. The value of the currency domestically is not directly related to its trade value.
I think “Not only that, but currency being valued lower internationally actually plays in favor of the government in a country that’s primarily an exporter of goods.” Is kinda proof that there is a direct correlation. In a globalized economy domestic and international markets are inherently intertwined.
These collapses all directly relate to the decline in material conditions.
You don’t say…so what is causing the decline in material
conditions?
Meanwhile, the dissolution of USSR was primarily political in nature.
Isn’t how we allocate productive forces always political in nature?
The economy of USSR was certainly in a far better shape than US is today where millions of people are currently starving, unable to get healthcare, or even afford housing.
You really think that the current US economy is doing worse than the Soviet Union in the late 80’s and early 90’s?
Food shortages were rampant in the 90s, even in Moscow. If we were utilizing the same metrics as America for “starving” (aka food insecurity) then the majority of the Soviet Union would have been “starving”.
Healthcare by the late 80s in the USSR had fallen tremendously, mostly because their transition to prioritizing outpatient care, which caused their hospital system started falling apart.
As far as housing… Yeah, America is always gonna win that particular shitty trophy. Though that’s not exactly because of an inability of production, moreso an inability to empathize with the working class.
I’m not claiming that America has a great economy, or that capitalism is the best economic system to distribute resources. Just that certain economic principals are relevant wether you have a command economy or not. China is a socialist state and they still back their debt with securities, because not doing so leads to currency instabilities in both the domestic and international sectors of the economy.
Collapses aren’t caused by loss of production capacity, they’re caused by misallocation of resources that leads to an unacceptable decline in the standard of living for the majority.
Oh, like 39% of the federal budget going to the military? You don’t think that might catch up with them at some point?
China is one of the largest buyers of US securities. Having a large foreign exchange reserve is beneficial for export economics whose government mainly relies on vat taxes for revenue.
China has been actively dumping US securities for years now. Given the openly hostile stance US is taking towards China, I fully expect that this trend will only accelerate going forward https://www.globaltimes.cn/page/202303/1287406.shtml
Even Japan tried to sell off US bonds just recently, but had to stop because it was making the market panic. It’s a perfect illustration of just how fragile the whole scheme is in practice.
Sanctions failed because oil is still 80$ a barrel and the vast majority of governments are run by people wanting to line pockets.
In reality, oil is a small portion of Russian overall economy. There seems to be disproportionate focus on Russian energy exports in the west which paints a distorted picture of how the economy in Russia actually works.
The whole point of buying securities is that they are liquid assets that can be traded as or like currency.
The whole point of buying securities is that you expect them to retain value, hence why it’s important for them to be backed by something tangible. In case, of the US, the confidence has largely been built on top of the petrodollar. Every modern country needs oil to operate, and when it was only possible to buy oil in dollars, that meant there would always be a steady demand. Today, the situation is different, and that’s a big problem for the US.
It’s not really a radical concept…? Especially considering that every major economy does some form of debt monetization.
That’s a process of issuing currency, you’re not borrowing anything from anybody.
I think “Not only that, but currency being valued lower internationally actually plays in favor of the government in a country that’s primarily an exporter of goods.” Is kinda proof that there is a direct correlation. In a globalized economy domestic and international markets are inherently intertwined.
The dependence on international trade is very high for countries that are deindustrialized, such as western economies, it’s a far less important factor for countries that are largely self sufficient. Fluctuations in trade obviously impact domestic economy, but they can be weathered and they’re not catastrophic in the long run. That’s precisely what Russia illustrated at the start of the war when the west put the most severe sanctions it could come up with.
You don’t say…so what is causing the decline in material conditions?
Misallocation of labour and resources as I’ve explained several different ways in this very thread. When the country stops producing things that the working majority needs, you start having problems.
Isn’t how we allocate productive forces always political in nature?
Politics encompass more than simply allocation of resources. In this particular case, the politics were that Yeltsin decided he’d rather be the president of Russia than a deputy of USSR, and a bunch of Baltic countries wanted to become independent. It’s notable that when a referendum happened, over 70% of the people voted to keep USSR though. If economic decline was the core reason, then you wouldn’t have seen high level of public support for USSR. You’d see a situation that’s similar to what we see in US today where majority of the population no longer believes that their country is working in their interest.
You really think that the current US economy is doing worse than the Soviet Union in the late 80’s and early 90’s?
Unquestionably so. I grew up in USSR, so I’m speaking from personal experience here. The kinds of horrors that are happening in US today, were completely beyond imagination.
Food shortages were rampant in the 90s, even in Moscow. If we were utilizing the same metrics as America for “starving” (aka food insecurity) then the majority of the Soviet Union would have been “starving”.
