Why we each have our own inflation
Financial analyst Vladimir Levchenko about the schism and the war among the ruling elite, nepotistic the attitudes of the “masses”, about why we stole the pension, as Russia will self-destruct, that the oil price will not grow, and rouble revalued three times.
Vasily Koltashov: Guest “Open Studio” — Vladimir Levchenko, financial analyst.
Vladimir, the first question concerns the recent statements of Sergei Glazyev that the ruble against the dollar is considerably undervalued. What is your opinion?
Vladimir Levchenko: on the contrary, I believe that the rouble is significantly overvalued by 50%. Let’s see what we produce in Russia is competitive in comparison with what we can buy? Nothing, by and large.
V. K.: And real estate?
V. L. property In another component. Anyone out there recently said that the cost of oil two dollars a barrel? And they are forty dollars a little. And hundred was fine? We have to sell 50 times above cost! We know the cost of the Moscow real estate. So here are prices go on falling and falling still. Just all used to some kind of super-profits. This is the first time the competitiveness. Why introduced agricultural enticingly? Because even at the current exchange rate of our national currency, all the same domestic products uncompetitive.
The second point. We see that for the last two years and a half, all the actions of our governing bodies, from the point of view of the economy, lead to a drop in the depth of the division of labor. I say it to that talk about some kind of purchasing power parity — tales. The deeper the division of labour, so you have more people who create more value, more highly paid people. And we have the last two and a half years, the present policy is, of course, not to say that she focused, rather, from a failure of professionalism. Here they lead to a drop exactly high-paying jobs in our economy, which naturally leads to long-term trends of declining living standards in our country, and absolutely segurana. So, naturally, if we go further in some village, or in season, for example, in the Kuban or the don the same tomatoes cost a penny, literally. They are cheap, because here are grown and well, and in Moscow they are more expensive. So what, then? There ruble, ruble here they are different? Well, it’s funny, actually. And, say, in America, the most technologically advanced economy in the world, how they make tech products? There are many people who create a huge array of value? I always answer simply that Einstein created the cost more than several million Chinese. And here with it it is impossible to argue. Hence the exchange rate.
V. K.: why not 25 rubles per dollar?
VL: Because you saw what happened with our economy last year, when all of a sudden decided, out of fear (effect is insufficient, in my opinion, the level of professionalism), regulators began to drastically compress the mass of rubles. As a result increased the budget deficit. We have once again stole the pensions and raised taxes. Now the excise tax on fuel raise, respectively, the us economy just collapsed.
V. K.: You mean, he tried to keep the ruble overvalued?
V. L.: They thought that actually now the price of oil goes up, everything goes back. Well, it’s like that old joke about the man and the Golden fish: “Fish, I want I had it all”. “Man, you already own everything”. These times are long gone. Attempt to return back there — only worse will become of it. That is, you need to move on, to evolve, to create something new, and not dreaming that it will come again, Uncle Sam will raise the price of oil. Historically, America develops only during periods of low commodity cycles, if the story does not know.
V. K.: the speaker said that our economy is “somewhere near zero”. How to understand what to expect, what to prepare? And where is “near zero?”
VL: Where is “around zero” is the question, rather, to Alexey Valentinovich. What is the economy? The economy is a consumption of various goods. Imagine our economy. Here is zero, i.e. there is no slope. Here we have a flat table, a Cup of coffee costs, it is not tilted, that is, coffee from it anywhere and nothing comes up not pushes. We are nine months on this smooth surface, and thus we find the balance. What should be with the head, so that within nine months we were standing on two legs and could not find a balance? Or we stand on all fours? Or we have the cerebellum stopped working completely, and we never know where we are? If you look at the mission statement, which last autumn did Prime Minister Medvedev, then Yes, they openly say: we don’t know where we are, don’t understand where the world is headed. We don’t understand why he is moving there. But we understand why we don’t take just because we refuse to evolve with the world. Here is the answer to the question.
I am often asked: “when will it get better?”. I say, and this should be a few moments. To start when we want to. We have to want it! In the meantime we are looking for an external enemy economic. We say: “we have brought down the price of oil.” Gentlemen, if you have the cost of oil production in all major regions substantially below current prices, that means someone has brought down the price of oil? Well, here’s how? That is, we must be willing. Thank God we are not Saudi Arabia. Yes, we know how to create something new, and our story, our fathers, grandfathers, great-grandfathers showed that we really do it. Look what the English say the Americans: “If you want to do something ordinary, do not give it to the Russians, they will not offer you the same ten things, they will do ten different”. But they say, “If you need to do something very difficult, let the Japanese and the Germans even better. But, if not possible, then do only Russians.” Why are we their strengths destroyed deliberately, trying to compete on those, and the extremely low-skilled segments where we are not competitive?! Here we get the result. Therefore, we have: to want, to understand, to formulate and to begin to act. After that will begin to appear a result. That is, you need to watch, based on very long-term perspective.
