Thank you Putin for giving us our daily Lolz. Who knew Europeans would be even funnier than Americans?
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- Thread starter bd popeye
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I recall Switzerland always had some really nosy and discriminating policies. Like the one where the neighborhood could effectively block out certain people from moving in to the neighborhood if they deemed the new guys to be unacceptable. And the conditions were pretty broad range, so this isn't surprising to me.
Inflation on a macro level is explained by price discovery along the supply-demand curve of money supply. However, when you apply this to supply-demand of specific items, this relationship on the macro level is not so obvious because price distortions will exist for bottlenecked items with supply constraints. This is how the CPI of core inflation can be manipulated to make it look like inflation is way lower than it actually is on the macro level. It is also the reason why sanctioned items can distort inflation for those sanctioned items due to their supply constraint. However, when you consider inflation on a macro level, as long as the entire economy is not able to be sanctioned into oblivion like Cuba, Venezuela, Iran or North Korea, it's macro inflation that is important.
In the case of Russia, if you compare the options of printing money out of nothing vs saving trade surpluses as balance sheet surpluses realized from economic activity, the main difference is the source of the Rubles. When currency is printed, it comes out of nothing, so it's direct result is inflation on the macro level commensurate with the inflation of the money supply because there was no change in the size of economy relative to the money supply. The Rubles coming from the gas and oil trade is the manifestation of economic activity from the infrastructure, extraction, labor and transportation of said oil and gas that was all initially paid for in Rubles before being exported to Europe. That oil and gas was paid for in US Dollars and Euros which are exchanged for Rubles on the forex market after the physical exchange of the oil and gas. In other words, the Rubles make a circular route with the end result being an account surplus of Rubles without printing Rubles and incurring macro inflation. This is no different than a worker earning their salary and saving it in a bank account for a rainy day. The inflation you refer to is not from macro inflation as I just described but from microeconomic price distortions caused by sanctions. So, for Russia to save Rubles in their current account for a rainy day, it has money to spend when it needs to spend it instead of being forced to print money when it needs to spend it which would create macro inflation.
There is nuance to this equation. The less self-sufficient a country is, the greater the potential for distortions to macro inflation. The level of self-sufficiency plays a huge role in how much foreign exchange reserves are needed in addition to needing foreign currencies to stabilize or fight currency attacks. However, this is another discussion.
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Eh, Trump didn't even know China and India shared a border when he was talking with Modi so who knows how well he understands this stuff
Imagine in a few years it could be Donald (shit hole countries) Trump and Liz (that's not Russia) Truss leading the "free" world. It will be hilarious.
Yet another episode of "Imagine headlines if it was China". Episodes are being aired quite fast nowadays.
I shit you not, if you were to it up with a lighter, it would burn like gasoline, with a spoon of shit.
“They deliver soy sauce directly through the tap in China?”
I think there's confusion on what are considered money printing, current account, reserves, etc.
Central banks do "print money" all the time as in increasing money supply and reducing it as well to support and match economic activities. This is done between a central bank and commercial banks, one method is by changing the bank reserve requirements, so banks can increase or have to reduce the amount of lending on their books, hence changing the money supply, another means is to change the interest rates. These actions usually are not inflationary as they are carried out to match money supply to support the underlying economic activities.
When people talk about money printing or QE though, that's when a central bank issues new money to buy govt bonds to support govt spending when tax income is not enough, that's usually inflationary.
As for keeping Rubles in Russia's current account, I assume it's referring to the BIS; in which case it makes no sense at all. If foreign countries need to buy rubles to pay for Russian exports, they would do so either through other countries with excess rubles to sell or buy from Russian central banks via commercial banks. If it's through the Russian central bank, it can simply "print" rubles and in turn earn foreign currencies which can be used to pay for imports or buy foreign assets. The "printing" in this case is supported by the exporting so it's not inflationary. There's no need to keep rubles in its current account as reserves.
Note: this is my last post in this matter as I'm sure readers of this thread have had enough of economics 101 already
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Actually your idea is not that great because fiat currencies from Western countries are next to worthless to Russia. The USD, Euro, Yen, etc Russia Central Bank receives are of little use because of the sanctions. All the new Rubles will flow back to Russia as payment for the fossil fuels and will lead to inflation because of the extra money supply, unless the Russia central bank soak them up.
Another method for countries to get Ruble/RMB is to issue bonds in Rubles/RMB and are bought by Russian/Chinese Central Bank. Russia and China will be providing other countries fiat moneys to buy their products (fossil fuel from Russia and consumer and industrial good from China). Same as above, the result will also be inflationary because the new money will go back to Russia and China, unless their central banks use money market operations to soak up the extra liquidity.