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Capital outflow this year from Russia has been a good thing. Here’s why

$13 billion of capital outflow in the 5 months to July was a necessary correction to the excessive capital inflow which happened before

Alexander Mercouris

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This article was first published by RussiaFeed

No subject in my experience causes more misunderstanding in discussions of economies – and of the Russian economy in particular – than capital outflow.

There seems to be a well-nigh universal belief that capital inflow is a “good” and that capital outflow is “bad”, and when the subject is Russia this is taken to an extreme.

Specifically whenever the subject of capital outflow from Russia arises commentators – including Russian commentators – invariably to fall into the trap of talking of how this reflects a “loss of confidence” in the Russian economy, with images of Russian businessmen bailing out of the country with suitcases filled with money.

Such things do happen, and they have happened to Russia in the past.  Russia experienced precisely that sort of capital outflow – or more properly capital flight – in the two crisis years of 1998 and 2008, when it appeared in both cases that the economy was going to crash (it didn’t quite do so in either case).

However as a general rule capital outflow most often simply reflects the fact that a country is running a trade surplus and cannot absorb all the money it is earning obliging it to invest some of this money abroad, or – as has been the case in Russia in recent years – is paying off its foreign debt.

Certainly the $13 billion of capital outflow that Russia has experienced so far this year is economically speaking inconsequential.

In my opinion most of it is a correction to the excessively high capital inflow that took place in the last quarter of last year and at the very start of this year, though some of it may also reflect the 40% rise in Russia’s balance of payments surplus to $21.7 billion, which has taken place this year over the same period.

Here is what I previously wrote about the high capital inflow into Russia at the end of last year and at the beginning of this year, and why it was causing me concern

…..the current rapid inflow of funds into Russia – with foreigners buying $727 million of Russian stocks in 2016, of which the bulk came in the last two months of the year – is a mixed blessing.

One effect of this sudden inflow of funds is that it is causing the rouble to strengthen (it fell below $60 today for the first time since July 2015), which is bad both for the budget and for the economy’s overall competitiveness.

Whilst this flood of money is a vote of confidence by the international investment community in Russia and its economy, reflecting optimism about the fall in inflation and the ongoing recovery, much of it also looks like hot money, attracted to Russia as much by the high real interest rates there as by optimism about the economy and the still very limited rise in oil prices, as well as by the election of Donald Trump.

Hot money is notoriously foot-loose, and is capable of leaving Russia as quickly as it comes in, causing significant problems in its wake.  Suffice to say that the fact that there has been this sudden rush of money into Russia is in my opinion a further good reason to cut interest rates now.

Since I wrote those words oil prices have softened, Russian interest rates have marginally fallen, it has become clear that Donald Trump’s election will not cause the sanctions the West has imposed on Russia to be lifted any time soon, and some or most of the “hot money” that was being attracted to Russia at the end of last year and at the start of this year has as a result thankfully left.

The result is that the excessive strengthening of the rouble which was taking place – and which it is now known was causing the Central Bank real concern – has ended, with the rouble still trading at $59, which is the level it reached when I wrote those words.

The $13 billion of capital outflow Russia has experienced since January in my opinion almost entirely reflects this development, and significantly in July – when the correction appears to have completed – it appears to have ended, with capital outflow that month being replaced by capital inflow.

$13 billion is hardly a significant amount for an economy the size of Russia’s, and as a macroeconomic indicator capital outflow of that size tells us little.

The economic indicators which matter in Russia are those which generally matter in other economies: the rates of inflation, unemployment and of GDP and manufacturing growth.

We do not usually worry excessively about rates of capital outflow from other advanced economies, and in the absence of a crisis we should not worry about it in Russia’s case either.

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Russia’s economy continues to outperform as gold takes center stage (Video)

The Duran Quick Take: Episode 118.

Alex Christoforou

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The Duran’s Alex Christoforou and Editor-in-Chief Alexander Mercouris examine how US and EU sanctions have continued to provide a huge boost to Russia’s economy. Russia’s food sovereignty has practically been achieved, as the Russian central bank continues to buy gold and lower its exposure to western financial markets.

