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WAR DESTROYS THE ECONOMY.
Sergey Pavlovich talked to Oleg Komolov, author of the YouTube channel "Prostye Chislya", about the Russian economy.
Why has housing become unaffordable? What is Trump preparing for China and Russia? How do long-term crises change our lives? Why is the key rate rising, but inflation is not falling? This and much more in this topic.
Enjoy reading!
Contents:
Introduction.
Pavlovich:
Friends, hello! And today Trump came a little bit about the economy and what he will bring us with Oleg Kamolov, the author of the channel "Prostye Chisla" and, by the way, a candidate of economic sciences. I do not understand much, but I understand the news agenda well. Now we will discuss what we will live with in the coming years, or rather, you. I am here in a slightly different economy, and you will live with this. Here. Oleg, hello.
Economist:
Good afternoon.
What is Trump preparing for Russia.
Pavlovich:
And so, in conclusion, what is Trump preparing for Russia, if possible? And here the Congress and the Senate, in principle, everywhere the majority is under the Republicans, that is, the president will be able to very quickly implement his decisions, yes, this has probably not happened for the last 30 years. And what does this mean for Russia? Why are Russian propagandists suddenly so happy? And yesterday there was something incomprehensible, then they were happy, Yesterday they started showing all sorts of obscene videos about Melania Trump.
Well, let's put it this way, if I were in Trump's place and saw this crap, I would, of course, be outraged and angry. And will Trump take on the solution of Russia's problems, as they see it?
Economist:
An interesting question. If you recall the events of 2016, Trump's first victory, Well, then the delight of the Russian state, former officials, deputies was more pronounced. If you remember, Zhirinovsky raised a glass of champagne to the events overseas. But now the reaction is more restrained, although generally positive. That is, in the Russian political establishment, Trump's victory is perceived as a more favorable event than the continuation of Biden's policy in the person of Kamala Harris.
But, again, I emphasize once again, more restrained rhetoric, since the previous experience of Trump's presidency showed that politics in America is not quite the same as in Russia. If a presidential candidate, for the sake of populism, expresses some sharp radical ideas and thereby wins the attention of the audience, it does not mean at all that he will consistently implement these actions.
And what's more, in American politics, not everything is tied to the president. It was not for nothing that you mentioned Congress. Even though the Republican Party dominates there, there are still different currents in the Republican Party, perhaps even branches, and not everyone there is delighted with Trump himself and his isolationist, often populist, rhetoric. Therefore, in general, if we look at how the markets reacted to Trump's victory, and generally speaking, the dynamics of the markets and the behavior of investors is always a good basis for political analysis, we will find that the American markets reacted best.
A number of American billionaires have become very rich. Literally in one day, there, since 2012, American indices have not grown so sharply. In fact, Elon Musk, there, earned more than 20 billion dollars, well, his assets, on the news of Trump's victory. A number of other American billionaires have also become rich. In total, their wealth has increased by about 65 billion dollars.
Pavlovich:
Well, I see... Yes, crypto. The thing is that crypto, look, Bitcoin has already gone silver in terms of capitalization.
Ekonomik:
Yes, the dollar, by the way, has strengthened. It is interesting that... Yes, actually, why did American capitalists react so sharply and so positively to Trump's victory? Because Trump went to the elections with two ideas. First, to increase pressure on China, which, accordingly, will mean that American regulatory policy will indulge American business and protect it from competition with its main adversary, China. Plus, Trump promised to reduce business taxes from 21 to 15 percent. Moreover, in his previous term, Trump introduced a tax break on income, reduced the progressivity of the income tax scale.
All this, again, is a concession in favor of the rich part of society. Also, the Moscow Exchange behaved quite positively, obviously expecting that Trump would lift sanctions or, at least, some of them would stop military actions, which means that this would contribute to a decrease in inflation in Russia, a decrease in the set point, and, finally, the stock market in Russia will breathe a sigh of relief, because now it is lying on its side.
This is evident from the dynamics, from the quotations of key Russian assets. In general, the companies are in such a deep depressive sleep. In general, some positive dynamics also took place on the Moscow Exchange, but the Chinese indices are all in the red zone. Again, it is clear why. Because Trump is entering his new presidential term with ideas of tightening protectionism, putting pressure on competitors from outside, and all of this will harm the Chinese economy, which is still heavily dependent on exports. An important point that...
I would like to focus my attention on, why one should not place great hopes on Trump's victory, well, for example, in the context of the end of the SVO. Because, indeed, maybe Trump will somehow come to an agreement with the leadership of the Russian Federation, and this will contribute to the end of the military actions right here and now, maybe some temporary truce will be achieved, but this does not mean at all that the overall tension in the global economy, militarization, deglobalization processes will suddenly disappear somewhere by one decision of the American president.
No, quite the opposite, I think that if the United States, represented by Trump, contribute to the end of the Ukrainian campaign, it will be only so that the United States and the NATO bloc in general can concentrate on accumulating their own forces for the next war with a more serious adversary, because no one has canceled the contradictions with China. There are many acute points through which the United States can put pressure on China.
This is economic competition that is entering the political field. If the United States suddenly decides to completely stop funding the Armed Forces of Ukraine and completely stop supplying weapons, it will not be at all to help the Russian state resolve its foreign policy issues. Only to accumulate weapons themselves and renew their armed funds and support their allies in Europe and generally outside the United States.
Thus, in fact, if Trump’s promised end within 24 hours, by the way, from what moment should we count them, maybe already now or after the inauguration, if this promise is fulfilled, this does not remove a single key problem of the global economy. The tension will remain, the confrontation will intensify, and this is evident at least from the measures that Trump introduced into American regulatory practice in his previous presidential years and which he promises to introduce now.
That is, in general, it is possible that everything is just beginning. Not only is the war not ending, but we are perhaps on the threshold of an even more serious military conflict.
Trade wars. Taiwan.
Pavlovich:
But he also started trade wars with China during his first term and tariff policy, that is, protective customs duties, and so on, he introduced all of this. And, in principle, you said it right, I agree about American billionaires, and the positive that will be on the markets, in connection with the fact that production is still, he understands that in China, as if in Taiwan, by the way, in connection with the threat of China, that everything is really very unstable, and they are starting to transfer, he has already transferred the mask, I don’t remember what he transferred, but to Vietnam, from Taiwan
specifically, because 60% of the world’s microchip production is occupied by one small Taiwan, which has been under great threat from China for the last few years. And, by the way, about Taiwan. What do you think, will there be a war between China and Taiwan, an attack? Because I was in Singapore six months ago, and real estate prices there have really accelerated, in my opinion, by one and a half or two times. Well, in general, an apartment of 200 meters there definitely costs more than a million dollars. Because rich Taiwanese, who, in principle, do not think that there will be a fuss soon, they buy real estate there, so that if something happens, they can quickly get out to Singapore.
What do you think about China and Taiwan?
Economy:
This is one of the potential points of tension. It is absolutely obvious, the US political leadership does not even hide it, that they are now preparing their own shield and sword in the future confrontation with China through the prism of the conflict in Taiwan. On the eve of the elections, I don’t remember, a representative of the Republican Party, unfortunately I forgot his last name, published his interview in the Washington Post, that is, an interview with him was published, in which he stated that the United States is now
increasing its production potential in the military-industrial complex in order, firstly, to support Israel in its fight against Islamic countries and, on the other hand, to potentially support Taiwan in its confrontation with China. For example, Taiwan will need the production of 152-millimeter shells to counter Chinese aggression.
There, Stinger missiles - all this, by the way, has not been produced in the United States for a long time, that is, production has slowed down significantly over the past couple of decades, because the United States did not have such a powerful potential enemy against which such weapons could be needed. In particular, these very Stinger missiles that the Republican spoke about, the militants with whom the United States fought in different parts of the world do not have supersonic aircraft, and, accordingly, the production of such weapons was gradually reduced.
But thanks to the Ukrainian company, all these productions were relaunched, in 31 states, production capacities were opened or additional investments were made or mothballed in the military-industrial complex, which is now simply on the rise in the United States. Suffice it to say that over the years of the SVO, the top 50 companies of the Western world from the military-industrial complex, mainly American, but there are also some European, increased their capitalization three times faster than the entire Western stock market. Well, that is, Stamp P 1200 is growing three times slower than the companies of the military-industrial complex of the Western world.
And in forecasts until 2027, they also plan to grow twice as fast as the world economy. That is, in general, investors understand where the future profits are, which industries will not be in greater demand. And all this, you understand, comes from the political context. Companies of the military-industrial complex will not grow if their products are not in demand in the world. And why will they be in demand in the world? I will return, in general, to the beginning of your last thesis about Trump and his policies.
You said that you started introducing protectionist tariffs against China, but I want to note that before Trump, Obama introduced customs tariffs, very tough customs tariffs of 265 percent, I think, against Chinese steel. Deglobalization processes began even before Trump, it was Obama who introduced the first sanctions against Russia, not Trump. That is, Trump is an isolationist, an open one, but economic wars between the largest countries in the world began before Trump.
Why? Because the global economy has been in a state of deglobalization for probably 15 years after the global financial crisis. It is arranged simply. The global financial crisis of 2008 showed that the previous mechanisms for organizing the global economy do not allow it to grow at the same rate as in the pre-crisis era. That is, relatively speaking, the old models do not allow development at the expected rate. This means that the global economic pie has stopped growing as it used to, and the competition between the largest countries, between the largest transnational corporations for the redistribution of this same economic pie has intensified.
Hence, economic wars, which express the protectionist policy of governments, inevitably develop into political confrontation. And now we see its direct implementation, now in the post-Soviet space, well, and in the Middle East, and in the future it may move to Asia, as you said about Taiwan. Trump introduced sanctions against China on a large scale, starting there with solar panels and household appliances, extending this to a number of other goods.
But we should not forget that China essentially acted in the same way and introduced its protectionist duties against American products, against food products, for example, which were supplied to China from the United States. And the most interesting thing is that Biden, who replaced Trump, did not remove a single customs tariff introduced by Trump, but added his own.
For example, a 100% customs duty on electric cars from China. And it seems to us that Trump is such an aggressive isolationist, but in fact, he is acting in the context of the interests of the American ruling class, American corporations that use the American state as an instrument of competition with China. Hence, there is no doubt that this policy will be continued by Trump, since Biden did not cancel it, and in general, I emphasize once again, it follows and corresponds to the interests of American business.
Therefore, the intensification of economic contradictions will inevitably entail an increase in political conflicts, and the highest form of political conflict is war. Therefore, not only Taiwan. New points of tension can flare up anywhere. And if the NWO ends on Trump's initiative and with his active participation, this absolutely, I emphasize once again, does not mean that the world will return to 2003 with globalization, the WTO and the dominance of the idea of the free market.
The end of the NWO. The unfavorable economic situation in the Russian Federation.
Pavlovich:
Well, by the way, this is a big question, whether it will end or not.
Economist:
Yes, that's also a question, I agree.
Pavlovich:
Because, in my opinion, Putin now has no logical reason to end it right now, right? Donetsk, Lugansk and all the rest dominate on the front there. But in Kursk, yes, they knocked it out, and I think that before Trump's inauguration, before January 20, they will try with all their might to seize even more Ukrainian land, and secondly, well, at least knock it out of the Kursk region in order to improve their negotiating position. What they leaked there the other day, in my opinion, that they allegedly called each other, Trump and Putin, in my opinion, well, maybe if they did call each other, it did not lead to any visible result, because even more missiles flew towards Ukraine yesterday.
Russia will still try to improve its negotiating position to the maximum. It is not bad now, but it will try to improve it even more.
Economist:
Yes, but there is still a problem. You said that there is no fundamental reason for Putin to end military actions right now. And indeed, the main point of conflict is Kherson and Zaporozhye, which, according to the referendum, were included in the Russian Constitution and are formally Russian territories. But we ourselves understand that the Russian army has no chance of capturing the same Kherson now, although such a conflict will arise, which
will leave the preconditions for the escalation of military actions in the future, because if the Constitution states that Kherson is Russian land, Russia is here forever, as our propagandists said, and now Kherson, as a result of an agreement mediated by Trump, will remain under the control of Ukraine, this will leave the Russian ruling class with grounds for resuming military actions when the economy is ready for this again. After all, we should not forget that the economic situation in Russia is extremely unfavorable. Well, maybe I exaggerated a little with the word "extremely", but it is clearly unfavorable.
This is evident from the inflation dynamics. It is evident because the Central Bank has stopped coping with inflation by raising the key rate. Ina Biulina will obviously raise it to higher values in December of this year, but inflation is still not falling. This is evident from the analytical document of the Central Bank. And why is inflation not falling? Because its source is, in fact, the state policy. This is not market, not cyclical inflation, which can be caused by some imbalances in the market economy, against which the key rate is usually applied. No, this is a simple pattern.
If the state sucks out the main resources from the economy in the form of labor, natural resources, capital and, in general, all other economic potential for the benefit of the army, then the rest of the civilian economy will not have enough of these resources, prices will accelerate in the economy, and it is impossible to fight these rising prices by raising the key rate, as we see.
Growing inflation is a big problem that entails a number of negative consequences, first of all, the aggravation of further social stratification, because inflation primarily hits the poor part of the population, which does not keep its savings in luxury goods, in real estate, the prices of which grow along with inflation. No, ordinary people buy pasta, potatoes and medicines, and the prices of these goods in Russia grow much faster than the official inflation. Here we are accustomed to say, there, in Russia, inflation is around nine percent. It seems not so much, in the nineties it was worse. But this is simply inflation calculated according to the methodology of Rosstat.
This methodology is very specific, it is constantly criticized, because it does not reflect the real structure of household consumption, and the majority of our population is poor.
Pavlovich:
Well, the real structure, we saw it with our own eyes, that with the start of the war, prices there doubled... In some positions, yes, take office paper, prices there doubled, and so on.
Economist:
Well, it was, of course, a period of shock. And since then, the economy has adapted, and paper is not so expensive now, it has become cheaper. But in general, if we are talking about food, medicine, housing and communal services, gasoline. That is, the majority of the population spends the bulk of their income on these categories of goods. Suffice it to say that only thirty percent of the adult population has savings in banks, bank deposits. That is, seventy percent of citizens, well, let's subtract from them, maybe, five percent of those who simply do not trust the banking system and somehow form their savings differently.
But it turns out that more than half of the population has no savings at all. A tank does not make the economy more productive, nor does a rocket. The number of working-age people will decrease by 10 million, a third of the federal budget goes to the "National Defense" item. Russia is now pinning all its hopes on cooperation with China. Russia is weaker than China, and it will certainly be a future victim of Chinese expansion.
Butin has found some kind of magic button or some kind of magic money tree. When you buy a car, you sponsor the foreign policy ambitions of the Russian state. And what does it mean that a person has no savings? It means that he spends all his current income on consumption. And this means that every time his salary, if it does not grow by an amount proportionate to the prices in stores, it does not grow. This is even evident from Rosstat data, it grows and is indexed by a much smaller amount.
The population is getting poorer every day. The common population, which does not have savings in the bank, does not have super-incomes from participation in the work of the military-industrial complex. And this, you understand, creates the preconditions for a deep social conflict. People are ready to tolerate the SVO and military actions, to watch this, as if it were a football match, where you can root for your own or another country, and wish for victory depending on your political position. But when, while watching this match, you understand that your refrigerator is already empty, you immediately understand that you have more pressing problems in your life than solving the geopolitical tasks of the Russian state.
And, perhaps, this will push the Russian population to a more acute formulation of such pressing political and economic issues, which can be expressed in all sorts of political protests, in various speeches, to extinguish, which the Russian state may not be able to. And our ruling class understands all this, and from here, perhaps, this circumstance will push it to some kind of compromise with Ukraine with Trump's mediation in order to accumulate strength and deliver the next blow when the economy returns to a relatively balanced state.
Reasons for Trump's victory.
Pavlovich:
As if it were impossible without them. We lived, yes, peacefully, that's how long, I lived there for 42 years without war, everything was so great. Well, it was somewhere, of course, all the time in Libya, and in Syria, and in Yugoslavia, but we didn't have it. I would like it not to be in the future, but it is what it is. Why do you think Trump won at all? I will voice my point of view, and you yours.
It seems to me that the American people of any class, yes, any social group, are already a little fed up with this leftist agenda, and this completely incomprehensible policy of Biden and the entire Cabinet, it started not even with them, but with Obama, they could not say their own "I" at all. That is, they mumble something, like, on the one hand, they are helping Ukraine, on the other hand, they are not helping, just as they could, and all this has turned into some kind of endless war, they have really dragged it out, and everyone understands this, yes, and even the money that the American congresses and others, well, allocated, only 10% of it, according to the news, reached Ukraine in the form of weapons, direct loans and so on.
Plus flirting with the leftist agenda, with Hamas, about Hamas, these crazy students about Palestinian universities, what they are doing. In general, it is difficult to imagine, to be honest, for me, being a university student, such a thing in the USA, right? And it seems to me that people are pretty fed up with all this, and they want to change at least something,
because in Europe and in many other places, all sorts of ultra-right nationalist parties have raised their heads and have come to power in many places or will come to power in the next election season. It seems to me that Trump's victory, Trump's, is more or less from the same series.
Economist:
I agree with you that it was not so much Trump who won as the Democrats who lost. But I do not see any truly leftist tendency, a leftist vector, in their policies of recent years. Yes, maybe in the rhetoric there is protection of minorities, all these environmental discussions, but this is a very small part of real leftism. In fact, the left forces, historically, are those who advocate for the interests of the working class, those who fight to reduce inequality, to provide workers with basic social benefits.
And has the Democratic Party managed to advance at least a little in this context? No. We see that inflation under Biden was colossal. Well, for the United States, 9% is something outrageous. It's like 60% would have banged for us now. Well, the United States has always, with rare exceptions, been a territory of economic low inflation, which the Federal Reserve System has always successfully fought. They had to raise the rate to, again, critical values for the United States - 5% per annum. This is something incredible for the Federal Reserve System, a historically very high level.
This led, if you remember, to the bankruptcy of several American banks that had invested money in bonds, and against the backdrop of the rate increase, these bonds depreciated, and the bank did not have, in fact, sufficient capital left, which led to a run on depositors. We remember Signature Bank and First Republic Bank - these are the banks that, in fact, became victims of this anti-inflation policy of the Federal Reserve System. In recent years. And Silicon Voli Bank, in my opinion, is not related to this story, did it burst for some other reasons? Well, as you understand, the banking system is structured as follows.