V. K.: Barack Obama recently stated that he thinks the President of Russia edits all articles in the Russian press, all controls. How much real information on the situation in the country gets the President?
VL: Personally my articles for sure, not edits. I am absolutely sure. Because what I write in the same form until readers reach. It’s understandable. On the other hand, how the President gets objective information, hard to say. In modern conditions, especially at the highest level, to get the full picture, the absolute. Question — in the desire. It is difficult to say. The only thing I see is the lack of the primacy of the economy. Again, despite all the statements of the President that, indeed, agriculture has always been and is more important than the army — these things are obvious. But until we see that it is fairly hard and sad. So here the priorities are a bit different. Why are they like that, too, probably, in the current environment to understand the action is, in my opinion, the simplest scenario. From the point of view of the theory of the seven-year cycles in psychology, the bulk of our population is a psychological adolescents who are not able to take responsibility for their own actions. They continually delegate this responsibility to the top. Accordingly, the condition of the mass of adolescents is very simple — it is a constant aggression and shifting blame for problems on anyone. What we actually see everywhere: in the external or domestic policy, in General, anywhere. Well, in this situation, the position “above the fray”, “here there will arrive the barin — the barin will judge us”. This “gentleman”, which, no matter come or not come, can still be bad. The most important, up there, a priori it should be good. It is a deep paternalism which we sit. An adult, who himself is able to draw on their inner abilities and psychologically Mature, he doesn’t need “daddy top”, he doesn’t need anybody. So he is in a position to answer for their actions, for the actions of their children, family and next. Accordingly, the more Mature person, the more people he is able to answer. So we have the bulk of and choose a such a person. It’s just.
V. K.: If we say that Russians are “teenagers”, and we have 22 million people below the poverty line. Unemployment goes to 6%. Increasingly, people mention the word “crisis”, the discontent grows. These “Teens” are supposed to protest or not?
VL: Actually Yes. Here we know, there are several reasons. First, why such a problem? This is also, including, due to the expensive ruble. I’ve been told that it is better to receive a salary at the rate of 70 rubles per dollar, than not get it at no matter what rate: in thirty, forty, fifty… that is the question: we have the whole policy of the regulatory bodies is constructed so, again, hard to say consciously, unconsciously, that ordinary people not been able himself to earn his bread himself, so he kept off his hat and was walking with a petition somewhere, anywhere, doesn’t matter: Gazprom, Rosneft, Sberbank, in any Corporation in which he is no one, solves nothing. And he: “you pay We will give or not give, or fire, maybe even fire. But judging by the unemployment — don’t let go. But, inflation will go, and you will get the same dollars”. And you are missing chances to do something yourself, some improvement. This is the biggest problem.
The next moment. About the protests. We don’t go up. We have a Maidan, in principle, impossible now. Maybe in 20 years, and earlier is unlikely. Because we, first, from 1988 to 2010 into the demographic pit. Socially active, that is, young 18-, 20-, 25-year-old, every year more and less. Second, they were born and grown up in families in the period was the rise of welfare, not based at all on anything. That is, the people themselves did nothing in order to live better: they just lived.
Naturally market expanding due to the growth in oil prices, devaluation of the dollar and interest rates in dollars. And those who could do something, just grabbed these pieces and the bulk, 80% of the population, setting, and they grew up living. During 2000-2012, the people did everything the same but get more for it. Here it is wrong, is contrary to the economy is highly corrupt. This is such a kind of drug that has addicted the whole country, and now, of course, wants to go back. That needs to change. So how many people is it poor, to protest they will not go.
There is another important psychological phenomenon. Long idleness leads to long term depression. We are in such living conditions, starting from 1917. Accordingly, when it is almost at the gene level is beginning to have an impact, it leads to tremendous passivity in the General population. Out of this psychological depression of a nation is very difficult. It’s literally the latest research, they do provide answers to many questions, but they don’t give the answer: “how do I get out?”. It is obvious that only individuals. And these individuals should really continue to push our civilization.