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Via TASS…

Outside pressure in the form of sanctions has become an incentive to resolve various issues of Russia’s economy, Russian Security Council Secretary Nikolai Patrushev stated in an interview with the Izvestiya daily.

He noted that through introducing sanctions against Russia, “the West aims to destabilize Russia’s economy and to create social and political tensions in society.”

“But during the difficult times, Russians have always stuck together and mobilized their resources in order to ensure the country’s sovereignty. This is what is happening now – the outside pressure has become an incentive to resolve many problems in Russia’s economy,” he said.

“Before the sanctions, it seemed that we would never be able to feed ourselves and that we are doomed to be dependent on Western import. However, right now, Russia’s food sovereignty in crucial sectors has practically been achieved, and in some areas, Russia has become the leading exporter,” Patrushev noted.

Those who apply the sanctions “can see that they (the sanctions – TASS) are ineffective and often achieve the opposite goal,” the Russian security chief concluded.

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US Neocon Foreign Policy and the War Waged Against Serbia

The Serbian assault began first by a ‘financial war’; by sanctions and finished off by an aggressive unprovoked incessant NATO bombing campaign.

Richard Galustian

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The ‘witch-hunt’ against President Trump over Russian collusion has officially ended, following the submission of the Mueller Report, enabling us to now focus on the real problems of America that effects the whole world.

In the hope of a waining of the Russophobia in America, let’s look at the US’s recent war history by starting with the 20th anniversary this month of the NATO war on Serbia in 1999 which amounted to almost 100 days of bombing of historic cities and infrastructure.

Firstly, these problems are, in the main caused by the Neocons, or Deep State, whatever you wish to call them, and the continuing promotion, by the US Military-Security Industrial Complex, of wars and regime change and secondly, Trump’s unreserved support for Israel, regardless of war crimes they may continue to commit against the Palestinians.

Incredibly after that one sided unjust and illegal war that NATO executed, NATO has the audacity to invite Serbia to join it! Something that will never happen. What do they smoke in DC, in the Pentagon and Brussels based NATO?

To compound these overall problems, the US Military and Israeli Defence Forces collaborate on these US regime change policies on all continents evidenced most recently by the arrival of crack Israeli troops last month in Brazil, prepared to support an attack potentially by Brazil and Columbia on Venezuela.

As, has now come to be expected, America pursues its Venezuelan regime change with full main stream media (MSM) cooperation, using well proven sophisticated propaganda techniques along with a variety of pretexts.

From Serbia to Iraq to Libya, where does it end? Observe that Trump is now seeking a ‘NATO alliance’ offering NATO status, to President Bolsonaro of Brazil to back the invasion of Venezuela.

So it is important to remember, as an example, that after a long war of economic and financial destabilization ended with the bombing of Serbia.

Serbia was previously a part of Yugoslavia, a country which had successfully evolved after 1945 to solve the old rivalries of the 19th and early 20th Century Balkan ethnic animosities which was, prior to the advent of power of President Tito, its past history.

The United Nations, instead of supporting, in effect, so called ‘humanitarian wars’ and ‘regime change wars’ by the US, using NATO, helped and relentlessly driven home by MSM outlets like CNN and FOX NEWS into people’s heads, must finally take a stand.

So too, Yugoslavia, once the envy of many in the world, given its then ‘non-aligned’ status under President Tito, was destroyed and broken up; ‘Balkanized’ in the early 1990s.

The Serbian assault began first by a ‘financial war’; by sanctions and finished off by an aggressive unprovoked incessant NATO bombing campaign. That’s what we can expect in Venezuela next.

This ‘Balkanization’ strategy similarly applies to Afghanistan, Iraq, Libya, Syria et al. It serves US Neocon interests to dismember States in the world and create smaller more ‘manageable’ countries.

‘Regime change’ runs against the intent, the very words contained in the US Constitution. No one in MSM ever reminds us of that fact. Nevertheless America’s ambition to overthrow other States continues, which they arrogantly now make no secret of. The next States will probably be Nicaragua then Iran to name but two.