Banks are closely interconnected. If one falls, it will certainly drag the others down with it. They are connected through the interbank lending system. And if in one relatively large bank Fester Pavlik, I think, occupied 14th place in the American bank rating. If any problems occur there, then this becomes a signal for depositors to withdraw their money from other banks. And from here the bank, which was initially in a precarious position, well, actually, finds itself on the brink of disaster.
Although, perhaps, there were no deep problems there at the moment. This is a separate issue, we can return to it. But I want to emphasize that, once again, no practical implementation of this very leftist policy, that is, support for the interests of the ordinary American worker, the American student, the ordinary American poor household, the Biden administration and in general the entire democratic leadership of the United States have not succeeded. Over the past 10 years, real estate prices in the United States have increased by 120 percent.
This simply deprives the average American, especially the young, of a chance to buy a house and provide themselves with this very American well-being. And the most characteristic thing is that most of this growth occurred in recent years. This year alone, the price of real estate in the United States has already increased by more than six percent. All this, of course, makes the average American refuse to support the Democratic Party, we see such a colossal improvement in the American society, but I think that this improvement is not ideological.
It is simply a movement away from failed politicians towards those who promise ordinary people more favorable living conditions. I think that if there were not two candidates participating in the elections in the United States, but at least three or four, and among them there was such a typical, characteristic left-wing radical politician, well, at least like Bernie Sanders, he is quite left-wing radical by the standards of the American political system, then he would have overtaken Trump and all other competitors if he proposed really effective left-wing political and economic measures to overcome the accumulated inequality.
Therefore, all this watering that you are talking about is more ideological and more superficial, superficial. The average American is not worried about this side of leftist rhetoric, not about environmental issues and not about gender socialization issues, but about the question of what he will eat tomorrow, whether he will have a job and any kind of past.
Yes, that's right. That's what the left has historically done, because, well, Trump is actually a right-wing politician. He said, we're going to lower taxes on business with him. That's right-wing rhetoric. Well, it's both economically and politically right. In theory, the average American should say, why are you lowering taxes on business when you should be lowering taxes on the average household? But in a situation where the previous administration has completely failed its social policy, people are simply hoping that the new president will act differently and be more successful, voting for him not because they've suddenly started to support him politically, but simply because it's a form of protest against the previous administration. You
can see how much American youth and American minorities have shifted toward Trump, which, it would seem, has always been the audience of the Democratic Party, and now they've abandoned their support for their previous idols and have shifted strongly toward Trump, they've made a big correction, if you look at the election results.
So, in general, I would like to emphasize once again, here I think that Trump is unlikely to reflect their interests in this sense, and it is unlikely that they, these ordinary people, will achieve the expected result, because, again, now Trump will be faced with the task, first of all, of supporting large American businesses in the fight against Chinese competitors, since, I would like to emphasize once again, we see how China is trying to penetrate the markets of Europe and the United States, to consolidate its dominance there through various tools, through the production of modern electric vehicles, through dominance in modern technologies, which have really advanced a lot in China recently.
Plus, China is creating corresponding infrastructure projects for this - "One Belt, One Road". Why is it being created? So that Chinese exporters can deliver goods to European markets with minimal logistical costs, in order to ultimately oust European manufacturers themselves from the European market in the future and to carry out the same scheme in the United States. We see how against this policy...
Pavlovich:
Well, plus many things in African countries, including infrastructure projects.
Economist:
Yes, of course. Well, Africa is part of this path. One of the routes there goes, in fact, through the Sinai Peninsula, through the Suez Canal, and Africa is also actively involved in this. From here, China is fighting for its dominance in the world markets, and in the global competition of corporations, politics is becoming the most important tool of competitive struggle. It is very important to combine politics and economics. Here we often like to say, here politics is separate, economics is separate, here the SVO began because one old man forgot to take his pills, and another, it means, said something bad to him on Twitter in response.
No, that's not how it works. Such political decisions have deep economic prerequisites. It is the economic analysis that allows us to make some more or less well-founded political forecasts. Once again, well, that is why I do not expect any peace on the planet, even if Trump fulfills his promise, the word will be completed.
China's attack on Taiwan. Consequences.
Pavlovich:
And will China still attack Taiwan? Well, it is clear that sanctions and other things will be imposed there, yes, that is, economically it will be, it seems to me, a very big blow to China, but Xi Jinping, as it were, received, well, such tacit approval for a new term in connection with the fact that he will still seize Taiwan. What do you think, will this really happen? And if we model this situation as having happened, what will be the consequences for China and for the world as a whole.
Let's assume that in a year there will be this war.
Economist:
Well, first of all, we need to say why China needs Taiwan at all. Now this process of inde-globalization that I mentioned, it expresses the competitive struggle of the largest global corporations not just for leadership, but first of all for technological leadership. We are now on the threshold, at the initial stage of the sixth technological order, the center of which is technologies, well, as they call it, such a BICS convergence, where NANO, BIO, COGNO and other technologies are combined together, forming, well, for example, such a variant of industrial implementation, such a unification of human intelligence with computer systems.
In short, okay, let's not go into it. The point is that now we are talking about the technological leadership of one or another country in the world, which will reduce the costs of producing basic goods and services. Those who can implement these new technologies of the sixth paradigm before others will be able to succeed in the competitive struggle, will receive a growing rate of profit and, accordingly, economic dominance over the entire world. And it is for this reason, for example, that the Chinese company Huawei is one of the main targets of American sanctions.
As we have noticed, several years ago Trump and then Biden tightened sanctions against Huawei. Why? Because Huawei is a leader in 5G technology, and 5G is a technology for accelerated data transmission, which is necessary for a new industrial revolution. And Taiwan is a place for the production of semiconductors, without which this technological robotization of the economy is impossible. In short, the world is moving towards robotization, only Russia is lagging far behind in this, and China is already nipping at the heels of Europe and the United States.
No robotization is possible without semiconductors. Again, the United States has imposed a number of sanctions against the semiconductor industry in China, and if this industry comes under further pressure, increasing pressure from the Western world, China will need to ensure a guarantee of the production of these very semiconductors, that is, control over production capacities. Taiwan is not needed for political purposes, to simply grab this territory for itself and, with the help of a small victorious war, set the Chinese population in a positive mood in favor of, that is, the current ruling regime.
No, that is not how it works. Taiwan is needed for economic, production purposes. That's it. And thus, these military actions can really begin. Another thing is that I am absolutely not ready to give any time forecasts and conditions here, because everyone understands what the consequences of these military actions will be. Even, well, there, the SVO in Ukraine, how it affected the world economy, there, Europe is now sitting without gas, and Germany has been showing zero, or even negative economic growth for several quarters, since it lost cheap Russian gas.
If China suddenly clashes with the United States over Taiwan, the global economy will receive such a serious blow from which it will not be able to recover. After all, China is not just a large country. It is a country to which the largest global value chains are tied. Without China, the production of a whole range of goods in other countries will stop. In other words, it is not China itself that will suffer. Even, you know, the Western press often uses such a euphemism as “a black hole in the global economy in the form of China.”
In other words, this is an option in case of, for example, a crisis in the Chinese economy. We see how China is slowing down, because its export potential is limited by sanctions, including other various problems in the Chinese economy, overaccumulation of capital. A deep Chinese crisis, as well as a war between China and some other country that could negatively affect its economy, will have a painful blow to the global economic system and, as you understand, to Russia as well. I think that it is mainly citizens of Russia, Russian-speaking people who are watching us. Russia is now pinning all its hopes on cooperation with China; there is no one else to sell our energy resources to.
If China suddenly reduces demand for them, and this all contributes to a fall in oil prices in the global economy, this will deal a blow to Russia's budget system, to the extent possible, to pay out all sorts of social benefits, to ensure some economic stability. Exchange rate stability, as you understand, without an influx of foreign currency. The ruble will very quickly go into a steep dive.
Pavlovich:
In a certain direction. And will it affect the ability to wage a daily war?
Economy:
Of course. But I think that China and Taiwan are unlikely to start sorting things out before the end of the NWO. I don't think that these events will happen in parallel. But this is, again, only a hypothesis, I have no grounds for this, no facts.
Oil. The collapse of the Russian economy.
Pavlovich:
And what about the fact that Trump, in principle, understands this, that he would like to collapse the price of energy resources, and Saudi Arabia snorted at Brix, but didn't go. And, in principle, the prospects of OPEC-plus of this cartel, they are becoming quite dubious. America has long been consistently, in principle, increasing the production of shale oil, and it is already possible to do all this, in principle, with one political decision, plus or minus, in some time. Plus increase sanctions against the so-called Russian shadow fleet.
Well, even more so, because the sanctions are lousy, and the administration there, in principle, under Biden, yes, made them that way, well, and everyone sees and acknowledges this, in principle. Biden, for example, destroys the price of oil, the Russian economy is tied, even though it sells much cheaper to China and India, there, with unclear payments from India in general, it is still tied to oil, and oil tomorrow becomes, there, 50 or even 30.
Economist:
What then in this scenario? Again, it is difficult to predict, because, obviously, other macroeconomic conditions will change, we cannot separate oil from the rest of the economy, that is, oil will become cheaper and something else will happen, but this something may have an even more serious impact on the Russian economy than the actual fall in prices, well, it is clear that nothing good, because as we see in practice, the Russian state places all its external economic and foreign political costs on the shoulders of ordinary people, so ordinary people will suffer first, we see how each subsequent crisis the state devalues the ruble against the dollar and, in fact, reduces the purchasing power of Russian salaries in 2014, and then during the years of covid, and then with the onset of the Cold War. Each time the ruble becomes cheaper and cheaper. We can buy less and less with it. Thus, the state compensates for the losses of export companies, budget losses, including the introduction of military action. Well, the victim of all these manipulations is the common man, who, again, well, at all times, here, you know, just like Karl Marx, the deeper the crisis, the more the common man suffers.
And the ruling classes will eventually come to an agreement with each other, and one crow will not peck out the other's eye, as they say. Therefore, the question here is rather about how an ordinary person can prepare for all this, how to protect himself. And here, the most important advice, probably, to an ordinary household that does not have any large savings, first of all, is not to get into debt. Because now our people love, especially those who are connected, say, with the military-industrial complex, or there is a family that received money for their mobilized relative, thinks, oh, good, what a blessing, money now, so I will take a million, and add a couple more to the loan, and buy some Chinese crossover. And by some years of crisis, such a household will approach with a large debt burden, and this is a big problem, because in the conditions of sharply reduced state expenditures on the military-industrial complex, when they are reduced, this inflated
Russian economic financial bubble, which is today actively fed by this giant compressor of state budget military expenditures, will certainly burst. And all this can lead to a very deep collapse of the Russian economy. By the way, the Central Bank is talking about this. This overheating will not end well. And it will not be possible to simply dispose of this huge excess money supply. Something bad will certainly happen. Or, as they say, a freeze on savings.
Well, if the Russian Central Bank goes down this path, in order to simply prevent these huge savings in the banking system from getting into the commodity market and not to accelerate inflation to triple-digit values, then trust in the banking system will collapse, and people who do not have the opportunity to withdraw money from banks will never take it there again, the process of lending to Russian enterprises will be disrupted. Firstly, a collapse will happen in this market.
Pavlovich:
Well, for me, as a bank user, yes, a client, it has already collapsed. It collapsed, and on the day when they did not allow me to withdraw my dollars, let's say, from my account.
Economist:
Yes, that's absolutely right. Well, a relatively small part of the Russian population had dollars in their accounts, but savings are kept by, well, a larger number of people. It is clear that it is still less than half, but ultimately this is the basis of liquidity for the entire banking sector. And if this money is frozen... And how much, by the way, do you have the figures at hand? How much? I read there... 64 trillion.
Pavlovich:
Or a trillion, or more than a trillion dollars, right?
Economist:
Well, 64 trillion rubles are currently lying on deposits in Russian banks. Well, and we must understand that this is not the deposit of ordinary people. 600 billion dollars. Yes, it turns out that about 4% of all these savings are large deposits. That is, no, so, 4% of deposits are deposits over 1.5 million rubles, in my opinion, yes, that's how it turns out. That is, these are mainly deposits that are already so significant, they form this amount.
That is, an ordinary person again shows here that he does not have any savings. So, in short, either we will talk about freezing this large monetary overhang so that when the key rate is reduced, it does not go to the real sector of the economy, does not create a colossal demand for all the goods around, does not accelerate inflation. Or the matter will end with the collapse of the bubble, when some bank that has taken out loans goes bankrupt, not having the ability to collect obligations from its counterparties.
And in this case, there will be a big deep crisis, which will simply wipe out all the old debts through the bankruptcy of individuals and legal entities. In short, no matter how you twist it, no matter what path you take, it is impossible to overcome the accumulated contradictions without consequences. That is, the central bank and the state can temporarily postpone them until the onset of a crisis with additional support from the budget, by raising the rate. Well, somehow the system is kept in equilibrium. But as soon as these measures are even slightly weakened, everything will go like an avalanche in the opposite direction.
Therefore, there is no simple solution here. And something very unpleasant awaits us untimely even in the medium term.
State obligations.
Pavlovich:
Well, the Central Bank fired Yudaev, I remember, she worked in the Central Bank there 100 years ago, and Nabiullina, well, according to rumors, constantly wants to leave there, but since the beginning of the war they do not let her go at all. They seem to have already, in my opinion, yes, exhausted all monetary policy measures, the latest one is raising the rate, you say it yourself, and we all see that it does not give anything, and this is not the last one.
Well, as for freezing deposits, well, of course, we can only guess, the probability of this event, it seems to me, can still be 20 percent, maybe someone will say 70 and so on, but in my paradigm it is only 50/50. It will either happen, as has happened more than once in Russian history, in the Soviet Union, or it will not happen. That is, 50/50. Siluanov, the Minister of Finance of the Russian Federation, said just today that you keep your money in federal loan bonds. And somewhere we have already heard something like this, these bonds were also during the Second World War.
Something, it seems to me, is a really dubious adventure and, probably, there will still be a freeze on deposits.
Economy:
Well, banks, as we see, are not eager to buy federal loan bonds. Every time the Finance Ministry auctions fail. Well, banks would be happy to buy bonds with a floating rate, because, ultimately, it is tied to the key rate and will grow, the yield will grow along with the growth of the key rate. But for now the government refuses such a practice, to a greater extent sells bonds with a fixed coupon. Well, why does it do this? Because otherwise it would be just a simple emission scheme.
That is, conventionally speaking, to sell bonds to banks en masse, the banks receive loans from the Central Bank, that is, in fact, the Central Bank finances the government through a gasket in the form of commercial banks. This is already direct emission financing of the budget, which will clearly lead to such a deep destabilization of the economy, while the Finance Ministry refuses this and is trying to somehow, somehow foist bonds with a fixed rate on Russian commercial banks, offering a big discount. We see that Russian OFZs are traded at a huge discount to increase profitability, and, in my opinion, the average profitability of this index of the largest Russian government OFZs is already more than 18%.
18% – I don’t think this has ever happened before. This is a historical record, and this value is constantly growing, which indicates that banks feel this risk and are not ready to get involved in financing the state without adequate compensation for this risk through a sufficiently high profitability. And the higher this profitability, the greater the likelihood that the state will someday be unable to meet its obligations.
In general, this is a big problem, they somehow forget about this, the growing rate, well, the key rate, it is clear who will be hurt? First of all, for an ordinary household, which is now forced to take out a car loan at 25%, and even at 30% in some cases.
Pavlovich:
Well, and also for manufacturers, of course.
Economist:
Yes, of course, yes, because they still take out loans, companies still need borrowed funds even in conditions of expensive money to spend on working capital, for example, on paying wages, on purchasing raw materials and everything else. But this actually hits the state, the state budget. On the one hand, the state has as much money as it wants, it can sell these OFZs, even to the Central Bank itself, in extreme cases, and endlessly increase budget expenditures.
But at the same time, the rate of servicing the state debt is growing. And this leads to the fact that an increasingly large part of the budget is spent on servicing old debts. I once made calculations here, and it turned out that, if we follow the forecasts of the Ministry of Finance, then by 2027 the Russian government will spend the same share of the state budget on servicing the debt as the United States. But in the United States, the state debt is 120% of GDP, and in Russia it will be only 30. Well, that is, with high rates, debt is very expensive.
It turns out that the burden on the budget is proportionate to one of the most indebted economies in the world. And what does this mean? That today more than 3 trillion is spent on servicing old UFZs, and this is money that, in general, with the size of government spending on education, on health care. That is, such a large piece of the state pie is simply wasted on covering old debts. And the further, the higher the key rate, the more the budget will be spent on these unproductive needs.
This means that social services, housing and utilities, and science will remain a loss. And we see how the state is saving a lot in these areas today. Science is financed today as little as ever, probably, in the history of Putin's Russia. Well, maybe in Yeltsin's time, less money was spent on science relative to Russia's GDP. And how much is there today? 0.69% of GDP is budget spending on science. This is so little that it does not allow us to set any long-term and strategic tasks for science.
But this is important for Russia now. The main problem of the Russian economy is the lack of personnel. And it can be solved either by an influx of migrants, and no one really wants to go to Russia now, or by increasing labor productivity. And how can it be increased? By introducing new technologies. But where can we get technologies if science is lying on its side and is not financed? That is, it is a vicious circle that leads to the accumulation, like a snowball, of new contradictions, which cannot be resolved in a calm, reformist way.
From here, as in the early twentieth century, the state itself creates the preconditions for revolution. You know, like the famous Soviet joke, that the day after the October Revolution, the Bolsheviks awarded Nicholas II the Order of the October Revolution for his active participation in its preparation. Well, the modern Russian state operates in approximately the same way.
Loans. Minimum interaction with the banking system.
Pavlovich:
By the way, this is a question from the point of view of the average person. Loans, is it necessary to take them now? Again, I am not talking about loans, payday loans and the like, yes, although they do take them, they need to feed their families. I am talking about people who are more or less well-off. And remember how in the 90s you take out, I don’t know, today it’s 100 dollars, yes, and tomorrow the ruble exchange rate has changed, and what we are basically seeing now is that it is still growing, but the dollar is growing, the ruble is falling, and you took out 100 dollars, and you will be paying back 10 in a year.