The shortages started after the dissolution, and introduction of liberal reforms. One thing USSR did quite well was ensuring that everyone had a decent minimum standard of living. You don’t have to take my word for it though, here’s what the CIA had to say https://www.cia.gov/readingroom/document/cia-rdp84b00274r000300150009-5
As far as housing… Yeah, America is always gonna win that particular shitty trophy. Though that’s not exactly because of an inability of production, moreso an inability to empathize with the working class.
Again, that’s my original point that labor and resources aren’t being allocated in the interest of the majority which is leading to discontent and civil unrest among the public.
I’m not claiming that America has a great economy, or that capitalism is the best economic system to distribute resources. Just that certain economic principals are relevant wether you have a command economy or not. China is a socialist state and they still back their debt with securities, because not doing so leads to currency instabilities in both the domestic and international sectors of the economy.
I’m not arguing against backing debt with securities though. What I’ve been saying is that Russia is in a good position to do so.
Debt to whom exactly?
I’m just paraphrasing the article you linked:
Parroting things without actually thinking about them doesn’t generally produce any interesting insights. As long as a country’s debt is denominated in its own currency and it has control over issuing that currency, it can create more of it to cover any outstanding obligations. This means there’s no risk of default because the government can simply print money to pay off its debts. That’s how US is able to have national debt of $34.4 trillion right now. If The Economist thinks that Russia’s financial reserves will be exhausted in five years or so, then they have some explaining to do regarding the US.
The US is able to have a national debt of 34.4 trillion because people are still willing to lend them money. They aren’t just printing money, they are selling securities, which is similar to taking out a loan.
Printing more money in your own currency without backing it with some sort of security is just going to devalue your buying power and increase inflation. The Russian government is currently utilizing their reserves to sustain their spending, but if they run through those reserves they’re going to have to stop spending, or start selling securities. Either way, deficit spending cannot be solved via printing press.
They’re very much printing money, meanwhile the demand for US bonds globally is in fact dropping.
There’s absolutely nothing preventing Russia from backing its currency with securities as well. In fact, Russia is in a much better position to do so because they’ve been stockpiling gold.
I mean the fact that it can is literally the premise behind MMT. That aside however, the very nature of currency is that it’s just a social contract. What actually matters is whether the country is able to allocate its productive forces effectively. As long as a country can continue to produce the things people need then the economy will be fine.
Lol, I mean money is being printed in the literal sense. But, it’s still backed by securities.
As far as bond demand goes, it tends to dip and surge in popularity based on its yield.
Securities are only valuable if the buyer believes they will be paid out once they have matured. Russia could start borrowing and utilizing securities, but they don’t exactly have a wide market to borrow from. Basically they’d have to borrow from China or maybe India, and those two likely wouldn’t be interested in gold reserves.
Gold isn’t a currency or even like a currency, it’s value declines the more it moves. It’s not exactly the best thing to back securities with, it’s more geared for purchasing when you have currency instabilities. More than likely they would have to back their securities with interest in oil/natural gass. However, that wouldn’t really help their problems too much, as that’s how they find their National Wealth Fund.
Borrowing money is not the same as “printing money”.
Yes, currency is a social contract, one that’s based on trust. How that currency performs and what it represents can influence that trust. Currency is not completely insulated from material realities, and the gap between the stated worth of the currency and the material realities of the country that determine that worth can determine how people outside the country will value it.
I mean… That’s a neat theory, but it kinda is easily disputed by nearly all economic collapses of the 19th century and onwards. If this is true, then did the Soviet Union’s economy explode simply due to an inability to allocate productive forces accordingly?
Has there been an economic collapse outside of a major war that was caused simply by a country losing its production capacity?
It’s very obviously shrinking in the long run given that now there’s a whole alternate world economy forming around BRICS that’s entirely outside the dollar. As trade outside the dollar continues to grow the demand for dollar naturally starts to drop. That in turn shrinks US economy as well, so prospects for returns on the securities continue to diminish as a result.
BRICS is literally a bigger economy than the G7 already, and it’s only growing. Russia is also one of the biggest commodity exporters globally, hence why sanctions against Russia failed in the first place. So, it’s pretty clear that Russia would have no problem backing their security with tangible stuff that countries need. Frankly, Russia is in a far better position than US here.
It’s an example of a tangible asset Russia can back securities with. Russia also produces a lot of things, such as titanium, that even the west can’t get by without.
Borrowing money in a currency you yourself issue is a nonsensical concept.
There is a difference between domestic market and international trade. The value of the currency domestically is not directly related to its trade value. My point was that as long as Russia is able to allocate labor and resources in a way that meets people’s needs then it doesn’t actually matter how much currency the government chooses to issue. Not only that, but currency being valued lower internationally actually plays in favor of the government in a country that’s primarily an exporter of goods.