V. K.: However, the former employee of FSB Alexey Kondaurov says that the government has quietly, but very thoroughly preparing for the protests.
V. L.: I think that mass protests can not be. This is the first. But if something like this will be stopped very quickly and at its very beginning. Then, indeed, we have in power mainly by representatives of special services, security agencies, and any activity needs to be nipped in the beginning, which goes against the government. I think they will be fine. Another thing, when further development of such situation and the deterioration of the economic situation, here the questions arise. Most likely, if we’re talking about some serious social cataclysms in our country. I think in the coming years from below such disasters rather impossible at all than likely. The only one where questions can be asked, is associated with schism in the ruling elite. These processes, in my opinion, coming, running and you will get all this, of course, depends on whether there is a system of checks and balances. Because, when the system itself is, by and large, no, it is very difficult to say. And these risks certainly exist, manifested, in any case. The question of when and how, while this is quite difficult to say.
V. K.: In the Ministry of economic development fixed the slowdown of the Russian economy. It seems that we, having been about zero, like trying to find our “new bottom”, as they like to say our Ministers. Maybe we don’t fall through the bottom?
VL: In 98-m to year in London this saying was composed, as all markets fell, devaluation of the ruble was, a crisis was developing. It began even before the Asian crisis, i.e. there was the first big crisis emerging at that time the markets. It began with China, Mexico, then was Southeast Asia entirely from one country to another, then it has come to Eastern Europe, to our country, and then to Latin America. They said, Yes, we thought the Russians already fell to the bottom, but who would have thought that they will start to dig? So the question is whether we want to dig or not? No, do not want. We are now in too passive condition. But no desire to build. Show me who and what there doing to feel better. The whole policy comes from the state of consciousness. But I have the feeling that in the minds of our governing bodies at all totally missing the word “tomorrow”. If we are, in principle, behave as if there were no tomorrow, our country without a future.
V. K.: the Power says that “we expect an increase in oil prices”…
VL: what are we doing? First, oil prices can’t grow. It is an objective reality, because we are in a falling commodity cycle, overproduction grows.
V. K.: You’re talking about falling commodity cycle. Explain to understand: because the West says Russia has created a mega-cartel, OPEC members and OPEC members combined, have put moral pressure on the markets, those surrendered, the price of oil rose.
VL: I doubt it did our comrades. Because even though we are a country that produces more oil but on the world stage, our energy role decreased in the last years. Secondly, all too well aware that all of these conversations are driven by a single trivial factor is that we, simply, pass peak production. Agree about the freezing, they don’t agree — we still fall prey to. Because there is no own technology, to make them normal is impossible. Why impossible, the answer is very simple. Banal laws of the market size. Just the lack of resources to invest.
Why the Soviet Union lost the race? Because the size of the market Council for mutual economic assistance was commonplace less than the size of the market capitalist countries. That’s all. Margin of safety we have. And the trade balance we proficien, moreover, we can say that he was never scarce. In this respect the policy of Malchish-Kibalchish “one day stand, Yes night to hold on” — so you can stay for a long time. But the population will live worse and worse, and the world will develop. And we again remember those conversations in the late 80s. Yeah, we thought we were behind for 20 years, then it turned out that on 30. No, the result was that we left behind forever.
V. K.: You a few months ago saying that oil prices should move down: this is their logic. They moved to the end of January, when we saw $ 28 per barrel of Brent crude oil, and then there was a sharp jerk upwards to 43 even reached the price, and now it is about 40. How would you comment what happened?