I mean loans, naturally, in the Russian ruble.
Economist:
Well, this, again, is all very individual. And it depends on the state of the household, solvency, sources of income. If your income is in foreign currency, then you are, in fact, the king of this world. But we have very few of those. It is one thing, a credit strategy for a low-income household from the poorest 50% of the population. Another thing, the privileged part of our society, large investors, our oligarchs, for them the advice would be completely different.
It is better for an ordinary person not to have debts at all in this situation. To have as little debt as possible, because, ultimately, citizens' incomes can fall very sharply against the backdrop of the upcoming crisis processes. No one will just write off your debts. Bankruptcy exists, such a procedure, of course. But to be declared bankrupt, you must first lose everything you have, except for your only home. And then, yes, your debts will be written off.
If our households are ready for such a scenario, then yes, you can take the risk. In general, the less debt you have, and most importantly, the fewer obligations other counterparties have to you, the easier it will be for you to survive the crisis. Therefore, it is not worth investing in any securities, bonds, keeping large amounts of money in the banking system, because this is also, in fact, just someone's word of honor - to return this money to you in the future with interest. And this word of honor can change very abruptly and be cancelled in the conditions of some economic force majeure.
Therefore, it is better to interact with financial systems as little as possible in conditions of turbulence. And invest all available funds, firstly, in your own health, because, perhaps, in the future all this will become much more expensive, and an operation, even of some dental nature, today costs only money, and in a couple of years you simply will not find that company, that firm, that clinic that can do the same operation for you for reasonable money.
Well, and, ultimately, in health, in education, in children, in material assets. That is, not in financial, not in obligations, because in conditions of turbulence, obligations are very unreliable. And that is why we see rising rates. Rising rates are a reflection of instability. That is, an investor includes high risk in a rising rate. There are no high rates with low risks. Are those people who have nothing in their pockets ready to take risks?
And they do not have the reserves they could rely on in case of hard times. The majority of the population does not have such reserves, so it is better to have minimal contact with the banking system, with the financial system now.
Preferential mortgages, unaffordable housing, bankruptcies of developers.
Pavlovich:
Real estate, that is, they cancelled preferential mortgages, all this, of course, is bad and so on, yes, but the rate is huge. Can you explain to our viewers in plain language why all this is happening and why, having taken out a loan for a one-room apartment on the outskirts of Moscow somewhere, you will pay as for... I don't remember how many there were, either 5 or 8 such one-room apartments. Ultimately, if you took out that mortgage for 30 years and did not pay it off early.
Economist:
Well, the reason is obvious. The state introduced a preferential mortgage program. Well, in general, it began to introduce various measures to support the construction industry even with the renovation program in Moscow, even before the preferential mortgage. Obviously to support the construction business, which with all related industries accounted for, in my opinion, 14% of Russia's GDP. This is a significant part of the Russian economy, it has been lying on its side for a long time, and in order to revive this sector, the state provided this preferential mortgage program, which, of course, was primarily used by developers, banks, and manufacturers of building materials.
Well, they, of course, remained in the black, and the common man, well, with the exception of those who managed to hurry up in time and take an apartment at relatively low prices, at a relatively low rate, well, there are few of them. In general, in general, a mortgage is a tool for supporting the wealthy population, a poor person does not even have money for a down payment, what kind of mortgage is there. Therefore, in general, indeed, we see how many took advantage of the preferential mortgage for investment purposes.
It seems that the preferential mortgage, as was proposed, is a social measure, that is, support for people who do not have housing, where there is nowhere to live. But, using the preferential mortgage, many bought apartments for further rent. Accordingly, they chose this reserve of the state budget, which provided the difference between this preferential and market rates.
And on top of that, we see how, against the backdrop of growing demand for housing, prices have skyrocketed to exorbitant heights, apartments have doubled in price in literally a few years, making real estate in Russia as inaccessible as, probably, never before, again, during the entire Putin era. The difference has grown sharply.
Pavlovich:
But at the same time, the plane, one of the largest developers, is bankrupting a very shaky economic situation, yes. I just read that they are almost going to go bankrupt if, again, government support measures do not save it.
Economist:
Yes, by the way, this is very reminiscent of the Chinese experience. There, I don’t know if they had the same program of preferential mortgages as we have, in my opinion, no, but there is a problem there, obviously, of over-accumulation of capital in the housing and commercial construction sector. These well-known Chinese ghost towns, which are built but unoccupied houses, reflect, in general, one of the important contradictions of the market economy between the volume of production and solvent demand.
That is, there are houses, there is a need for these houses, but against the background of the growth of real estate values, houses are so expensive that the average Chinese does not have the money to buy this housing, this real estate. Hence, the money has been invested, investments have been spent, labor, natural resources, electricity - all of this has been spent on the construction of this housing, but it is impossible to sell the housing. Hence the case of the Evergrande company, which, in general, found itself in a bankrupt state. This is what threatens the Russian market today in modern realities.
That is, over-accumulation of capital, excess investments, growth of warehouse stocks, lack of demand will naturally lead to financial difficulties for the company, including bankruptcies. And hence the state has two ways. Either resume the preferential mortgage program, but by the way, there is no money in the budget for this, this is also all quite expensive. Only a trillion rubles this year will go to compensate for part of the transactions at a preferential interest rate through the housing and utilities article.
The state will finance this preferential mortgage program, family mortgage, which still remains in the Russian economy. Or you need to directly buy out, as they say, toxic assets from companies that are on the verge of bankruptcy, that is, act as an insurance company for private business. This was in 2008, when the American government saved American banks from bankruptcy, because the bankruptcy of a large company, both in the financial sector and in the real economy, entails a series of bankruptcies of smaller enterprises that are tied to giants that act as a kind of black hole.
If a large company goes bankrupt, others will be sucked into it.
Pavlovich:
Probably, Russia will save, because the same developers, yes, they are, as they say, too big to fail. If they fall, then this is hundreds, well, not hundreds, this is tens of thousands, hundreds of thousands of jobs, and this, again, increases social tension. Therefore, it seems to me, if you choose between two evils, yes, well, they will choose this budget now for the preferential mortgage, what you say, the remaining one, and, accordingly, it seems to me, there will be some direct measures to support developers.
Economist:
Perhaps, yes, perhaps. But again, at the expense of what? It is impossible to take money out of thin air. There is national income, that is, the result of our labor for one year, it is equal to 100%. You can take 30% of this money for military action, i.e. just tear a large piece out of this pie, and somehow divide the rest among yourselves. This means that each ordinary person will get less. And the more the state spends on unproductive needs, this national income through the system of budget redistribution, the less is left for economic development.
From here we see that the GDP in Russia seems to be growing against the background of the SVO in 2023, it will also grow by 3 percent this year, but the economy is not developing, because these are unproductive expenses. A tank does not make the economy more productive, nor does a rocket, nor does a built house that is not inhabited by ordinary people, but simply stands and waits until a buyer is found at such a high price, at such a high key rate. All this, again, creates such an illusion, such a picture, you know, which always accompanies the economy on the eve of a deep crisis.
It seems that some miracle happens and the old laws of the economy are canceled. This is what happened on the eve of 2008, and this is what is happening now. It seems that Putin has found some kind of magic button or some kind of magic money tree from which you can endlessly pick banknotes and use them to pay for everything in the world, for military operations, for preferential mortgages, for servicing old debts, and for everything in the world. But no, all the same, you know, the labor theory of value, what does it explain to us?
That everything comes from human labor. That's how much people have produced, that's how much we have at our disposal. All of this can be spent on various needs. And if you spend the economic result in an unproductive way, then you reduce the possibilities for producing goods in greater quantities in the next production cycle and create the preconditions for a crisis. Therefore, none of this is free. Everything that is happening around us now, all of this will certainly come back to haunt us in the future, we will have to pay for it, if not next year, then in a few years. These are contradictions that will hit us in the very near future.
And therefore we must be prepared for this.
The safety margin of the Russian economy.
Pavlovich:
Oh, by the way, a question. How much safety margin do you give? Well, just in your personal forecast of the Russian economy. Well, if we assume that the war has not stopped, and everything is going roughly as per expenses, incomes as per today's level, but together with all those imbalances that are already observed.
Economist:
You know, there is no answer to this question, not a single analyst will give it, because this category lies outside the actual material analysis of the Russian economy. Russia is a very resource-based economy and simply increasing oil prices by 10 dollars per barrel will change a lot in the economic structure. But the most important thing is that even if we assume that we can very strictly predict the entire dynamics of raw material prices and all political events on the external arena, we can also predict,
we cannot predict the scale of the system's internal political reserve because, ultimately, these 65 trillion that are in deposits and another 40 trillion in financial assets in other forms and also various savings of the population's assets are a reserve that can be gradually drawn down as long as the people tolerate it, that is, in fact, the main reserve of the Russian state in this system is patience, calmness and the paternalistic potential of the Russian people.
As long as society accepts all this, as long as it agrees to live worse and worse with each month, with each year, this entire system will continue to this extent, the state will continue to draw reserves from it. Therefore, it seems to me that the analysis here should rather be political science than economic and sociological, looking at the mood of the masses. Because we often see people in very poor countries saying that they feel happy, calm and do not oppose their government. And at the same time, citizens of relatively developed France, at the slightest thing, immediately block the center of Paris with strikes.
That is, this category is very subtle, psychological, it requires an analysis of public consciousness with other, non-economic instruments. Therefore, again, speaking about the potential Russian economy, the economic, perhaps, potential is one, but the political is completely different. And they may not coincide at all and move in different directions.
How to buy an apartment in today's reality.
Pavlovich:
If we return to housing, how can you acquire your own housing in Russia today, yes, for an ordinary worker, I don't know, an office worker, with a salary of, well, up to 100 thousand rubles? No way.
Economist:
Well, just move to another region. If he earns 100 thousand rubles in Moscow, he can move, well, I don’t know, to some Vladimir region, buy a hut there for, I don’t know, 200 thousand rubles and renovate it himself. Well, in Moscow, it’s impossible for a person with an average income to buy an apartment. In general, even before the introduction of preferential mortgages, there were these calculations that showed that a family with two children with an average salary in the region cannot afford a mortgage in any Russian region, because mortgage payments reduce the average income per household member below the subsistence level.
That is, the average person couldn’t afford an average apartment even in 2021 and 2020, and now, well, even more so. That is, there’s no way… Well, that is, you have to wait until one of your relatives dies. That’s how housing problems are usually solved in our country. Here, the grandmother has left this world, and the young family is moving into the grandmother's apartment. Well, so, yes. But it is impossible for the average household to solve this using the market method.
And since the average values, they are also greatly distorted. And in reality, our average salary is not truly average. The median salary is truly average. It is about a third lower than the average, which is given by... the statistical average, which is given by Rosstat. And if we look at the modal salary, the mode is even lower. That is, the one that divides... Well, the most common Russian salary, in my opinion, is two times lower than the arithmetic mean. That's it.
That is, in this case, the situation becomes even worse, and in this sense, there is not even a single option for an ordinary person without some kind of good, good external financial support in the form of some kind of inheritance or help from parents, or, again, all sorts of social elevators that the state provides today in the form of participation in the SVO. Such extravagant methods will help solve the housing issue. But if you don't participate in all this and don't have these magic money trees somewhere outside, then, again, buying a home is unaffordable for an ordinary person.
Real salary in the country.
Pavlovich:
Let's talk again about the formula for calculating, in principle, the real salary in the country. Yes, I'll repeat it. There is an average, well, an average, as it is calculated, like the temperature in the hospital in that joke. That is, your boss, you get 100 thousand, you get 50. As a result, the average for your region will be 75. And Oleg says that this average figure should be divided by about 2, and we will get the real picture of the salary.
Economist:
No, no, look, there is an average, there is a median, there is a modal. The average salary, the arithmetic mean, as you correctly said, they simply gathered everyone, divided all the salaries by the number of workers. And here they take into account the salary of a nanny in a kindergarten, 25 thousand rubles, and the salary of a top manager of Gazprom, several million a day. All this ultimately gives us this average, which does not reflect anything at all. There is a median salary, this is the salary that divides the population exactly in half.
50 percent receive more, 50 percent receive less. And it is somewhere, as a rule, a third lower than the arithmetic mean. And there is also a modal salary, that is, as if speaking, all the working population is divided into such modes, that is, into groups by salary. And there are some salaries that are the most popular, that is, the salary that the most workers receive. And there are salaries that the fewest workers receive there. So, the most popular salary in Russia is usually half the arithmetic mean.
Let's take it like this.
Pavlovich:
This is terrible. This is probably if we take the whole country as a whole, yes, again, with the arithmetic mean, it will probably come out to 30 thousand rubles.
Economist:
No, well, the arithmetic mean Rosstat gives is 73, in my opinion, 75. But again, this is all an inflated salary. This includes payments to participants in the SVO. But can they even be called workers? These are not hired workers, these are people who are engaged in unproductive labor. That is, they receive money from society, but do not make any contribution to the development of productive forces. Moreover, they spend resources. They need to sew clothes for them, give them dry rations, provide them with shells, tanks and ammunition.
And these are all labor resources, primarily energy, raw materials. That is, all this takes resources from the economy, but does not return anything in return. Moreover, this reduces the population in the number of the working population. I don’t even mean so much the mortality of people at the front, that’s obvious. There are tens of thousands, well, according to various unofficial estimates, we lost people at the front. After all, this is also a deformation of the human psyche, how many people will return from the front completely incapable of socialization.
Plus, the disabled, we seem to, well, we don’t attribute them to direct losses at the front, there, in the form of deaths, but a person without a leg is an unproductive worker, no matter how you look at it. A person with psychological trauma. That is, in the future, this will have an even greater impact in the reduction of the working population. And all the demographic forecasts that I have come across from colleagues, they all give a negative assessment. By 2045, in the negative scenario, the number of the working population will decrease by 10 million.
By the way, this is important simply for living people. Again, this does not include people who are not socialized after participating in military operations. In the most favorable scenario, by 2045 the working-age population will decrease by 3 million people. Well, on average, somewhere around 5 and a half. And then either replace them with migrants, and this is clear, what social consequences this entails, what contradictions, we have all seen this very clearly in Russia in recent years. Or, again, introduce new technologies, but the Russian state, Russian big business are completely unprepared for this. Well, they are simply not used to existing according to this model. They built their investment strategies in completely different conditions. For decades they adapted to the global raw materials market situation. And now they need to change their business, abandon the economy of cheap labor, invest in new technologies. They simply do not know how. This is not done just at the click of a button. Let me invest in a machine tool or I will invest in an oil pipeline. No, we just need to change the business model. In general, the entire philosophy of doing business - these decades are needed to rebuild the economy on water-supply.
Therefore, we see that even in conditions of labor shortage, investments are only going to the military-industrial complex. On average, investments grew by about 19% in 2020, while everything that is above 19, everything that gave this increase is the chemical industry, metallurgy, equipment repair, the production of all kinds of drones, well, in short, everything related to servicing the front.
Everything that is much less than 19% is the civilian sector, these are civilian products, these are cars for ordinary people, these are trams, these are tractors, this is everything we need in agriculture, in industry, everything that is not related to servicing the front. That is, on the contrary, there is a degradation of production capacities, the obsolescence of production capacities is growing. This is another separate problem. Somehow we do not really talk about this, they forget. But Rosstat does provide these statistics. On the eve of the SVO...
Pavlovich:
Housing and public utilities clearly remind us.
Economist:
It's winter now, we will see even more problems than last year, 100%. 53, if I'm not mistaken, production capacities in Russia, fixed capital, are worn out by 53% until 2022. Then there is a sharp drop to 48%, but not because investments have increased, but because the accounting methodology has changed. Companies have been allowed to keep accounting records in a new way, revise and extend the useful life of fixed capital items, elements of fixed capital.
That's why the indicator fell. Simply, if any of the viewers wants to check, they will see this anomaly, why suddenly in 2022 the depreciation of assets fell so sharply. Not because our economy has flourished. Well, there are investments somewhere, again, primarily in the military-industrial complex, but the main reason for the 5% drop is the change in accounting methods. And the growing depreciation, as you correctly said, is accidents in the housing and utilities system, low labor productivity, industrial injuries, low product quality, excess energy consumption
and a number of other problems that only aggravate the accumulated contradictions, but do not allow us to get out of them.
Those who left the Russian Federation. Population size.
Pavlovich:
Well, plus those who left. How many, according to your calculations, let's say, workers left?
Economist:
Well, I didn't count specifically, and no one can give an exact calculation, because those who left do not always renounce Russian citizenship. It is unclear whether they left forever or for a while, who returned. But, obviously, we are talking about hundreds of thousands of people who have dropped out of the Russian labor market. Well, is it one hundred or seven hundred, well, I don’t know. But this is also significantly the main thing that they are leaving...
Pavlovich:
I can say from experience in searching for employees, we need programmers all the time. Like this year, it has never been so bad. Previously, we, for example, 200 resumes on HeadHunter, Well, I mean, during the military year there were already 21-22, 200 resumes, but we looked through 6-10 people, there we hired one or two. Now, out of 200 resumes with salaries from 4 thousand dollars, well, requested, yes, and these are juniors after Skillbox courses, we may not take a single one at all, and it is directly, well, it is very clear that the quality of the labor market has worsened, and this, well, it is not only us who notice.
That is, for these employees we compete with banks, and with advertising agencies, and with anyone, with any non-manufacturing sector.
Recently, information appeared, literally a week ago I began to notice that the population of the Russian Federation is no longer 146, like, million, but, in my opinion, this is some kind of canard, that some archives of registry offices, allegedly security forces, have digitized, and, it turns out, according to birth and death certificates, it turns out that there are 90 million. But I look at this and laugh, and I saw it in the last week.
Economist:
No, but still, this tale is many years old. I think I heard it back in 2016 that according to registry offices in Russia, in fact, the population is significantly smaller. Well, again, I myself have not counted all Russians personally, but, obviously, the demographic dynamics are negative. And this is another separate problem of Russian society. The fertility rate this year is 1.4 children per woman. That is, less than two per married couple.