These collapses all directly relate to the decline in material conditions. So not sure how that’s disputed in your mind. Meanwhile, the dissolution of USSR was primarily political in nature. The economy of USSR was certainly in a far better shape than US is today where millions of people are currently starving, unable to get healthcare, or even afford housing.
Collapses aren’t caused by loss of production capacity, they’re caused by misallocation of resources that leads to an unacceptable decline in the standard of living for the majority. Very much like what we’re seeing happening in US at this very moment incidentally.
If US debt is growing at an ever faster past, that logically demands that us securities are being sold at an ever higher pace…
China is one of the largest buyers of US securities. Having a large foreign exchange reserve is beneficial for export economics whose government mainly relies on vat taxes for revenue.
Sanctions failed because oil is still 80$ a barrel and the vast majority of governments are run by people wanting to line pockets.
The whole point of buying securities is that they are liquid assets that can be traded as or like currency.
It’s not really a radical concept…? Especially considering that every major economy does some form of debt monetization.
I think “Not only that, but currency being valued lower internationally actually plays in favor of the government in a country that’s primarily an exporter of goods.” Is kinda proof that there is a direct correlation. In a globalized economy domestic and international markets are inherently intertwined.
You don’t say…so what is causing the decline in material conditions?
Isn’t how we allocate productive forces always political in nature?
You really think that the current US economy is doing worse than the Soviet Union in the late 80’s and early 90’s?
Food shortages were rampant in the 90s, even in Moscow. If we were utilizing the same metrics as America for “starving” (aka food insecurity) then the majority of the Soviet Union would have been “starving”.
Healthcare by the late 80s in the USSR had fallen tremendously, mostly because their transition to prioritizing outpatient care, which caused their hospital system started falling apart.
As far as housing… Yeah, America is always gonna win that particular shitty trophy. Though that’s not exactly because of an inability of production, moreso an inability to empathize with the working class.
I’m not claiming that America has a great economy, or that capitalism is the best economic system to distribute resources. Just that certain economic principals are relevant wether you have a command economy or not. China is a socialist state and they still back their debt with securities, because not doing so leads to currency instabilities in both the domestic and international sectors of the economy.
Oh, like 39% of the federal budget going to the military? You don’t think that might catch up with them at some point?
China has been actively dumping US securities for years now. Given the openly hostile stance US is taking towards China, I fully expect that this trend will only accelerate going forward https://www.globaltimes.cn/page/202303/1287406.shtml
Even Japan tried to sell off US bonds just recently, but had to stop because it was making the market panic. It’s a perfect illustration of just how fragile the whole scheme is in practice.
In reality, oil is a small portion of Russian overall economy. There seems to be disproportionate focus on Russian energy exports in the west which paints a distorted picture of how the economy in Russia actually works.
The whole point of buying securities is that you expect them to retain value, hence why it’s important for them to be backed by something tangible. In case, of the US, the confidence has largely been built on top of the petrodollar. Every modern country needs oil to operate, and when it was only possible to buy oil in dollars, that meant there would always be a steady demand. Today, the situation is different, and that’s a big problem for the US.
That’s a process of issuing currency, you’re not borrowing anything from anybody.
The dependence on international trade is very high for countries that are deindustrialized, such as western economies, it’s a far less important factor for countries that are largely self sufficient. Fluctuations in trade obviously impact domestic economy, but they can be weathered and they’re not catastrophic in the long run. That’s precisely what Russia illustrated at the start of the war when the west put the most severe sanctions it could come up with.
Misallocation of labour and resources as I’ve explained several different ways in this very thread. When the country stops producing things that the working majority needs, you start having problems.
Politics encompass more than simply allocation of resources. In this particular case, the politics were that Yeltsin decided he’d rather be the president of Russia than a deputy of USSR, and a bunch of Baltic countries wanted to become independent. It’s notable that when a referendum happened, over 70% of the people voted to keep USSR though. If economic decline was the core reason, then you wouldn’t have seen high level of public support for USSR. You’d see a situation that’s similar to what we see in US today where majority of the population no longer believes that their country is working in their interest.
Unquestionably so. I grew up in USSR, so I’m speaking from personal experience here. The kinds of horrors that are happening in US today, were completely beyond imagination.
The shortages started after the dissolution, and introduction of liberal reforms. One thing USSR did quite well was ensuring that everyone had a decent minimum standard of living. You don’t have to take my word for it though, here’s what the CIA had to say https://www.cia.gov/readingroom/document/cia-rdp84b00274r000300150009-5
Again, that’s my original point that labor and resources aren’t being allocated in the interest of the majority which is leading to discontent and civil unrest among the public.
I’m not arguing against backing debt with securities though. What I’ve been saying is that Russia is in a good position to do so.