VL: Standard situation, nothing can move forever in one direction. If the locally-wherever it is, you know, in Soviet times there was a saying — get ‘ em cheaper: was — the ruble has become two. Until today, the ruble, the ruble tomorrow, the day after the ruble is not interesting to anyone. And as soon as it became two, immediately: “Oh, maybe three tomorrow.” I.e. everyone gets curious. So, when oil falls from $ 110 down to 50 — that nobody really was interesting. Then it jumped to 70 dollars, then began to fall. At some point I started to think — why? Everyone saw that the stocks at absolute historic highs in the world, everyone saw that the overproduction of oil record, it continues to grow, and all sorts of different problems that are slowing the economy, etc. And speculators began to make a huge number of bets on falling oil prices. And at some point the number of bets has become a very big and serious, plus some natural factors, some shale companies in America ceased to be effective, some wells were preserved, and in these conditions began to invent different stories about the freezing of oil prices, about the freezing of production and so on. So, naturally, we saw a reversal. But the driver of this growth was made by, of course, the Chinese, who deliberately pulled their inefficient companies that should fail, they will go bankrupt. They raised domestic prices for iron ore and steel, partly on copper, that is, main mortgage products China. Because you have something, you value of the collateral fell, the oversupply of steel was absolutely phenomenal in China, and nobody wants to do anything with it, and so it remained. But as it is a pledge subject under credits, i.e. you need either bankrupt the company and sell the collateral, just what the Chinese economy can collapse, they decided to delay it. Naturally, when the process has started, it has helped to grow and oil prices. A very simple story. In any case it will ever happen, infinitely to delay these things. The longer these problems will be postponed, the more severe will be a way out of them. Globally we are in a falling cycle, will the price of oil will not grow. She can’t stay here, because I think the age of oil is over. Now, I believe, we see the transition to the age of the gas. For Russia it is not so bad: we have a lot of gas. The question is, what technologies are developed here, and already existing American technologies gas cheaper to transport liquefied natural than to use the pipeline. And here is a big problem, and supertankers leaving the United States. And they even came to Europe. The first was unloaded in Rio de Janeiro, in my opinion, in the beginning of the month, have already come to Europe. Ie this is a great division of the market, indeed, but if to learn, and I believe that this will be an energy breakthrough, learn how to use crystal form gas hydrates of methane, it will be a tremendous breakthrough. We have too much, but a lot of them everywhere. They are not only in the permafrost are in the ocean of this gas just countless. And then it will be a question of technology. In General, the further civilization develops, the more it will be valued not what a piece of iron, gold or oil, but the person who actually figured out how to use it, and understand how to use it.
V. K.: You say we are in a falling cycle, there is a redistribution in the market of hydrocarbons. And how it will affect us? Now, many welcome the fact that the ruble has appreciated, say to 60 rubles per dollar.
V. L.: we are here at all remained without work, right. This year, indeed, our economy will decrease very slightly or not reduced. Because clamping the money supply can not go on, that we see. The Central Bank began to give some money debt banking system before Central Bank to the Ministry of Finance has decreased, and perhaps entirely closed. Accordingly, the deficit of roubles will decrease. This will improve the situation in the credit market, maybe it will even bring down interest rates, but the excise taxes on fuel are much in the way everywhere they are present.
The salvation of all different inefficient large structures, such as AVTOVAZBANK will also provide bad service. Thus, if the ruble will be so expensive, here it would be very sad, the money will leave the country anyway. What is the difference between the current situation and the 2000-ies? The rate of profit in the economy is missing, by and large. Where we have a rate of return? We have a rate of return…
V. K.: cost-effective Raw materials complex.
VL: Right. But he doesn’t need the money. They can’t evolve. I.e. they have no technology to develop new fields because they do not give: we are under sanctions. And develop do not particularly need, because there’s overproduction of oil, demand growth is still grandmother in TWAIN said.
V. K. processing of this raw material?
VL: And for this technology need. We now come to such a situation in the world, when you sell technology. Another thing is that these technologies will improve. In what phase of division of labor, development and sales of these technologies we’ll stroumsa, it really doesn’t matter anyway. Most importantly, normally be embedded. And the more high level of division of labor we will stroumsa, the better we will live. That is, you need to get away from the idea that we for the good life need a million hectares of land per person. One is enough, absolutely.
About falling commodity cycle — this all very seriously and for a long time. Values change, and the more will develop the communication, the less you will need to consume raw materials.
V. K.: Here’s a couple of years ago you recommended to buy dollars. And now? What to buy, dollars or euros? How to protect yourself?
V. L.: we can Protect ourselves the only way is to develop personal abilities. You need to understand that each of us can do what it does not make economic market. It is clear that safe need. Now when the ruble definitely need to buy dollars. It is not said that he will not move for 2-3 rubles in some direction. He will not become stronger — it’s all the same. This year, you will be part of the money to put into gold, because the world economy is in such a situation that if not this year then next year the economy will encounter some shock and will definitely be an escape from risk, care at gold and see that it can be sold.