What does this mean? That Russia will continue to die out. This will make an additional contribution to the labor shortage in our country. Why is this happening? There are a number of reasons. There is no single key factor. There is a demand for a change in lifestyle. After all, we are not a peasant society, we are a highly urbanized society, and the birth rate in it always falls. But there is obviously also the influence of negative socio-economic policy. The state itself proved this by introducing an experiment with maternity capital.
Here is how maternity capital was introduced for the second child in 2007, the birth rate immediately went up, and demographers claim that thanks to this measure, Russia has an additional 2.5 million children born second, third, and so on. But when maternity capital was introduced and expanded to the first child, the effect was much weaker, because, as a rule, people give birth to the first child anyway, without additional material stimulation, just to put a tick in their life achievements. And in this regard, maternity capital shows us that a significant factor in making decisions about having children is the socio-economic factor.
The lack of money to raise a child, that is, a large family almost automatically becomes a low-income family, plus the commercialization of the social sphere. I can see this clearly in the education system, especially higher education, where budget places make up an ever smaller share and more and more universities are going down the path of commercialization.
All these are children, this is an expensive pleasure, that is, such a very expensive investment with dubious future dividends. And for this reason, against the background of what is happening now in Russia, when states spend their economic potential not on improving the well-being of the population, but on military action, on global competition with the Western world, then in this case the demographic situation will only worsen from year to year. And, again, the state is making the only bet here on attracting migrants.
This is shown, among other things, by the calculations of Rosstat. If we go to the Rosstat website and look at the demographic forecast that is published there, its three scenarios, then each of these three scenarios assumes a reduction in the indigenous population and its replacement by migrants, just in different volumes. The favorable scenario there, in my opinion, is within the limits of two million, and the unfavorable scenario assumes that the indigenous population will die out even faster than new citizens from abroad will come to Russia.
That is, in this sense, the state does not even assume that the situation can change for the better, and the population will begin to grow naturally. And all this, of course, gives, again, an additional unfavorable factor in the socio-economic forecast for the medium and long term. And all the old contradictions that accumulate in favorable times, in crisis conditions, in military actions, are aggravated and simply accelerate our movement towards unpleasant economic consequences.
Pavlovich:
Well, here is also an obvious problem that most often they are unskilled. Because if they are highly skilled, they earn more or less in their own country, taking into account their rates, they will be able to live more or less normally, and some are even provided for. According to forecasts, I think, well, we were told this week, yes, that the next 20 years will only get worse. I would like to hear something different, but, excuse me, I have no other recipes for you.
The automobile market.
Pavlovich:
And, if you allow me, two questions. The first is the car market. Of course, we all took taxis, Yandex, Uber, yes, these Kia Optima, Hyundai Sonata, and that's where comfort is a plus, if you take Yandex. Everything was great, everything was fine, the war began. We went several times, naturally, Hoval is not the worst option, also Geely, Moskvich is the worst option, because it stinks of cheap plastic inside.
In general, and when a Hyundai or Kia comes to you, well, it's as if you are now in a different place, as if you are getting into a Mercedes or BMW, at least business class from the E-class. And what do you say to the pro-car market, is it worth taking the Chinese now? And here in Thailand I drive Chinese cars, well, it’s clear that they won’t last forever, that I won’t pass them on to my son or grandson as an inheritance, like my mother’s 124 coupe still drives just fine, basically.
But in general, in principle, considering that it costs 10-12 dollars, MG is some kind of brand, well, it’s worth its money, and here I would buy it, for example. But in Russia, as far as I know, the Chinese, they are also x2, x3, and the prices are in China.
And what do you say, can we buy them, should we buy them, or should we try to buy some used Europeans and drive them from abroad?
Economist:
Buying used Europeans, driving them from abroad — these are such extravagant options that simply don’t suit everyone. Not everyone is ready to take the risk, to buy a car without a warranty with the difficulty of buying spare parts, because, again, not only are there few European cars, and there are no spare parts, and there are no such supplies as there were before SVO. It's just that, probably, only fans of some special brand, German, there, some Korean, American, will want to get involved in such deals en masse. For the common man, there are no options left: either you or Chinese manufacturers.
Well, there is also such an extravagant option - Iranian cars. In 2022 there was already a car show, in Russia and the director of an Iranian company, I forgot, Khodra, what is it called there, in general, yes, Iran Khodra, yes.
Pavlovich:
Iran Khodra, not Peugeot, an old manufacturer of an old Peugeot car.
Economik:
In 22, he was going to supply several tens of thousands of cars to Russia annually, in the long term. But somehow I still haven’t noticed Iranian cars on our roads. I think it’s just Iranian manufacturers, although in general they produce quite, well, such, how to say, tolerable cars for the Iranian consumer, quite import-substituted, there is a high level of localization of production, but, of course, they are inferior to the Chinese in all respects to modern ones, and they will not receive mass distribution in Russia.
And so, well, it is completely obvious that China is capturing the Russian market, has received a new sales market. This, by the way, is another example of how they compete...
Pavlovich:
Global, global, I would say.
Economist:
Yes, how corporations compete. We are used to this understanding, you know, in the area of small business, how an enterprise competes. Whoever sets a lower price, makes a higher quality, that one wins the competitive struggle, as our first-year economics textbooks teach us. What great achievements has the Chinese auto industry demonstrated that it was able to push out all Western manufacturers on the Russian market? None. There are simply political instruments with which China has captured the Russian market. That's how the policy has developed, that there is nothing more for us to buy except Chinese brands.
They are, well, quite interesting. Of course, Chinese cars are very crude. This is quite obvious just from the reviews of the owners of these cars, but I think that in 5-7 years the Chinese auto industry will have made great progress, because according to the history of the last decades it is actively following the path of absorption of Western brands, the same Volvo company was absorbed by Chinese investors, and many of
Volvo's technologies were alive now, embodied, of course, in a somewhat deformed form, but, nevertheless, China is obviously evolving as a car manufacturer. And, absolutely certainly, they will increasingly dominate the world market. But in Russia, AvtoVAZ, well, a sad fate awaits it absolutely, because with the departure of Western concerns, not that it is even difficult now to produce old models, somehow they somehow replaced imports, somewhere there some gearboxes are supplied by China, somewhere there even their own production, they established something, like generators, in my opinion, they began to produce their own instead of Valya.
But all this is just an attempt to plug the holes in a sinking ship. AvtoVAZ is definitely not competitive compared to China, especially in its potential. China already offers a much wider range of its products to Russia. Well, essentially, AvtoVAZ is two models. This is Granta and Vesta. They account for 75 or 80 percent of sales there. The rest is small stuff. Even what will appear in the future, some Lada Aura, it seems, will cost the same as the Audi A8 before the start of the SVO.
That is, this is a completely inadequate price tag for a car of this class with such consumer characteristics. So, in general, what is left for the state? In order to prevent AvtoVAZ from going bankrupt, they are raising the utility fee. We see how it was introduced this year and will continue to increase in the future. In 2030, in my opinion, it will add 1 million rubles to the price of an imported car.
And already now, for example, the Geely Cool Ray, imported from China, is added to its price in combination with the utility fee, all sorts of additional duties, VAT, etc., it becomes twice as expensive after import to Russia. Why is the Russian government doing this? As I said, to support AvtoVAZ, and they also hope to attract Chinese investors to Russia so that they open factories here for at least the assembly of large-unit Chinese brands, and thereby saturate the market not through import, but through domestic production, create jobs with demand for some additional production and services within the country.
But, as we see, China is not eager to invest in Russia. This is a very interesting fact that requires a separate in-depth study. It would seem that the Russian market is open to Chinese investors. Come, open factories. The Europeans have left, Russian enterprises are not competitive. But China invests, for example, in Kazakhstan twice as much as in Russia. Although Kazakhstan is several times smaller in terms of its economic turnover. Why? Because China is afraid of sanctions.
Despite the confrontation with the United States, despite the fact that US trade relations are gradually breaking down, and Mexico is already the largest exporter, well, supplier of goods from outside to the American economy, and not China, all the same, Chinese banks, Chinese manufacturers are afraid of sanctions and do not want to invest in Russia, so as not to fall under restrictions that will hurt the Chinese industry, tied to Western markets. Hence, it turns out that Chinese brands do not come to Russia as manufacturers.
Within the country, one AvtoVAZ is obviously not capable of satisfying the demand quantitatively, or qualitatively either. From here we, well, all this will only lead to the fact that the current state policy is that cars will become more and more expensive. This is an additional recycling fee, it, of course, has nothing to do with any recycling of the car. It is simply a levy in favor of the budget. By buying a car, you sponsor the foreign policy ambitions of the Russian state in this way. And in this sense, you get a product of worse quality at a higher price.
Hence, I do not expect any favorable developments in the automobile market even in the medium term. Only the mass arrival of Chinese investors can change something, but again, the Russian market is not very interesting to them. Many brands simply do not officially sell their cars in Russia, not to mention opening a production facility. There is one Haval plant, but it was opened before the sanctions. It somehow exists, and new ones are unlikely to appear. This is too risky for China. They have other, more interesting markets than ours,
where they do not face sanctions pressure.
Expenditures on military operations. Economic reasons for military operations and interests.
Pavlovich:
And how much has the country already been calculated by someone? How much does it spend on war per year in general? And if we compare in retrospect, in other historical periods, such amounts were perhaps spent on health care, science, and so on?
Economist:
Well, if we talk about budget expenditures on military operations, they are reflected in the budget. This is approximately 33%, well, a third of the federal budget goes to the item "National Defense". This year, in my opinion, it is 10 trillion rubles, and next year it will be 13 trillion rubles. That is, the amount is constantly growing. But, by the way, this increase from 10 to 13 is, in fact, an indexation of 30 percent, because the share of military spending in the budget remained the same. By the way, this is an interesting indirect sign of how the state assesses inflation. That is, it indexed military spending by 30 percent, but thereby, in fact, it says, this is our real inflation in the country.
Not 9, as Biulin claims, but actually closer to 30. Accordingly, what does this mean? This is a large share of the economy, which is directed through the budget to unproductive spending, and this is in relation to the pressure on the entire economy commensurate with the Soviet Union in the 60s. Something like that. At the height of the Cold War, during the Cuban Missile Crisis, the USSR spent just as much on the war.
Excessive military spending, as we remember, hit the Soviet economy quite hard, because a large production potential was also spent unproductively. But the most interesting thing is that back then there really was a threat of a real Third World War, a serious one, well, the world had just survived the consequences of the Second World War and saw what kind of costs the Second World War had for our society, and then talk of a military threat was not a joke, not some kind of fiction invented to justify foreign policy ambitions, but it really was a real threat that could be embodied in a Third World War, there, just some careless statement and decision by one of the leaders of the largest states of that world. And today, when we talk about military actions, it is absolutely obvious that they have nothing to do with protecting national security. This is simply a tool that the largest Russian corporations use in the struggle for the redistribution of foreign markets.
What is Ukraine? They tell us there that this is anti-Russia, Russophobia, and all the other fairy tales of a political nature. Of course, this factor cannot be of some small significance, but first of all, Ukraine is human resources, labor, natural resources, a sales market, colossal investments made by Russian companies in the territory of Ukraine even in the pre-Maidan era. I conducted a small analysis, by the way, the largest and most popular video on our channel is prime numbers,
economic reasons and our own. We usually talk about cultural reasons politically, and what economic reasons are there? Economic reasons are such that Russian corporations in the banking system, in the extractive industry, in mechanical engineering, in the manufacturing industry, invested tens of billions of dollars in the Ukrainian economy, and then, after the Maidan, after the change of power, they began to be actively forced out of there, and they lost their money there. And there was nothing left for Russian business except to try to regain control over Ukrainian territory, over the Ukrainian economic region, first of all, by force.
These are investments that Russian capital has made abroad to obtain additional profit from exploiting local resources. And the most important thing is that Russian business, in the conditions of this aggravated contradiction between the largest actors in the world economy, is being forced out not only from the Ukrainian market, but in general it is beginning to lose its influence on the world economy, and has lost the European market for sales in the gas sector. Here again, it is simply competition by political means.
American gas suppliers do not sell it to Europeans in higher quality or at a lower price, no, they took political measures and deprived Russia of the European market and thereby squeezed out a piece of the sales market in a competitive struggle, and, therefore, the colossal profits that the 400-million European sales market provides. Accordingly, this is a war for economic interests, first and foremost. They are trying to cover it up with such a fig leaf of national interests and convince us that this is all in our favor.
And we should be primarily interested in the continuation of all these militaristic aspirations of the Russian state. But a political economic analysis of the entire history of modern capitalism shows that the main driver of political events are the interests of the ruling class. These gentlemen don't give a damn about the interests of the common man, on the contrary, he is a resource for feeding these instruments with which the ruling class makes its way on world markets, the interests of the largest capitals have converged in the form of military actions, particularly in Ukraine, and then this
will spread in any case to other theaters of military action, therefore, I will emphasize once again, I started with this and will finish our conversation with this important thesis, in any political events it is necessary to certainly find economic, if not specific, interests, you know, they perceive it so vulgarly. And who specifically benefits financially from this decision? No, this is a superficial view. Rather, we must understand the economic prerequisites for a change in the political vector.
Why did Putin hug the American president in 2005 and host a parade with him on Red Square in the 2000s, and in 2012, I think, or in 2013-14, a summit of Russia and the EU was held on the creation of a single economic space from Lisbon to Vladivostok? In general, they wanted to unite the economies and create a giant tariff-free, customs-free zone. And now they have become the grunting pigs in Medvedev's tweets. Why did this happen? Did the two presidents just quarrel with each other? No, economic interests clashed, the interests of corporations.
Previously, they could coexist and divide up world markets without stepping on the toes and, in fact, on the garden of their neighbor. And now, in order to grow, you need to bite off a piece from your competitor and enter into confrontation with him, relying on the institutions of the national state. Hence, the competition of corporations is the source of global instability.
The main stakeholders in a world war.
Pavlovich:
And who is the main beneficiary of the war, if we take it on a global scale now, well, I mean Russia, Ukraine? In my opinion, it was just the States, but I could be wrong, there could be many more stakeholders there.
Economist:
What is happening in the world now is a struggle for the place of the new hegemon of the world economy. This is the place at the top of this economic pyramid. Who will collect, so to speak, all the cream of the crop from the world economy. Before that, the United States played this role for decades. But the 2008 crisis showed that the old model had exhausted itself. It is impossible to live the old way. This dominance of American financial capital, well, it is simply not because it is bad, because this is how capitalism works, it led to the 2008 crisis.
And since then, the world has been in this turbulence, which is an expression of the struggle for the place of the new hegemon. Who will replace the United States on this path? Or will the United States retain its dominance? That is, in fact, China is now challenging the United States, trying to become the center of the world economy, to control its financial and production part, becoming a cultural hegemon, which is important. We also sometimes forget about culture, but this is also an important condition for reinforcing the dominance of a particular country in the world economy. That is, the question now is who will become the leader of the global economic system.
And what does a leader mean? It is some abstract concept. In fact, a leader imposes a relationship of unequal exchange with less developed countries. That is, the United States is not just a hegemon, because the dollar is in the world, everyone worships it, and everyone buys goods with it. With the help of the dollar and other instruments, the United States has been able to receive more from the world for decades than it gives in return. This is clearly visible in the American structure of foreign trade.
Exports are two times less than imports. This is, well, the most simple expression of unequal exchange. Get more - give less. This is what the largest actors in the world economy are striving for today, to take a dominant place in the global economic system. And all means are good for this. This is what they are fighting for now. And it is impossible to achieve this without technological leadership, cultural, military, political. And now, in fact, there are showdowns between criminal groups.
Who is the boss in the area? Who will oppress everyone, who will collect tribute? From smaller, weaker and incapable of defending themselves participants of world politics. That is, in essence, the struggle of capitals by the hands of ordinary people. As usual, it is not the children of oligarchs who die on the fronts of world wars.
Pavlovich:
But still between several main actors, that is, the USA, let's say, on one side, and the one that has joined, yes, partially, there, the European Union somehow, this weak and fragmented one after all. And the second is the axis of China plus satellites, what, well, we don't take India into account, it is a competitor. It turns out, China, Russia, the DPRK, Iran, probably four countries.
Economy:
In general, the DPRK is compared incorrectly with China in terms of the scale of its participation in the global economy. In general, these are the United States and China, the two main actors. They have allies who cling to the leader for various reasons. Why is Russia drifting towards China? Firstly, there is no one else to turn to. And secondly, with the help of China, relying on China, our ruling class hopes to regain its dominance in the post-Soviet space, to once again receive this label of reigning over Belarus, Ukraine, Moldova, Georgia, the Baltics.
But it is not at all a fact that China will allow this to Russian capital, that it itself will not want to reign and own everything in the territory of the post-Soviet space and even in the territory of Russia itself. Hence, an interesting conclusion for the future, to a question that is definitely worth returning to someday. And what are the prospects for Russian-Chinese relations? So far it seems that this is our closest ally, our best friend, into whose arms we must certainly rush. And Chinese capital has its own scales.
Pavlovich:
This is obviously not true.
Economist:
It lives by the laws of business. This is desirable, this is wishful thinking. And the fact that another conflict with China may soon occur, and it will turn from an eastern partner into a grunting piglet - this is a very likely scenario, which will most likely happen. It's just that both China and the United States live by the laws of capitalism, and capitalism requires expansion for constant development, accumulation of capital. And when you need to accumulate capital, you must certainly squeeze something out of your weaker neighbor.
Russia is weaker than China, and it will certainly be a future victim of Chinese expansion. It's just that maybe not directly, like through the seizure of territory. In the Middle Ages, they seized territory so that the peasants could collect corvee and work off their quitrent. Today, exploitation in the world is carried out through direct investment. The companies whose companies dominate the national market of a weaker country collect all the surplus value and the results of the labor of the local population.
Hence, direct investment and analysis of direct investment in the global economy is the most important tool of political analysis. In which market dominates investments of a certain country, that is where the political influence of this country on a weaker neighbor is observed. And all this is directly related to profit extraction, for which this entire system exists.
Advice to viewers. Deep recession.
Pavlovich:
The last question. But we have a target portrait of viewers on the channel - 96% men, 25-34. Well, I know many of them personally, very many. These are mainly temshchiks of all kinds, yes, who earned capital in a not entirely transparent way, many former hackers and so on. And many people, many security officials of all kinds, according to my calculations at least 3000 of all kinds from the FSB and the Ministry of Internal Affairs.