A very noteworthy most recent outrageous unilateral declaration was made by President Trump, not yet formally agreed by US institutions, ‘giving’ something he has no authority to give; Syrian territory, the Golan Heights to be precise, to Israel. Something that one day could trigger a full scale Arab-Israeli War.

This is of extreme importance yet no real outcry comes from world leaders; well not so far.

The main reason for that decision given by senior US Administration figures is that “God anointed Trump to save the Jews”.

Not forgetting Trump’s need (which we the people don’t understand exactly why) to support Prime Minister Netanyahu in his difficult upcoming elections in Israel – in part because both countries failed to ‘regime change’ Syria – but more importantly to help the ‘financial terrorists’ who formed a company jointly that has already started drilling for oil in the Golan Heights. You might like to know who owns such oil drilling company which should answer a plethora of questions in one go that you must be asking yourselves.

The shareholder’s names tells us everything; Dick Cheney; Baron Rothschild and Rupert Murdoch. The titular heads of neocons, bankers and media on the planet.

In ending there is no more evidence required for us, the people of the world, to rise up against the globalist dark forces wherever they exist, be it in Brussels, London, France or Washington. We must demand democratic elections or start revolutions, the latter has already begun in France in the form of ‘the yellow vests’. And Brexit, by definition, is a rejection by the British people of globalism and American Hegemony.

The pattern of US destabilization and destruction of States to loot them of their sovereign resources is the unseen history of the last 100 years, not taught in any university, anywhere in the West.

As far as Ukraine is concerned, its government was taken down by the CIA and replaced by an ultra fascist regime that has full backing from America. This is no secret. But the MSM simple don’t report it.

US led NATO is ‘the transnational war machine’ of the world, devouring almost all free countries wealth. It can extort to terrorize all into conformity to the global ‘carcinogenic’ US Neocon imperialistic strategy.

A total estimated 20m people around the world have died since the end of WW11 at the hands of US Forces. Think about that for a moment.

One of the most famous sayings attributed to America’s great President Abraham Lincoln is about deception: “You can fool all the people some of the time and some of the people all the time, but you cannot fool all the people all the time.”

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‘Dark day for internet freedom’: EU approves controversial copyright reform

Julia Reda, a German MEP with the Pirate Party, described it as a “dark day for internet freedom.”

RT

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Via RT


The European Parliament has voted to adopt the highly controversial Article 13 provision which would govern the production and distribution of content online under the auspices of increasing copyright protections.

Tuesday’s move will update the EU’s 20-year-old copyright rules and will govern everything from audiovisual content to memes, much to the dismay of many social media users who have already begun outpouring their grief online.

MEPs passed the legislation by 348 votes to 274 Tuesday. Opponents had hoped for last-minute amendments to be made but their efforts were in vain.

Julia Reda, a German MEP with the Pirate Party, described it as a “dark day for internet freedom.”

Article 13 or ‘The Directive on Copyright in the Digital Single Market’ makes all platforms legally responsible for the content hosted and shared on their platforms.

The process of updating the bloc’s copyright laws began in the European Commission two years ago, ostensibly to protect Europe’s publishers, broadcasters and artists and guarantee fair compensation from big tech companies.

By essentially forcing companies like Google, Facebook and Twitter to pay artists and publishers for the reproduction of their work online, include in meme format, the EU is effectively clamping down on online memery.

The onus will now be on tech companies to clamp down on content-sharing on their platforms, which will likely ensure yet more draconian policing of speech and content.

EU member states now have two years to pass their own laws putting Article 13 into effect.

Tens of thousands marched in protest across Germany ahead of the vote, decrying what they viewed as severe online censorship.

Tech giant Google said that while the directive is “improved” it will still lead to legal uncertainty and will damage Europe’s creative and digital economies.

Critics have argued that the only way for Article 13 to be effectively enforced would be through the use of upload filters which automatically check content to see if it’s copyrighted or not, at least in theory. However, the exact mechanics of such a system have yet to be fully debated and the potential for abuse is immediately clear.

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