V. K.: Many people buy a property just to lose money.
VL: It’s great nonsense, because, from the point of view of investment, property is the analogue of long bonds. Therefore, one thing, if you buy an apartment and rent will be get the income. And if you don’t get — it’s expensive to hold an empty apartment. Taxes have increased, rent has increased, the tax for the repair, although it absolutely was introduced. That is not asset but liability. If you want to turn it into an asset, must pass. If renting, do the math, the interest rate you will get. Take a bet on the bonds of the most reliable in our country — Federal loan bonds. You have three times the difference.
V. K.: That is, more profitable bonds to buy?
V. L. of Course, three times! Based on this trivial math problems, we have a property worth three times more than it should. Either we have so much must interest rates fall, and for this we owe much to fall in consumer inflation, which is considered to be the Central Bank, and for this economy we have to begin to move. This should go investments and our exclusive all inefficient agencies must freeze their rates permanently at this level. But this is one of those tales.
The next point that may push property prices up — is the standard of living. But I don’t see now ideas for a front raise living standards. Now everything depends on us. Everyone has every moment of every day to put themselves in the terms of brainstorming, and so to live more interesting, if we are human beings. Either situation will put in the terms of brainstorming, and it already hurt.
V. K.: Well, how to take responsibility for inflation? Here Dmitry Medvedev said that the 2018 tax freeze, maybe it will somehow affect the prices.
VL: So fuel taxes recently raised.
V. K.: consumer inflation What to expect this year?
V. L.: it Depends on how you count. Again, first, we have inflation and deflation in production. We have 4 months of living with industrial deflation. The idea is the interest rates on the economy needs to focus, not on the food price index. It is food, and poor quality food — that is what we have now is guided by the Central Bank.
For a pensioner is one inflation, because on his pension, he selects those products that able to buy. For a person who earns a thousand dollars a month — for it had another inflation. Completely different. For a person who earns 5 thousand — the third, to earn 30-50 thousand — four. Inflation of consumer they already are not important, they have investment inflation. If the shares of “Gazprom” or “savings” or “Apple” rose, he didn’t participate and lost money. Here it is for inflation. So you need to remove inflation for vulnerable groups of the population, providing people affordable local food. It is clear that not all can. We have a Northern country, it is clear that nowhere in these difficult climatic conditions in which the people lives, so all this talk of food security is, excuse me, from the evil one. But to ensure the import of fruit and vegetables in exchange for grain exports, raw materials and so on — this can easily be done. To do this, again, to integrate into the international system even more. But here’s some basic things you can do? Through infrastructure projects and tax breaks. And in any case not to give money. It is impossible to conduct any large-scale projects, to create some state corporations, etc. Then it stops working. You have to give people the opportunity to do it ourselves, and then it will start to work. And in order that they could do it themselves, have to understand perfectly how it works. What they do not take taxes, they will come. And when their business will work, it will not be taken away. Here it should be.
V. K.: we permanently withdraw the license of banks, you are advised to invest an extra penny to the dollar. Where the Russian bear saved 200-300 dollars, where to carry them, in the Bank or under the pillow? You trust the banks at all?
VL: No problem. You know what banks you can deal with? Only with those that will remain. Such banks are few. We won’t advertise, but they are, in General, you know. All the rest is a lottery. Overall, the banking system we have is inefficient. I am totally against all, if you take the wording of the Central Bank, suspicious transactions. The same applies to the financial market. Therefore, if there are any savings, the money needs to work. Accordingly, if I invest, so should get return.
We are a nation which lives, unfortunately, in the past. It feels like we all already retired, had gathered here at the cemetery. I refuse to go to the cemetery. I believe that we are a nation that has a future. But most of us should realize and start to do something. And I want a future for my children, grandchildren, etc. And I do not act simply on the basis of what will be tomorrow, and that tomorrow I’m going to do. And I act based on how my actions will affect not only me but also my children and future generations. I.e. as long as each of us will not do so, we will say that here we have someone in something to blame but ourselves.
V. K.: There is a view that if the contract with the West to abolish the sanctions, then we’ll be fine, everything will work out. Your opinion?
V. L.: No, of course not adjusted. First, to negotiate with the West, need to understand the rules of the game we agree. This is the first. Now these rules no, every time someone tries something someone imposed. In any case, teenager adults always impose their will — this is an obvious thing. We have many love show in China. What did China originally? They fully accepted the Western rules of the game, leaving some point. What we have now: China is the second economy in the world, and with it all considered. Therefore, if we develop have their own internal economy and make strong education, strong science, but this is done for several generations, then we will be a force to be reckoned with. And then we can negotiate on a different level. I think that’s what we have to do this ourselves, without reference to anyone.