Economist:
Good afternoon, comrade major.
Pavlovich:
Also, subscribe to Oleg's channel, use numbers more, and there's a link in the description. And these are people from all sorts of digital businesses, that is, SEO specialists and so on, that is, the Internet environment, plus a few bank managers and so on. In general, not the worst, but I would say the best, probably, the public on the Internet. Their income, in principle, is probably average. I would take 1,150 rubles in total, probably, per month.
And what would you advise young people, such as 30 years old, let's say, with such an income, at about this time regarding investments, savings and generally some kind of passage with minimal turbulence of this path that awaits us all in the next few years, well, those who live in Russia, I mean.
Economist:
Well, if you give investment recommendations, then you have to bear responsibility for them. But this is still not my area of expertise, I am not an investor. I am not talking about investment, but rather savings, I guess. Saving is one of the forms of investment. That is, ultimately, investment is savings for a household. But since I do not deal with this issue specifically, that is, it is impossible to cover the immensity, I deal with investments in the political economy sense. I am interested in this on the scale of global political economy, global economic ties. If we talk about the situation within the country, then I have already, in general, voiced the problem that our society faces.
This is the prospect of a deep economic recession. And in these conditions, any participation in the financial market becomes extremely risky. Because you will not be able to pay off your obligations, and they will not be able to pay off your obligations. Who suffered the most in the 2008 crisis? Those who invested money in banks that seemed to be the leaders of the American economy, issued mortgage loans, issued derivative financial instruments, seemed to have deceived the laws of economics.
Well, they went bankrupt, and the debtors were left with nothing. Well, somewhere there, of course, the state paid money for them. But the state does not have its own money, it operates with public income. And thus, if the state acts as a protector and insurance agent for big business, then it simply takes money from one pocket and transfers it to yours. In this sense, you will not become richer from this. Therefore, in general, well, it depends on how prone a person is to risk. If you have spare money that you do not mind losing, then individual projects in conditions of instability can bring colossal profitability.
Well, it always happens that way. High risks, the highest return. But along with this highest return, there is a high probability of losing everything if the economic pendulum shifts in the opposite direction. Therefore, in fact, it is impossible to give universal advice. If you are ready to take risks, take risks. If you have fundamental problems with housing, health, children, education, some kind of everyday inconvenience, then, of course, you need to solve them first, because it is easier to do this now than tomorrow.
Prices are always rising. And now in Russia they are rising even more, and the inflationary spiral will not end anytime soon. Much should change even before the end of the SVO. This is obvious. Because the consequences have accumulated, they will not go away. After the war ends and peace comes, this excess money supply, a gigantic money overhang, it will not dissolve by itself in an instant with a magic wand, it will have to be put somewhere, and this will be a problem for the entire economy, or colossal inflation, or, as we said, a crack in the banking system with an outflow of depositors from them.
That is, in general, all this will hit the population hard, which means that if you want to save, you really, really need my investment advice, then this is obvious, people understand this even without an economic education. Save money in the dollar, because now, of course, the dollar is much more stable relative to the ruble, a predictable and growing currency than any other, even than the yuan. We see this in the global economy. Despite all sorts of upheavals, the dollar remains the main, the main form of savings for states, corporations, and households, and here the mass consciousness quite clearly catches the trends.
If you really want to save, then it's better to save in cash dollars or, I don't know, in some foreign account in some distant, quiet country. But this is only to protect yourself from the crisis in Russia. If the entire world economy goes boom, there will be no safe haven there, you won't be saved anywhere. You just need to understand that this is capitalism.
If you are ready to live in this system and are not ready to fight it for a better world, then be ready to accept all its costs when all the consequences of the crisis fall on your shoulders, and the main beneficiaries of this entire system, on the contrary, will emerge from it with growing incomes and increased prosperity, and with even more strengthened political power.
Results.
Pavlovich:
Well, if you are not ready, then get in like old lady Agafya, yes, and live there, basically, with wolves. Excellent advice, thank you. I'll sum it up. Send your children to the best schools and sit in cash. Well, if somewhere you can buy something at a good price and sell it quickly, then see for yourself.
Well, that's all. Thank you very much Oleg Kamolov, author of the absolutely wonderful channel "Prime Numbers". Thank you for the informative conversation. And if you have any other economic questions, please write them under this episode. We'll collect enough, so maybe we'll do a second episode. And also, please, write your region and the average salary for your region and for you specifically.
Hugs. Bye.
Sergey Pavlovich talked to Oleg Komolov, author of the YouTube channel "Prostye Chislya", about the Russian economy.
Why has housing become unaffordable? What is Trump preparing for China and Russia? How do long-term crises change our lives? Why is the key rate rising, but inflation is not falling? This and much more in this topic.
Enjoy reading!
Contents:
- Introduction
- What Trump is preparing for Russia
- Trade wars. Taiwan.
- Completion of the SVO. Unfavorable economic situation in the Russian Federation.
- Reasons for Trump's victory.
- China's Attack on Taiwan. Consequences.
- Oil. Collapse of the Russian economy.
- State obligations
- Loans. Minimum interaction with the banking system.
- Preferential mortgages, unaffordable housing, bankruptcies of developers
- The safety margin of the Russian economy
- How to buy an apartment in today's reality
- Real wages in the country
- Those who left the Russian Federation. Population size.
- Car market
- Expenditures on SVO. Economic reasons for SVO and interests.
- The main stakeholders in the world war
- Advice to viewers: Deep recession.
- Results
Introduction.
Pavlovich:
Friends, hello! And today Trump came a little bit about the economy and what he will bring us with Oleg Kamolov, the author of the channel "Prostye Chisla" and, by the way, a candidate of economic sciences. I do not understand much, but I understand the news agenda well. Now we will discuss what we will live with in the coming years, or rather, you. I am here in a slightly different economy, and you will live with this. Here. Oleg, hello.
Economist:
Good afternoon.
What is Trump preparing for Russia.
Pavlovich:
And so, in conclusion, what is Trump preparing for Russia, if possible? And here the Congress and the Senate, in principle, everywhere the majority is under the Republicans, that is, the president will be able to very quickly implement his decisions, yes, this has probably not happened for the last 30 years. And what does this mean for Russia? Why are Russian propagandists suddenly so happy? And yesterday there was something incomprehensible, then they were happy, Yesterday they started showing all sorts of obscene videos about Melania Trump.
Well, let's put it this way, if I were in Trump's place and saw this crap, I would, of course, be outraged and angry. And will Trump take on the solution of Russia's problems, as they see it?
Economist:
An interesting question. If you recall the events of 2016, Trump's first victory, Well, then the delight of the Russian state, former officials, deputies was more pronounced. If you remember, Zhirinovsky raised a glass of champagne to the events overseas. But now the reaction is more restrained, although generally positive. That is, in the Russian political establishment, Trump's victory is perceived as a more favorable event than the continuation of Biden's policy in the person of Kamala Harris.
But, again, I emphasize once again, more restrained rhetoric, since the previous experience of Trump's presidency showed that politics in America is not quite the same as in Russia. If a presidential candidate, for the sake of populism, expresses some sharp radical ideas and thereby wins the attention of the audience, it does not mean at all that he will consistently implement these actions.
And what's more, in American politics, not everything is tied to the president. It was not for nothing that you mentioned Congress. Even though the Republican Party dominates there, there are still different currents in the Republican Party, perhaps even branches, and not everyone there is delighted with Trump himself and his isolationist, often populist, rhetoric. Therefore, in general, if we look at how the markets reacted to Trump's victory, and generally speaking, the dynamics of the markets and the behavior of investors is always a good basis for political analysis, we will find that the American markets reacted best.
A number of American billionaires have become very rich. Literally in one day, there, since 2012, American indices have not grown so sharply. In fact, Elon Musk, there, earned more than 20 billion dollars, well, his assets, on the news of Trump's victory. A number of other American billionaires have also become rich. In total, their wealth has increased by about 65 billion dollars.
Pavlovich:
Well, I see... Yes, crypto. The thing is that crypto, look, Bitcoin has already gone silver in terms of capitalization.
Ekonomik:
Yes, the dollar, by the way, has strengthened. It is interesting that... Yes, actually, why did American capitalists react so sharply and so positively to Trump's victory? Because Trump went to the elections with two ideas. First, to increase pressure on China, which, accordingly, will mean that American regulatory policy will indulge American business and protect it from competition with its main adversary, China. Plus, Trump promised to reduce business taxes from 21 to 15 percent. Moreover, in his previous term, Trump introduced a tax break on income, reduced the progressivity of the income tax scale.
All this, again, is a concession in favor of the rich part of society. Also, the Moscow Exchange behaved quite positively, obviously expecting that Trump would lift sanctions or, at least, some of them would stop military actions, which means that this would contribute to a decrease in inflation in Russia, a decrease in the set point, and, finally, the stock market in Russia will breathe a sigh of relief, because now it is lying on its side.
This is evident from the dynamics, from the quotations of key Russian assets. In general, the companies are in such a deep depressive sleep. In general, some positive dynamics also took place on the Moscow Exchange, but the Chinese indices are all in the red zone. Again, it is clear why. Because Trump is entering his new presidential term with ideas of tightening protectionism, putting pressure on competitors from outside, and all of this will harm the Chinese economy, which is still heavily dependent on exports. An important point that...
I would like to focus my attention on, why one should not place great hopes on Trump's victory, well, for example, in the context of the end of the SVO. Because, indeed, maybe Trump will somehow come to an agreement with the leadership of the Russian Federation, and this will contribute to the end of the military actions right here and now, maybe some temporary truce will be achieved, but this does not mean at all that the overall tension in the global economy, militarization, deglobalization processes will suddenly disappear somewhere by one decision of the American president.
No, quite the opposite, I think that if the United States, represented by Trump, contribute to the end of the Ukrainian campaign, it will be only so that the United States and the NATO bloc in general can concentrate on accumulating their own forces for the next war with a more serious adversary, because no one has canceled the contradictions with China. There are many acute points through which the United States can put pressure on China.
This is economic competition that is entering the political field. If the United States suddenly decides to completely stop funding the Armed Forces of Ukraine and completely stop supplying weapons, it will not be at all to help the Russian state resolve its foreign policy issues. Only to accumulate weapons themselves and renew their armed funds and support their allies in Europe and generally outside the United States.
Thus, in fact, if Trump’s promised end within 24 hours, by the way, from what moment should we count them, maybe already now or after the inauguration, if this promise is fulfilled, this does not remove a single key problem of the global economy. The tension will remain, the confrontation will intensify, and this is evident at least from the measures that Trump introduced into American regulatory practice in his previous presidential years and which he promises to introduce now.
That is, in general, it is possible that everything is just beginning. Not only is the war not ending, but we are perhaps on the threshold of an even more serious military conflict.
Trade wars. Taiwan.
Pavlovich:
But he also started trade wars with China during his first term and tariff policy, that is, protective customs duties, and so on, he introduced all of this. And, in principle, you said it right, I agree about American billionaires, and the positive that will be on the markets, in connection with the fact that production is still, he understands that in China, as if in Taiwan, by the way, in connection with the threat of China, that everything is really very unstable, and they are starting to transfer, he has already transferred the mask, I don’t remember what he transferred, but to Vietnam, from Taiwan
specifically, because 60% of the world’s microchip production is occupied by one small Taiwan, which has been under great threat from China for the last few years. And, by the way, about Taiwan. What do you think, will there be a war between China and Taiwan, an attack? Because I was in Singapore six months ago, and real estate prices there have really accelerated, in my opinion, by one and a half or two times. Well, in general, an apartment of 200 meters there definitely costs more than a million dollars. Because rich Taiwanese, who, in principle, do not think that there will be a fuss soon, they buy real estate there, so that if something happens, they can quickly get out to Singapore.
What do you think about China and Taiwan?
Economy:
This is one of the potential points of tension. It is absolutely obvious, the US political leadership does not even hide it, that they are now preparing their own shield and sword in the future confrontation with China through the prism of the conflict in Taiwan. On the eve of the elections, I don’t remember, a representative of the Republican Party, unfortunately I forgot his last name, published his interview in the Washington Post, that is, an interview with him was published, in which he stated that the United States is now
increasing its production potential in the military-industrial complex in order, firstly, to support Israel in its fight against Islamic countries and, on the other hand, to potentially support Taiwan in its confrontation with China. For example, Taiwan will need the production of 152-millimeter shells to counter Chinese aggression.
There, Stinger missiles - all this, by the way, has not been produced in the United States for a long time, that is, production has slowed down significantly over the past couple of decades, because the United States did not have such a powerful potential enemy against which such weapons could be needed. In particular, these very Stinger missiles that the Republican spoke about, the militants with whom the United States fought in different parts of the world do not have supersonic aircraft, and, accordingly, the production of such weapons was gradually reduced.
But thanks to the Ukrainian company, all these productions were relaunched, in 31 states, production capacities were opened or additional investments were made or mothballed in the military-industrial complex, which is now simply on the rise in the United States. Suffice it to say that over the years of the SVO, the top 50 companies of the Western world from the military-industrial complex, mainly American, but there are also some European, increased their capitalization three times faster than the entire Western stock market. Well, that is, Stamp P 1200 is growing three times slower than the companies of the military-industrial complex of the Western world.
And in forecasts until 2027, they also plan to grow twice as fast as the world economy. That is, in general, investors understand where the future profits are, which industries will not be in greater demand. And all this, you understand, comes from the political context. Companies of the military-industrial complex will not grow if their products are not in demand in the world. And why will they be in demand in the world? I will return, in general, to the beginning of your last thesis about Trump and his policies.
You said that you started introducing protectionist tariffs against China, but I want to note that before Trump, Obama introduced customs tariffs, very tough customs tariffs of 265 percent, I think, against Chinese steel. Deglobalization processes began even before Trump, it was Obama who introduced the first sanctions against Russia, not Trump. That is, Trump is an isolationist, an open one, but economic wars between the largest countries in the world began before Trump.
Why? Because the global economy has been in a state of deglobalization for probably 15 years after the global financial crisis. It is arranged simply. The global financial crisis of 2008 showed that the previous mechanisms for organizing the global economy do not allow it to grow at the same rate as in the pre-crisis era. That is, relatively speaking, the old models do not allow development at the expected rate. This means that the global economic pie has stopped growing as it used to, and the competition between the largest countries, between the largest transnational corporations for the redistribution of this same economic pie has intensified.
Hence, economic wars, which express the protectionist policy of governments, inevitably develop into political confrontation. And now we see its direct implementation, now in the post-Soviet space, well, and in the Middle East, and in the future it may move to Asia, as you said about Taiwan. Trump introduced sanctions against China on a large scale, starting there with solar panels and household appliances, extending this to a number of other goods.
But we should not forget that China essentially acted in the same way and introduced its protectionist duties against American products, against food products, for example, which were supplied to China from the United States. And the most interesting thing is that Biden, who replaced Trump, did not remove a single customs tariff introduced by Trump, but added his own.
For example, a 100% customs duty on electric cars from China. And it seems to us that Trump is such an aggressive isolationist, but in fact, he is acting in the context of the interests of the American ruling class, American corporations that use the American state as an instrument of competition with China. Hence, there is no doubt that this policy will be continued by Trump, since Biden did not cancel it, and in general, I emphasize once again, it follows and corresponds to the interests of American business.
Therefore, the intensification of economic contradictions will inevitably entail an increase in political conflicts, and the highest form of political conflict is war. Therefore, not only Taiwan. New points of tension can flare up anywhere. And if the NWO ends on Trump's initiative and with his active participation, this absolutely, I emphasize once again, does not mean that the world will return to 2003 with globalization, the WTO and the dominance of the idea of the free market.
The end of the NWO. The unfavorable economic situation in the Russian Federation.
Pavlovich:
Well, by the way, this is a big question, whether it will end or not.
Economist:
Yes, that's also a question, I agree.
Pavlovich:
Because, in my opinion, Putin now has no logical reason to end it right now, right? Donetsk, Lugansk and all the rest dominate on the front there. But in Kursk, yes, they knocked it out, and I think that before Trump's inauguration, before January 20, they will try with all their might to seize even more Ukrainian land, and secondly, well, at least knock it out of the Kursk region in order to improve their negotiating position. What they leaked there the other day, in my opinion, that they allegedly called each other, Trump and Putin, in my opinion, well, maybe if they did call each other, it did not lead to any visible result, because even more missiles flew towards Ukraine yesterday.
Russia will still try to improve its negotiating position to the maximum. It is not bad now, but it will try to improve it even more.
Economist:
Yes, but there is still a problem. You said that there is no fundamental reason for Putin to end military actions right now. And indeed, the main point of conflict is Kherson and Zaporozhye, which, according to the referendum, were included in the Russian Constitution and are formally Russian territories. But we ourselves understand that the Russian army has no chance of capturing the same Kherson now, although such a conflict will arise, which
will leave the preconditions for the escalation of military actions in the future, because if the Constitution states that Kherson is Russian land, Russia is here forever, as our propagandists said, and now Kherson, as a result of an agreement mediated by Trump, will remain under the control of Ukraine, this will leave the Russian ruling class with grounds for resuming military actions when the economy is ready for this again. After all, we should not forget that the economic situation in Russia is extremely unfavorable. Well, maybe I exaggerated a little with the word "extremely", but it is clearly unfavorable.
This is evident from the inflation dynamics. It is evident because the Central Bank has stopped coping with inflation by raising the key rate. Ina Biulina will obviously raise it to higher values in December of this year, but inflation is still not falling. This is evident from the analytical document of the Central Bank. And why is inflation not falling? Because its source is, in fact, the state policy. This is not market, not cyclical inflation, which can be caused by some imbalances in the market economy, against which the key rate is usually applied. No, this is a simple pattern.
If the state sucks out the main resources from the economy in the form of labor, natural resources, capital and, in general, all other economic potential for the benefit of the army, then the rest of the civilian economy will not have enough of these resources, prices will accelerate in the economy, and it is impossible to fight these rising prices by raising the key rate, as we see.
Growing inflation is a big problem that entails a number of negative consequences, first of all, the aggravation of further social stratification, because inflation primarily hits the poor part of the population, which does not keep its savings in luxury goods, in real estate, the prices of which grow along with inflation. No, ordinary people buy pasta, potatoes and medicines, and the prices of these goods in Russia grow much faster than the official inflation. Here we are accustomed to say, there, in Russia, inflation is around nine percent. It seems not so much, in the nineties it was worse. But this is simply inflation calculated according to the methodology of Rosstat.
This methodology is very specific, it is constantly criticized, because it does not reflect the real structure of household consumption, and the majority of our population is poor.
Pavlovich:
Well, the real structure, we saw it with our own eyes, that with the start of the war, prices there doubled... In some positions, yes, take office paper, prices there doubled, and so on.
Economist:
Well, it was, of course, a period of shock. And since then, the economy has adapted, and paper is not so expensive now, it has become cheaper. But in general, if we are talking about food, medicine, housing and communal services, gasoline. That is, the majority of the population spends the bulk of their income on these categories of goods. Suffice it to say that only thirty percent of the adult population has savings in banks, bank deposits. That is, seventy percent of citizens, well, let's subtract from them, maybe, five percent of those who simply do not trust the banking system and somehow form their savings differently.
But it turns out that more than half of the population has no savings at all. A tank does not make the economy more productive, nor does a rocket. The number of working-age people will decrease by 10 million, a third of the federal budget goes to the "National Defense" item. Russia is now pinning all its hopes on cooperation with China. Russia is weaker than China, and it will certainly be a future victim of Chinese expansion.
Butin has found some kind of magic button or some kind of magic money tree. When you buy a car, you sponsor the foreign policy ambitions of the Russian state. And what does it mean that a person has no savings? It means that he spends all his current income on consumption. And this means that every time his salary, if it does not grow by an amount proportionate to the prices in stores, it does not grow. This is even evident from Rosstat data, it grows and is indexed by a much smaller amount.
The population is getting poorer every day. The common population, which does not have savings in the bank, does not have super-incomes from participation in the work of the military-industrial complex. And this, you understand, creates the preconditions for a deep social conflict. People are ready to tolerate the SVO and military actions, to watch this, as if it were a football match, where you can root for your own or another country, and wish for victory depending on your political position. But when, while watching this match, you understand that your refrigerator is already empty, you immediately understand that you have more pressing problems in your life than solving the geopolitical tasks of the Russian state.
And, perhaps, this will push the Russian population to a more acute formulation of such pressing political and economic issues, which can be expressed in all sorts of political protests, in various speeches, to extinguish, which the Russian state may not be able to. And our ruling class understands all this, and from here, perhaps, this circumstance will push it to some kind of compromise with Ukraine with Trump's mediation in order to accumulate strength and deliver the next blow when the economy returns to a relatively balanced state.
Reasons for Trump's victory.
Pavlovich:
As if it were impossible without them. We lived, yes, peacefully, that's how long, I lived there for 42 years without war, everything was so great. Well, it was somewhere, of course, all the time in Libya, and in Syria, and in Yugoslavia, but we didn't have it. I would like it not to be in the future, but it is what it is. Why do you think Trump won at all? I will voice my point of view, and you yours.
It seems to me that the American people of any class, yes, any social group, are already a little fed up with this leftist agenda, and this completely incomprehensible policy of Biden and the entire Cabinet, it started not even with them, but with Obama, they could not say their own "I" at all. That is, they mumble something, like, on the one hand, they are helping Ukraine, on the other hand, they are not helping, just as they could, and all this has turned into some kind of endless war, they have really dragged it out, and everyone understands this, yes, and even the money that the American congresses and others, well, allocated, only 10% of it, according to the news, reached Ukraine in the form of weapons, direct loans and so on.
Plus flirting with the leftist agenda, with Hamas, about Hamas, these crazy students about Palestinian universities, what they are doing. In general, it is difficult to imagine, to be honest, for me, being a university student, such a thing in the USA, right? And it seems to me that people are pretty fed up with all this, and they want to change at least something,
because in Europe and in many other places, all sorts of ultra-right nationalist parties have raised their heads and have come to power in many places or will come to power in the next election season. It seems to me that Trump's victory, Trump's, is more or less from the same series.
Economist:
I agree with you that it was not so much Trump who won as the Democrats who lost. But I do not see any truly leftist tendency, a leftist vector, in their policies of recent years. Yes, maybe in the rhetoric there is protection of minorities, all these environmental discussions, but this is a very small part of real leftism. In fact, the left forces, historically, are those who advocate for the interests of the working class, those who fight to reduce inequality, to provide workers with basic social benefits.
And has the Democratic Party managed to advance at least a little in this context? No. We see that inflation under Biden was colossal. Well, for the United States, 9% is something outrageous. It's like 60% would have banged for us now. Well, the United States has always, with rare exceptions, been a territory of economic low inflation, which the Federal Reserve System has always successfully fought. They had to raise the rate to, again, critical values for the United States - 5% per annum. This is something incredible for the Federal Reserve System, a historically very high level.
This led, if you remember, to the bankruptcy of several American banks that had invested money in bonds, and against the backdrop of the rate increase, these bonds depreciated, and the bank did not have, in fact, sufficient capital left, which led to a run on depositors. We remember Signature Bank and First Republic Bank - these are the banks that, in fact, became victims of this anti-inflation policy of the Federal Reserve System. In recent years. And Silicon Voli Bank, in my opinion, is not related to this story, did it burst for some other reasons? Well, as you understand, the banking system is structured as follows.
Banks are closely interconnected. If one falls, it will certainly drag the others down with it. They are connected through the interbank lending system. And if in one relatively large bank Fester Pavlik, I think, occupied 14th place in the American bank rating. If any problems occur there, then this becomes a signal for depositors to withdraw their money from other banks. And from here the bank, which was initially in a precarious position, well, actually, finds itself on the brink of disaster.
Although, perhaps, there were no deep problems there at the moment. This is a separate issue, we can return to it. But I want to emphasize that, once again, no practical implementation of this very leftist policy, that is, support for the interests of the ordinary American worker, the American student, the ordinary American poor household, the Biden administration and in general the entire democratic leadership of the United States have not succeeded. Over the past 10 years, real estate prices in the United States have increased by 120 percent.
This simply deprives the average American, especially the young, of a chance to buy a house and provide themselves with this very American well-being. And the most characteristic thing is that most of this growth occurred in recent years. This year alone, the price of real estate in the United States has already increased by more than six percent. All this, of course, makes the average American refuse to support the Democratic Party, we see such a colossal improvement in the American society, but I think that this improvement is not ideological.
It is simply a movement away from failed politicians towards those who promise ordinary people more favorable living conditions. I think that if there were not two candidates participating in the elections in the United States, but at least three or four, and among them there was such a typical, characteristic left-wing radical politician, well, at least like Bernie Sanders, he is quite left-wing radical by the standards of the American political system, then he would have overtaken Trump and all other competitors if he proposed really effective left-wing political and economic measures to overcome the accumulated inequality.
Therefore, all this watering that you are talking about is more ideological and more superficial, superficial. The average American is not worried about this side of leftist rhetoric, not about environmental issues and not about gender socialization issues, but about the question of what he will eat tomorrow, whether he will have a job and any kind of past.
Yes, that's right. That's what the left has historically done, because, well, Trump is actually a right-wing politician. He said, we're going to lower taxes on business with him. That's right-wing rhetoric. Well, it's both economically and politically right. In theory, the average American should say, why are you lowering taxes on business when you should be lowering taxes on the average household? But in a situation where the previous administration has completely failed its social policy, people are simply hoping that the new president will act differently and be more successful, voting for him not because they've suddenly started to support him politically, but simply because it's a form of protest against the previous administration. You
can see how much American youth and American minorities have shifted toward Trump, which, it would seem, has always been the audience of the Democratic Party, and now they've abandoned their support for their previous idols and have shifted strongly toward Trump, they've made a big correction, if you look at the election results.
So, in general, I would like to emphasize once again, here I think that Trump is unlikely to reflect their interests in this sense, and it is unlikely that they, these ordinary people, will achieve the expected result, because, again, now Trump will be faced with the task, first of all, of supporting large American businesses in the fight against Chinese competitors, since, I would like to emphasize once again, we see how China is trying to penetrate the markets of Europe and the United States, to consolidate its dominance there through various tools, through the production of modern electric vehicles, through dominance in modern technologies, which have really advanced a lot in China recently.
Plus, China is creating corresponding infrastructure projects for this - "One Belt, One Road". Why is it being created? So that Chinese exporters can deliver goods to European markets with minimal logistical costs, in order to ultimately oust European manufacturers themselves from the European market in the future and to carry out the same scheme in the United States. We see how against this policy...
Pavlovich:
Well, plus many things in African countries, including infrastructure projects.
Economist:
Yes, of course. Well, Africa is part of this path. One of the routes there goes, in fact, through the Sinai Peninsula, through the Suez Canal, and Africa is also actively involved in this. From here, China is fighting for its dominance in the world markets, and in the global competition of corporations, politics is becoming the most important tool of competitive struggle. It is very important to combine politics and economics. Here we often like to say, here politics is separate, economics is separate, here the SVO began because one old man forgot to take his pills, and another, it means, said something bad to him on Twitter in response.
No, that's not how it works. Such political decisions have deep economic prerequisites. It is the economic analysis that allows us to make some more or less well-founded political forecasts. Once again, well, that is why I do not expect any peace on the planet, even if Trump fulfills his promise, the word will be completed.
China's attack on Taiwan. Consequences.
Pavlovich:
And will China still attack Taiwan? Well, it is clear that sanctions and other things will be imposed there, yes, that is, economically it will be, it seems to me, a very big blow to China, but Xi Jinping, as it were, received, well, such tacit approval for a new term in connection with the fact that he will still seize Taiwan. What do you think, will this really happen? And if we model this situation as having happened, what will be the consequences for China and for the world as a whole.
Let's assume that in a year there will be this war.
Economist:
Well, first of all, we need to say why China needs Taiwan at all. Now this process of inde-globalization that I mentioned, it expresses the competitive struggle of the largest global corporations not just for leadership, but first of all for technological leadership. We are now on the threshold, at the initial stage of the sixth technological order, the center of which is technologies, well, as they call it, such a BICS convergence, where NANO, BIO, COGNO and other technologies are combined together, forming, well, for example, such a variant of industrial implementation, such a unification of human intelligence with computer systems.
In short, okay, let's not go into it. The point is that now we are talking about the technological leadership of one or another country in the world, which will reduce the costs of producing basic goods and services. Those who can implement these new technologies of the sixth paradigm before others will be able to succeed in the competitive struggle, will receive a growing rate of profit and, accordingly, economic dominance over the entire world. And it is for this reason, for example, that the Chinese company Huawei is one of the main targets of American sanctions.
As we have noticed, several years ago Trump and then Biden tightened sanctions against Huawei. Why? Because Huawei is a leader in 5G technology, and 5G is a technology for accelerated data transmission, which is necessary for a new industrial revolution. And Taiwan is a place for the production of semiconductors, without which this technological robotization of the economy is impossible. In short, the world is moving towards robotization, only Russia is lagging far behind in this, and China is already nipping at the heels of Europe and the United States.
No robotization is possible without semiconductors. Again, the United States has imposed a number of sanctions against the semiconductor industry in China, and if this industry comes under further pressure, increasing pressure from the Western world, China will need to ensure a guarantee of the production of these very semiconductors, that is, control over production capacities. Taiwan is not needed for political purposes, to simply grab this territory for itself and, with the help of a small victorious war, set the Chinese population in a positive mood in favor of, that is, the current ruling regime.
No, that is not how it works. Taiwan is needed for economic, production purposes. That's it. And thus, these military actions can really begin. Another thing is that I am absolutely not ready to give any time forecasts and conditions here, because everyone understands what the consequences of these military actions will be. Even, well, there, the SVO in Ukraine, how it affected the world economy, there, Europe is now sitting without gas, and Germany has been showing zero, or even negative economic growth for several quarters, since it lost cheap Russian gas.
If China suddenly clashes with the United States over Taiwan, the global economy will receive such a serious blow from which it will not be able to recover. After all, China is not just a large country. It is a country to which the largest global value chains are tied. Without China, the production of a whole range of goods in other countries will stop. In other words, it is not China itself that will suffer. Even, you know, the Western press often uses such a euphemism as “a black hole in the global economy in the form of China.”
In other words, this is an option in case of, for example, a crisis in the Chinese economy. We see how China is slowing down, because its export potential is limited by sanctions, including other various problems in the Chinese economy, overaccumulation of capital. A deep Chinese crisis, as well as a war between China and some other country that could negatively affect its economy, will have a painful blow to the global economic system and, as you understand, to Russia as well. I think that it is mainly citizens of Russia, Russian-speaking people who are watching us. Russia is now pinning all its hopes on cooperation with China; there is no one else to sell our energy resources to.
If China suddenly reduces demand for them, and this all contributes to a fall in oil prices in the global economy, this will deal a blow to Russia's budget system, to the extent possible, to pay out all sorts of social benefits, to ensure some economic stability. Exchange rate stability, as you understand, without an influx of foreign currency. The ruble will very quickly go into a steep dive.
Pavlovich:
In a certain direction. And will it affect the ability to wage a daily war?
Economy:
Of course. But I think that China and Taiwan are unlikely to start sorting things out before the end of the NWO. I don't think that these events will happen in parallel. But this is, again, only a hypothesis, I have no grounds for this, no facts.
Oil. The collapse of the Russian economy.
Pavlovich:
And what about the fact that Trump, in principle, understands this, that he would like to collapse the price of energy resources, and Saudi Arabia snorted at Brix, but didn't go. And, in principle, the prospects of OPEC-plus of this cartel, they are becoming quite dubious. America has long been consistently, in principle, increasing the production of shale oil, and it is already possible to do all this, in principle, with one political decision, plus or minus, in some time. Plus increase sanctions against the so-called Russian shadow fleet.
Well, even more so, because the sanctions are lousy, and the administration there, in principle, under Biden, yes, made them that way, well, and everyone sees and acknowledges this, in principle. Biden, for example, destroys the price of oil, the Russian economy is tied, even though it sells much cheaper to China and India, there, with unclear payments from India in general, it is still tied to oil, and oil tomorrow becomes, there, 50 or even 30.
Economist:
What then in this scenario? Again, it is difficult to predict, because, obviously, other macroeconomic conditions will change, we cannot separate oil from the rest of the economy, that is, oil will become cheaper and something else will happen, but this something may have an even more serious impact on the Russian economy than the actual fall in prices, well, it is clear that nothing good, because as we see in practice, the Russian state places all its external economic and foreign political costs on the shoulders of ordinary people, so ordinary people will suffer first, we see how each subsequent crisis the state devalues the ruble against the dollar and, in fact, reduces the purchasing power of Russian salaries in 2014, and then during the years of covid, and then with the onset of the Cold War. Each time the ruble becomes cheaper and cheaper. We can buy less and less with it. Thus, the state compensates for the losses of export companies, budget losses, including the introduction of military action. Well, the victim of all these manipulations is the common man, who, again, well, at all times, here, you know, just like Karl Marx, the deeper the crisis, the more the common man suffers.
And the ruling classes will eventually come to an agreement with each other, and one crow will not peck out the other's eye, as they say. Therefore, the question here is rather about how an ordinary person can prepare for all this, how to protect himself. And here, the most important advice, probably, to an ordinary household that does not have any large savings, first of all, is not to get into debt. Because now our people love, especially those who are connected, say, with the military-industrial complex, or there is a family that received money for their mobilized relative, thinks, oh, good, what a blessing, money now, so I will take a million, and add a couple more to the loan, and buy some Chinese crossover. And by some years of crisis, such a household will approach with a large debt burden, and this is a big problem, because in the conditions of sharply reduced state expenditures on the military-industrial complex, when they are reduced, this inflated
Russian economic financial bubble, which is today actively fed by this giant compressor of state budget military expenditures, will certainly burst. And all this can lead to a very deep collapse of the Russian economy. By the way, the Central Bank is talking about this. This overheating will not end well. And it will not be possible to simply dispose of this huge excess money supply. Something bad will certainly happen. Or, as they say, a freeze on savings.
Well, if the Russian Central Bank goes down this path, in order to simply prevent these huge savings in the banking system from getting into the commodity market and not to accelerate inflation to triple-digit values, then trust in the banking system will collapse, and people who do not have the opportunity to withdraw money from banks will never take it there again, the process of lending to Russian enterprises will be disrupted. Firstly, a collapse will happen in this market.
Pavlovich:
Well, for me, as a bank user, yes, a client, it has already collapsed. It collapsed, and on the day when they did not allow me to withdraw my dollars, let's say, from my account.
Economist:
Yes, that's absolutely right. Well, a relatively small part of the Russian population had dollars in their accounts, but savings are kept by, well, a larger number of people. It is clear that it is still less than half, but ultimately this is the basis of liquidity for the entire banking sector. And if this money is frozen... And how much, by the way, do you have the figures at hand? How much? I read there... 64 trillion.
Pavlovich:
Or a trillion, or more than a trillion dollars, right?
Economist:
Well, 64 trillion rubles are currently lying on deposits in Russian banks. Well, and we must understand that this is not the deposit of ordinary people. 600 billion dollars. Yes, it turns out that about 4% of all these savings are large deposits. That is, no, so, 4% of deposits are deposits over 1.5 million rubles, in my opinion, yes, that's how it turns out. That is, these are mainly deposits that are already so significant, they form this amount.
That is, an ordinary person again shows here that he does not have any savings. So, in short, either we will talk about freezing this large monetary overhang so that when the key rate is reduced, it does not go to the real sector of the economy, does not create a colossal demand for all the goods around, does not accelerate inflation. Or the matter will end with the collapse of the bubble, when some bank that has taken out loans goes bankrupt, not having the ability to collect obligations from its counterparties.
And in this case, there will be a big deep crisis, which will simply wipe out all the old debts through the bankruptcy of individuals and legal entities. In short, no matter how you twist it, no matter what path you take, it is impossible to overcome the accumulated contradictions without consequences. That is, the central bank and the state can temporarily postpone them until the onset of a crisis with additional support from the budget, by raising the rate. Well, somehow the system is kept in equilibrium. But as soon as these measures are even slightly weakened, everything will go like an avalanche in the opposite direction.
Therefore, there is no simple solution here. And something very unpleasant awaits us untimely even in the medium term.
State obligations.
Pavlovich:
Well, the Central Bank fired Yudaev, I remember, she worked in the Central Bank there 100 years ago, and Nabiullina, well, according to rumors, constantly wants to leave there, but since the beginning of the war they do not let her go at all. They seem to have already, in my opinion, yes, exhausted all monetary policy measures, the latest one is raising the rate, you say it yourself, and we all see that it does not give anything, and this is not the last one.
Well, as for freezing deposits, well, of course, we can only guess, the probability of this event, it seems to me, can still be 20 percent, maybe someone will say 70 and so on, but in my paradigm it is only 50/50. It will either happen, as has happened more than once in Russian history, in the Soviet Union, or it will not happen. That is, 50/50. Siluanov, the Minister of Finance of the Russian Federation, said just today that you keep your money in federal loan bonds. And somewhere we have already heard something like this, these bonds were also during the Second World War.
Something, it seems to me, is a really dubious adventure and, probably, there will still be a freeze on deposits.
Economy:
Well, banks, as we see, are not eager to buy federal loan bonds. Every time the Finance Ministry auctions fail. Well, banks would be happy to buy bonds with a floating rate, because, ultimately, it is tied to the key rate and will grow, the yield will grow along with the growth of the key rate. But for now the government refuses such a practice, to a greater extent sells bonds with a fixed coupon. Well, why does it do this? Because otherwise it would be just a simple emission scheme.
That is, conventionally speaking, to sell bonds to banks en masse, the banks receive loans from the Central Bank, that is, in fact, the Central Bank finances the government through a gasket in the form of commercial banks. This is already direct emission financing of the budget, which will clearly lead to such a deep destabilization of the economy, while the Finance Ministry refuses this and is trying to somehow, somehow foist bonds with a fixed rate on Russian commercial banks, offering a big discount. We see that Russian OFZs are traded at a huge discount to increase profitability, and, in my opinion, the average profitability of this index of the largest Russian government OFZs is already more than 18%.
18% – I don’t think this has ever happened before. This is a historical record, and this value is constantly growing, which indicates that banks feel this risk and are not ready to get involved in financing the state without adequate compensation for this risk through a sufficiently high profitability. And the higher this profitability, the greater the likelihood that the state will someday be unable to meet its obligations.
In general, this is a big problem, they somehow forget about this, the growing rate, well, the key rate, it is clear who will be hurt? First of all, for an ordinary household, which is now forced to take out a car loan at 25%, and even at 30% in some cases.
Pavlovich:
Well, and also for manufacturers, of course.
Economist:
Yes, of course, yes, because they still take out loans, companies still need borrowed funds even in conditions of expensive money to spend on working capital, for example, on paying wages, on purchasing raw materials and everything else. But this actually hits the state, the state budget. On the one hand, the state has as much money as it wants, it can sell these OFZs, even to the Central Bank itself, in extreme cases, and endlessly increase budget expenditures.
But at the same time, the rate of servicing the state debt is growing. And this leads to the fact that an increasingly large part of the budget is spent on servicing old debts. I once made calculations here, and it turned out that, if we follow the forecasts of the Ministry of Finance, then by 2027 the Russian government will spend the same share of the state budget on servicing the debt as the United States. But in the United States, the state debt is 120% of GDP, and in Russia it will be only 30. Well, that is, with high rates, debt is very expensive.
It turns out that the burden on the budget is proportionate to one of the most indebted economies in the world. And what does this mean? That today more than 3 trillion is spent on servicing old UFZs, and this is money that, in general, with the size of government spending on education, on health care. That is, such a large piece of the state pie is simply wasted on covering old debts. And the further, the higher the key rate, the more the budget will be spent on these unproductive needs.
This means that social services, housing and utilities, and science will remain a loss. And we see how the state is saving a lot in these areas today. Science is financed today as little as ever, probably, in the history of Putin's Russia. Well, maybe in Yeltsin's time, less money was spent on science relative to Russia's GDP. And how much is there today? 0.69% of GDP is budget spending on science. This is so little that it does not allow us to set any long-term and strategic tasks for science.
But this is important for Russia now. The main problem of the Russian economy is the lack of personnel. And it can be solved either by an influx of migrants, and no one really wants to go to Russia now, or by increasing labor productivity. And how can it be increased? By introducing new technologies. But where can we get technologies if science is lying on its side and is not financed? That is, it is a vicious circle that leads to the accumulation, like a snowball, of new contradictions, which cannot be resolved in a calm, reformist way.
From here, as in the early twentieth century, the state itself creates the preconditions for revolution. You know, like the famous Soviet joke, that the day after the October Revolution, the Bolsheviks awarded Nicholas II the Order of the October Revolution for his active participation in its preparation. Well, the modern Russian state operates in approximately the same way.
Loans. Minimum interaction with the banking system.
Pavlovich:
By the way, this is a question from the point of view of the average person. Loans, is it necessary to take them now? Again, I am not talking about loans, payday loans and the like, yes, although they do take them, they need to feed their families. I am talking about people who are more or less well-off. And remember how in the 90s you take out, I don’t know, today it’s 100 dollars, yes, and tomorrow the ruble exchange rate has changed, and what we are basically seeing now is that it is still growing, but the dollar is growing, the ruble is falling, and you took out 100 dollars, and you will be paying back 10 in a year.
I mean loans, naturally, in the Russian ruble.
Economist:
Well, this, again, is all very individual. And it depends on the state of the household, solvency, sources of income. If your income is in foreign currency, then you are, in fact, the king of this world. But we have very few of those. It is one thing, a credit strategy for a low-income household from the poorest 50% of the population. Another thing, the privileged part of our society, large investors, our oligarchs, for them the advice would be completely different.
It is better for an ordinary person not to have debts at all in this situation. To have as little debt as possible, because, ultimately, citizens' incomes can fall very sharply against the backdrop of the upcoming crisis processes. No one will just write off your debts. Bankruptcy exists, such a procedure, of course. But to be declared bankrupt, you must first lose everything you have, except for your only home. And then, yes, your debts will be written off.
If our households are ready for such a scenario, then yes, you can take the risk. In general, the less debt you have, and most importantly, the fewer obligations other counterparties have to you, the easier it will be for you to survive the crisis. Therefore, it is not worth investing in any securities, bonds, keeping large amounts of money in the banking system, because this is also, in fact, just someone's word of honor - to return this money to you in the future with interest. And this word of honor can change very abruptly and be cancelled in the conditions of some economic force majeure.
Therefore, it is better to interact with financial systems as little as possible in conditions of turbulence. And invest all available funds, firstly, in your own health, because, perhaps, in the future all this will become much more expensive, and an operation, even of some dental nature, today costs only money, and in a couple of years you simply will not find that company, that firm, that clinic that can do the same operation for you for reasonable money.
Well, and, ultimately, in health, in education, in children, in material assets. That is, not in financial, not in obligations, because in conditions of turbulence, obligations are very unreliable. And that is why we see rising rates. Rising rates are a reflection of instability. That is, an investor includes high risk in a rising rate. There are no high rates with low risks. Are those people who have nothing in their pockets ready to take risks?
And they do not have the reserves they could rely on in case of hard times. The majority of the population does not have such reserves, so it is better to have minimal contact with the banking system, with the financial system now.
Preferential mortgages, unaffordable housing, bankruptcies of developers.
Pavlovich:
Real estate, that is, they cancelled preferential mortgages, all this, of course, is bad and so on, yes, but the rate is huge. Can you explain to our viewers in plain language why all this is happening and why, having taken out a loan for a one-room apartment on the outskirts of Moscow somewhere, you will pay as for... I don't remember how many there were, either 5 or 8 such one-room apartments. Ultimately, if you took out that mortgage for 30 years and did not pay it off early.
Economist:
Well, the reason is obvious. The state introduced a preferential mortgage program. Well, in general, it began to introduce various measures to support the construction industry even with the renovation program in Moscow, even before the preferential mortgage. Obviously to support the construction business, which with all related industries accounted for, in my opinion, 14% of Russia's GDP. This is a significant part of the Russian economy, it has been lying on its side for a long time, and in order to revive this sector, the state provided this preferential mortgage program, which, of course, was primarily used by developers, banks, and manufacturers of building materials.
Well, they, of course, remained in the black, and the common man, well, with the exception of those who managed to hurry up in time and take an apartment at relatively low prices, at a relatively low rate, well, there are few of them. In general, in general, a mortgage is a tool for supporting the wealthy population, a poor person does not even have money for a down payment, what kind of mortgage is there. Therefore, in general, indeed, we see how many took advantage of the preferential mortgage for investment purposes.
It seems that the preferential mortgage, as was proposed, is a social measure, that is, support for people who do not have housing, where there is nowhere to live. But, using the preferential mortgage, many bought apartments for further rent. Accordingly, they chose this reserve of the state budget, which provided the difference between this preferential and market rates.
And on top of that, we see how, against the backdrop of growing demand for housing, prices have skyrocketed to exorbitant heights, apartments have doubled in price in literally a few years, making real estate in Russia as inaccessible as, probably, never before, again, during the entire Putin era. The difference has grown sharply.
Pavlovich:
But at the same time, the plane, one of the largest developers, is bankrupting a very shaky economic situation, yes. I just read that they are almost going to go bankrupt if, again, government support measures do not save it.
Economist:
Yes, by the way, this is very reminiscent of the Chinese experience. There, I don’t know if they had the same program of preferential mortgages as we have, in my opinion, no, but there is a problem there, obviously, of over-accumulation of capital in the housing and commercial construction sector. These well-known Chinese ghost towns, which are built but unoccupied houses, reflect, in general, one of the important contradictions of the market economy between the volume of production and solvent demand.
That is, there are houses, there is a need for these houses, but against the background of the growth of real estate values, houses are so expensive that the average Chinese does not have the money to buy this housing, this real estate. Hence, the money has been invested, investments have been spent, labor, natural resources, electricity - all of this has been spent on the construction of this housing, but it is impossible to sell the housing. Hence the case of the Evergrande company, which, in general, found itself in a bankrupt state. This is what threatens the Russian market today in modern realities.
That is, over-accumulation of capital, excess investments, growth of warehouse stocks, lack of demand will naturally lead to financial difficulties for the company, including bankruptcies. And hence the state has two ways. Either resume the preferential mortgage program, but by the way, there is no money in the budget for this, this is also all quite expensive. Only a trillion rubles this year will go to compensate for part of the transactions at a preferential interest rate through the housing and utilities article.
The state will finance this preferential mortgage program, family mortgage, which still remains in the Russian economy. Or you need to directly buy out, as they say, toxic assets from companies that are on the verge of bankruptcy, that is, act as an insurance company for private business. This was in 2008, when the American government saved American banks from bankruptcy, because the bankruptcy of a large company, both in the financial sector and in the real economy, entails a series of bankruptcies of smaller enterprises that are tied to giants that act as a kind of black hole.
If a large company goes bankrupt, others will be sucked into it.
Pavlovich:
Probably, Russia will save, because the same developers, yes, they are, as they say, too big to fail. If they fall, then this is hundreds, well, not hundreds, this is tens of thousands, hundreds of thousands of jobs, and this, again, increases social tension. Therefore, it seems to me, if you choose between two evils, yes, well, they will choose this budget now for the preferential mortgage, what you say, the remaining one, and, accordingly, it seems to me, there will be some direct measures to support developers.
Economist:
Perhaps, yes, perhaps. But again, at the expense of what? It is impossible to take money out of thin air. There is national income, that is, the result of our labor for one year, it is equal to 100%. You can take 30% of this money for military action, i.e. just tear a large piece out of this pie, and somehow divide the rest among yourselves. This means that each ordinary person will get less. And the more the state spends on unproductive needs, this national income through the system of budget redistribution, the less is left for economic development.
From here we see that the GDP in Russia seems to be growing against the background of the SVO in 2023, it will also grow by 3 percent this year, but the economy is not developing, because these are unproductive expenses. A tank does not make the economy more productive, nor does a rocket, nor does a built house that is not inhabited by ordinary people, but simply stands and waits until a buyer is found at such a high price, at such a high key rate. All this, again, creates such an illusion, such a picture, you know, which always accompanies the economy on the eve of a deep crisis.
It seems that some miracle happens and the old laws of the economy are canceled. This is what happened on the eve of 2008, and this is what is happening now. It seems that Putin has found some kind of magic button or some kind of magic money tree from which you can endlessly pick banknotes and use them to pay for everything in the world, for military operations, for preferential mortgages, for servicing old debts, and for everything in the world. But no, all the same, you know, the labor theory of value, what does it explain to us?
That everything comes from human labor. That's how much people have produced, that's how much we have at our disposal. All of this can be spent on various needs. And if you spend the economic result in an unproductive way, then you reduce the possibilities for producing goods in greater quantities in the next production cycle and create the preconditions for a crisis. Therefore, none of this is free. Everything that is happening around us now, all of this will certainly come back to haunt us in the future, we will have to pay for it, if not next year, then in a few years. These are contradictions that will hit us in the very near future.
And therefore we must be prepared for this.
The safety margin of the Russian economy.
Pavlovich:
Oh, by the way, a question. How much safety margin do you give? Well, just in your personal forecast of the Russian economy. Well, if we assume that the war has not stopped, and everything is going roughly as per expenses, incomes as per today's level, but together with all those imbalances that are already observed.
Economist:
You know, there is no answer to this question, not a single analyst will give it, because this category lies outside the actual material analysis of the Russian economy. Russia is a very resource-based economy and simply increasing oil prices by 10 dollars per barrel will change a lot in the economic structure. But the most important thing is that even if we assume that we can very strictly predict the entire dynamics of raw material prices and all political events on the external arena, we can also predict,
we cannot predict the scale of the system's internal political reserve because, ultimately, these 65 trillion that are in deposits and another 40 trillion in financial assets in other forms and also various savings of the population's assets are a reserve that can be gradually drawn down as long as the people tolerate it, that is, in fact, the main reserve of the Russian state in this system is patience, calmness and the paternalistic potential of the Russian people.
As long as society accepts all this, as long as it agrees to live worse and worse with each month, with each year, this entire system will continue to this extent, the state will continue to draw reserves from it. Therefore, it seems to me that the analysis here should rather be political science than economic and sociological, looking at the mood of the masses. Because we often see people in very poor countries saying that they feel happy, calm and do not oppose their government. And at the same time, citizens of relatively developed France, at the slightest thing, immediately block the center of Paris with strikes.
That is, this category is very subtle, psychological, it requires an analysis of public consciousness with other, non-economic instruments. Therefore, again, speaking about the potential Russian economy, the economic, perhaps, potential is one, but the political is completely different. And they may not coincide at all and move in different directions.
How to buy an apartment in today's reality.
Pavlovich:
If we return to housing, how can you acquire your own housing in Russia today, yes, for an ordinary worker, I don't know, an office worker, with a salary of, well, up to 100 thousand rubles? No way.
Economist:
Well, just move to another region. If he earns 100 thousand rubles in Moscow, he can move, well, I don’t know, to some Vladimir region, buy a hut there for, I don’t know, 200 thousand rubles and renovate it himself. Well, in Moscow, it’s impossible for a person with an average income to buy an apartment. In general, even before the introduction of preferential mortgages, there were these calculations that showed that a family with two children with an average salary in the region cannot afford a mortgage in any Russian region, because mortgage payments reduce the average income per household member below the subsistence level.
That is, the average person couldn’t afford an average apartment even in 2021 and 2020, and now, well, even more so. That is, there’s no way… Well, that is, you have to wait until one of your relatives dies. That’s how housing problems are usually solved in our country. Here, the grandmother has left this world, and the young family is moving into the grandmother's apartment. Well, so, yes. But it is impossible for the average household to solve this using the market method.
And since the average values, they are also greatly distorted. And in reality, our average salary is not truly average. The median salary is truly average. It is about a third lower than the average, which is given by... the statistical average, which is given by Rosstat. And if we look at the modal salary, the mode is even lower. That is, the one that divides... Well, the most common Russian salary, in my opinion, is two times lower than the arithmetic mean. That's it.
That is, in this case, the situation becomes even worse, and in this sense, there is not even a single option for an ordinary person without some kind of good, good external financial support in the form of some kind of inheritance or help from parents, or, again, all sorts of social elevators that the state provides today in the form of participation in the SVO. Such extravagant methods will help solve the housing issue. But if you don't participate in all this and don't have these magic money trees somewhere outside, then, again, buying a home is unaffordable for an ordinary person.
Real salary in the country.
Pavlovich:
Let's talk again about the formula for calculating, in principle, the real salary in the country. Yes, I'll repeat it. There is an average, well, an average, as it is calculated, like the temperature in the hospital in that joke. That is, your boss, you get 100 thousand, you get 50. As a result, the average for your region will be 75. And Oleg says that this average figure should be divided by about 2, and we will get the real picture of the salary.
Economist:
No, no, look, there is an average, there is a median, there is a modal. The average salary, the arithmetic mean, as you correctly said, they simply gathered everyone, divided all the salaries by the number of workers. And here they take into account the salary of a nanny in a kindergarten, 25 thousand rubles, and the salary of a top manager of Gazprom, several million a day. All this ultimately gives us this average, which does not reflect anything at all. There is a median salary, this is the salary that divides the population exactly in half.
50 percent receive more, 50 percent receive less. And it is somewhere, as a rule, a third lower than the arithmetic mean. And there is also a modal salary, that is, as if speaking, all the working population is divided into such modes, that is, into groups by salary. And there are some salaries that are the most popular, that is, the salary that the most workers receive. And there are salaries that the fewest workers receive there. So, the most popular salary in Russia is usually half the arithmetic mean.
Let's take it like this.
Pavlovich:
This is terrible. This is probably if we take the whole country as a whole, yes, again, with the arithmetic mean, it will probably come out to 30 thousand rubles.
Economist:
No, well, the arithmetic mean Rosstat gives is 73, in my opinion, 75. But again, this is all an inflated salary. This includes payments to participants in the SVO. But can they even be called workers? These are not hired workers, these are people who are engaged in unproductive labor. That is, they receive money from society, but do not make any contribution to the development of productive forces. Moreover, they spend resources. They need to sew clothes for them, give them dry rations, provide them with shells, tanks and ammunition.
And these are all labor resources, primarily energy, raw materials. That is, all this takes resources from the economy, but does not return anything in return. Moreover, this reduces the population in the number of the working population. I don’t even mean so much the mortality of people at the front, that’s obvious. There are tens of thousands, well, according to various unofficial estimates, we lost people at the front. After all, this is also a deformation of the human psyche, how many people will return from the front completely incapable of socialization.
Plus, the disabled, we seem to, well, we don’t attribute them to direct losses at the front, there, in the form of deaths, but a person without a leg is an unproductive worker, no matter how you look at it. A person with psychological trauma. That is, in the future, this will have an even greater impact in the reduction of the working population. And all the demographic forecasts that I have come across from colleagues, they all give a negative assessment. By 2045, in the negative scenario, the number of the working population will decrease by 10 million.
By the way, this is important simply for living people. Again, this does not include people who are not socialized after participating in military operations. In the most favorable scenario, by 2045 the working-age population will decrease by 3 million people. Well, on average, somewhere around 5 and a half. And then either replace them with migrants, and this is clear, what social consequences this entails, what contradictions, we have all seen this very clearly in Russia in recent years. Or, again, introduce new technologies, but the Russian state, Russian big business are completely unprepared for this. Well, they are simply not used to existing according to this model. They built their investment strategies in completely different conditions. For decades they adapted to the global raw materials market situation. And now they need to change their business, abandon the economy of cheap labor, invest in new technologies. They simply do not know how. This is not done just at the click of a button. Let me invest in a machine tool or I will invest in an oil pipeline. No, we just need to change the business model. In general, the entire philosophy of doing business - these decades are needed to rebuild the economy on water-supply.
Therefore, we see that even in conditions of labor shortage, investments are only going to the military-industrial complex. On average, investments grew by about 19% in 2020, while everything that is above 19, everything that gave this increase is the chemical industry, metallurgy, equipment repair, the production of all kinds of drones, well, in short, everything related to servicing the front.
Everything that is much less than 19% is the civilian sector, these are civilian products, these are cars for ordinary people, these are trams, these are tractors, this is everything we need in agriculture, in industry, everything that is not related to servicing the front. That is, on the contrary, there is a degradation of production capacities, the obsolescence of production capacities is growing. This is another separate problem. Somehow we do not really talk about this, they forget. But Rosstat does provide these statistics. On the eve of the SVO...
Pavlovich:
Housing and public utilities clearly remind us.
Economist:
It's winter now, we will see even more problems than last year, 100%. 53, if I'm not mistaken, production capacities in Russia, fixed capital, are worn out by 53% until 2022. Then there is a sharp drop to 48%, but not because investments have increased, but because the accounting methodology has changed. Companies have been allowed to keep accounting records in a new way, revise and extend the useful life of fixed capital items, elements of fixed capital.
That's why the indicator fell. Simply, if any of the viewers wants to check, they will see this anomaly, why suddenly in 2022 the depreciation of assets fell so sharply. Not because our economy has flourished. Well, there are investments somewhere, again, primarily in the military-industrial complex, but the main reason for the 5% drop is the change in accounting methods. And the growing depreciation, as you correctly said, is accidents in the housing and utilities system, low labor productivity, industrial injuries, low product quality, excess energy consumption
and a number of other problems that only aggravate the accumulated contradictions, but do not allow us to get out of them.
Those who left the Russian Federation. Population size.
Pavlovich:
Well, plus those who left. How many, according to your calculations, let's say, workers left?
Economist:
Well, I didn't count specifically, and no one can give an exact calculation, because those who left do not always renounce Russian citizenship. It is unclear whether they left forever or for a while, who returned. But, obviously, we are talking about hundreds of thousands of people who have dropped out of the Russian labor market. Well, is it one hundred or seven hundred, well, I don’t know. But this is also significantly the main thing that they are leaving...
Pavlovich:
I can say from experience in searching for employees, we need programmers all the time. Like this year, it has never been so bad. Previously, we, for example, 200 resumes on HeadHunter, Well, I mean, during the military year there were already 21-22, 200 resumes, but we looked through 6-10 people, there we hired one or two. Now, out of 200 resumes with salaries from 4 thousand dollars, well, requested, yes, and these are juniors after Skillbox courses, we may not take a single one at all, and it is directly, well, it is very clear that the quality of the labor market has worsened, and this, well, it is not only us who notice.
That is, for these employees we compete with banks, and with advertising agencies, and with anyone, with any non-manufacturing sector.
Recently, information appeared, literally a week ago I began to notice that the population of the Russian Federation is no longer 146, like, million, but, in my opinion, this is some kind of canard, that some archives of registry offices, allegedly security forces, have digitized, and, it turns out, according to birth and death certificates, it turns out that there are 90 million. But I look at this and laugh, and I saw it in the last week.
Economist:
No, but still, this tale is many years old. I think I heard it back in 2016 that according to registry offices in Russia, in fact, the population is significantly smaller. Well, again, I myself have not counted all Russians personally, but, obviously, the demographic dynamics are negative. And this is another separate problem of Russian society. The fertility rate this year is 1.4 children per woman. That is, less than two per married couple.
What does this mean? That Russia will continue to die out. This will make an additional contribution to the labor shortage in our country. Why is this happening? There are a number of reasons. There is no single key factor. There is a demand for a change in lifestyle. After all, we are not a peasant society, we are a highly urbanized society, and the birth rate in it always falls. But there is obviously also the influence of negative socio-economic policy. The state itself proved this by introducing an experiment with maternity capital.
Here is how maternity capital was introduced for the second child in 2007, the birth rate immediately went up, and demographers claim that thanks to this measure, Russia has an additional 2.5 million children born second, third, and so on. But when maternity capital was introduced and expanded to the first child, the effect was much weaker, because, as a rule, people give birth to the first child anyway, without additional material stimulation, just to put a tick in their life achievements. And in this regard, maternity capital shows us that a significant factor in making decisions about having children is the socio-economic factor.
The lack of money to raise a child, that is, a large family almost automatically becomes a low-income family, plus the commercialization of the social sphere. I can see this clearly in the education system, especially higher education, where budget places make up an ever smaller share and more and more universities are going down the path of commercialization.
All these are children, this is an expensive pleasure, that is, such a very expensive investment with dubious future dividends. And for this reason, against the background of what is happening now in Russia, when states spend their economic potential not on improving the well-being of the population, but on military action, on global competition with the Western world, then in this case the demographic situation will only worsen from year to year. And, again, the state is making the only bet here on attracting migrants.
This is shown, among other things, by the calculations of Rosstat. If we go to the Rosstat website and look at the demographic forecast that is published there, its three scenarios, then each of these three scenarios assumes a reduction in the indigenous population and its replacement by migrants, just in different volumes. The favorable scenario there, in my opinion, is within the limits of two million, and the unfavorable scenario assumes that the indigenous population will die out even faster than new citizens from abroad will come to Russia.
That is, in this sense, the state does not even assume that the situation can change for the better, and the population will begin to grow naturally. And all this, of course, gives, again, an additional unfavorable factor in the socio-economic forecast for the medium and long term. And all the old contradictions that accumulate in favorable times, in crisis conditions, in military actions, are aggravated and simply accelerate our movement towards unpleasant economic consequences.
Pavlovich:
Well, here is also an obvious problem that most often they are unskilled. Because if they are highly skilled, they earn more or less in their own country, taking into account their rates, they will be able to live more or less normally, and some are even provided for. According to forecasts, I think, well, we were told this week, yes, that the next 20 years will only get worse. I would like to hear something different, but, excuse me, I have no other recipes for you.
The automobile market.
Pavlovich:
And, if you allow me, two questions. The first is the car market. Of course, we all took taxis, Yandex, Uber, yes, these Kia Optima, Hyundai Sonata, and that's where comfort is a plus, if you take Yandex. Everything was great, everything was fine, the war began. We went several times, naturally, Hoval is not the worst option, also Geely, Moskvich is the worst option, because it stinks of cheap plastic inside.
In general, and when a Hyundai or Kia comes to you, well, it's as if you are now in a different place, as if you are getting into a Mercedes or BMW, at least business class from the E-class. And what do you say to the pro-car market, is it worth taking the Chinese now? And here in Thailand I drive Chinese cars, well, it’s clear that they won’t last forever, that I won’t pass them on to my son or grandson as an inheritance, like my mother’s 124 coupe still drives just fine, basically.
But in general, in principle, considering that it costs 10-12 dollars, MG is some kind of brand, well, it’s worth its money, and here I would buy it, for example. But in Russia, as far as I know, the Chinese, they are also x2, x3, and the prices are in China.
And what do you say, can we buy them, should we buy them, or should we try to buy some used Europeans and drive them from abroad?
Economist:
Buying used Europeans, driving them from abroad — these are such extravagant options that simply don’t suit everyone. Not everyone is ready to take the risk, to buy a car without a warranty with the difficulty of buying spare parts, because, again, not only are there few European cars, and there are no spare parts, and there are no such supplies as there were before SVO. It's just that, probably, only fans of some special brand, German, there, some Korean, American, will want to get involved in such deals en masse. For the common man, there are no options left: either you or Chinese manufacturers.
Well, there is also such an extravagant option - Iranian cars. In 2022 there was already a car show, in Russia and the director of an Iranian company, I forgot, Khodra, what is it called there, in general, yes, Iran Khodra, yes.
Pavlovich:
Iran Khodra, not Peugeot, an old manufacturer of an old Peugeot car.
Economik:
In 22, he was going to supply several tens of thousands of cars to Russia annually, in the long term. But somehow I still haven’t noticed Iranian cars on our roads. I think it’s just Iranian manufacturers, although in general they produce quite, well, such, how to say, tolerable cars for the Iranian consumer, quite import-substituted, there is a high level of localization of production, but, of course, they are inferior to the Chinese in all respects to modern ones, and they will not receive mass distribution in Russia.
And so, well, it is completely obvious that China is capturing the Russian market, has received a new sales market. This, by the way, is another example of how they compete...
Pavlovich:
Global, global, I would say.
Economist:
Yes, how corporations compete. We are used to this understanding, you know, in the area of small business, how an enterprise competes. Whoever sets a lower price, makes a higher quality, that one wins the competitive struggle, as our first-year economics textbooks teach us. What great achievements has the Chinese auto industry demonstrated that it was able to push out all Western manufacturers on the Russian market? None. There are simply political instruments with which China has captured the Russian market. That's how the policy has developed, that there is nothing more for us to buy except Chinese brands.
They are, well, quite interesting. Of course, Chinese cars are very crude. This is quite obvious just from the reviews of the owners of these cars, but I think that in 5-7 years the Chinese auto industry will have made great progress, because according to the history of the last decades it is actively following the path of absorption of Western brands, the same Volvo company was absorbed by Chinese investors, and many of
Volvo's technologies were alive now, embodied, of course, in a somewhat deformed form, but, nevertheless, China is obviously evolving as a car manufacturer. And, absolutely certainly, they will increasingly dominate the world market. But in Russia, AvtoVAZ, well, a sad fate awaits it absolutely, because with the departure of Western concerns, not that it is even difficult now to produce old models, somehow they somehow replaced imports, somewhere there some gearboxes are supplied by China, somewhere there even their own production, they established something, like generators, in my opinion, they began to produce their own instead of Valya.
But all this is just an attempt to plug the holes in a sinking ship. AvtoVAZ is definitely not competitive compared to China, especially in its potential. China already offers a much wider range of its products to Russia. Well, essentially, AvtoVAZ is two models. This is Granta and Vesta. They account for 75 or 80 percent of sales there. The rest is small stuff. Even what will appear in the future, some Lada Aura, it seems, will cost the same as the Audi A8 before the start of the SVO.
That is, this is a completely inadequate price tag for a car of this class with such consumer characteristics. So, in general, what is left for the state? In order to prevent AvtoVAZ from going bankrupt, they are raising the utility fee. We see how it was introduced this year and will continue to increase in the future. In 2030, in my opinion, it will add 1 million rubles to the price of an imported car.
And already now, for example, the Geely Cool Ray, imported from China, is added to its price in combination with the utility fee, all sorts of additional duties, VAT, etc., it becomes twice as expensive after import to Russia. Why is the Russian government doing this? As I said, to support AvtoVAZ, and they also hope to attract Chinese investors to Russia so that they open factories here for at least the assembly of large-unit Chinese brands, and thereby saturate the market not through import, but through domestic production, create jobs with demand for some additional production and services within the country.
But, as we see, China is not eager to invest in Russia. This is a very interesting fact that requires a separate in-depth study. It would seem that the Russian market is open to Chinese investors. Come, open factories. The Europeans have left, Russian enterprises are not competitive. But China invests, for example, in Kazakhstan twice as much as in Russia. Although Kazakhstan is several times smaller in terms of its economic turnover. Why? Because China is afraid of sanctions.
Despite the confrontation with the United States, despite the fact that US trade relations are gradually breaking down, and Mexico is already the largest exporter, well, supplier of goods from outside to the American economy, and not China, all the same, Chinese banks, Chinese manufacturers are afraid of sanctions and do not want to invest in Russia, so as not to fall under restrictions that will hurt the Chinese industry, tied to Western markets. Hence, it turns out that Chinese brands do not come to Russia as manufacturers.
Within the country, one AvtoVAZ is obviously not capable of satisfying the demand quantitatively, or qualitatively either. From here we, well, all this will only lead to the fact that the current state policy is that cars will become more and more expensive. This is an additional recycling fee, it, of course, has nothing to do with any recycling of the car. It is simply a levy in favor of the budget. By buying a car, you sponsor the foreign policy ambitions of the Russian state in this way. And in this sense, you get a product of worse quality at a higher price.
Hence, I do not expect any favorable developments in the automobile market even in the medium term. Only the mass arrival of Chinese investors can change something, but again, the Russian market is not very interesting to them. Many brands simply do not officially sell their cars in Russia, not to mention opening a production facility. There is one Haval plant, but it was opened before the sanctions. It somehow exists, and new ones are unlikely to appear. This is too risky for China. They have other, more interesting markets than ours,
where they do not face sanctions pressure.
Expenditures on military operations. Economic reasons for military operations and interests.
Pavlovich:
And how much has the country already been calculated by someone? How much does it spend on war per year in general? And if we compare in retrospect, in other historical periods, such amounts were perhaps spent on health care, science, and so on?
Economist:
Well, if we talk about budget expenditures on military operations, they are reflected in the budget. This is approximately 33%, well, a third of the federal budget goes to the item "National Defense". This year, in my opinion, it is 10 trillion rubles, and next year it will be 13 trillion rubles. That is, the amount is constantly growing. But, by the way, this increase from 10 to 13 is, in fact, an indexation of 30 percent, because the share of military spending in the budget remained the same. By the way, this is an interesting indirect sign of how the state assesses inflation. That is, it indexed military spending by 30 percent, but thereby, in fact, it says, this is our real inflation in the country.
Not 9, as Biulin claims, but actually closer to 30. Accordingly, what does this mean? This is a large share of the economy, which is directed through the budget to unproductive spending, and this is in relation to the pressure on the entire economy commensurate with the Soviet Union in the 60s. Something like that. At the height of the Cold War, during the Cuban Missile Crisis, the USSR spent just as much on the war.
Excessive military spending, as we remember, hit the Soviet economy quite hard, because a large production potential was also spent unproductively. But the most interesting thing is that back then there really was a threat of a real Third World War, a serious one, well, the world had just survived the consequences of the Second World War and saw what kind of costs the Second World War had for our society, and then talk of a military threat was not a joke, not some kind of fiction invented to justify foreign policy ambitions, but it really was a real threat that could be embodied in a Third World War, there, just some careless statement and decision by one of the leaders of the largest states of that world. And today, when we talk about military actions, it is absolutely obvious that they have nothing to do with protecting national security. This is simply a tool that the largest Russian corporations use in the struggle for the redistribution of foreign markets.
What is Ukraine? They tell us there that this is anti-Russia, Russophobia, and all the other fairy tales of a political nature. Of course, this factor cannot be of some small significance, but first of all, Ukraine is human resources, labor, natural resources, a sales market, colossal investments made by Russian companies in the territory of Ukraine even in the pre-Maidan era. I conducted a small analysis, by the way, the largest and most popular video on our channel is prime numbers,
economic reasons and our own. We usually talk about cultural reasons politically, and what economic reasons are there? Economic reasons are such that Russian corporations in the banking system, in the extractive industry, in mechanical engineering, in the manufacturing industry, invested tens of billions of dollars in the Ukrainian economy, and then, after the Maidan, after the change of power, they began to be actively forced out of there, and they lost their money there. And there was nothing left for Russian business except to try to regain control over Ukrainian territory, over the Ukrainian economic region, first of all, by force.
These are investments that Russian capital has made abroad to obtain additional profit from exploiting local resources. And the most important thing is that Russian business, in the conditions of this aggravated contradiction between the largest actors in the world economy, is being forced out not only from the Ukrainian market, but in general it is beginning to lose its influence on the world economy, and has lost the European market for sales in the gas sector. Here again, it is simply competition by political means.
American gas suppliers do not sell it to Europeans in higher quality or at a lower price, no, they took political measures and deprived Russia of the European market and thereby squeezed out a piece of the sales market in a competitive struggle, and, therefore, the colossal profits that the 400-million European sales market provides. Accordingly, this is a war for economic interests, first and foremost. They are trying to cover it up with such a fig leaf of national interests and convince us that this is all in our favor.
And we should be primarily interested in the continuation of all these militaristic aspirations of the Russian state. But a political economic analysis of the entire history of modern capitalism shows that the main driver of political events are the interests of the ruling class. These gentlemen don't give a damn about the interests of the common man, on the contrary, he is a resource for feeding these instruments with which the ruling class makes its way on world markets, the interests of the largest capitals have converged in the form of military actions, particularly in Ukraine, and then this
will spread in any case to other theaters of military action, therefore, I will emphasize once again, I started with this and will finish our conversation with this important thesis, in any political events it is necessary to certainly find economic, if not specific, interests, you know, they perceive it so vulgarly. And who specifically benefits financially from this decision? No, this is a superficial view. Rather, we must understand the economic prerequisites for a change in the political vector.
Why did Putin hug the American president in 2005 and host a parade with him on Red Square in the 2000s, and in 2012, I think, or in 2013-14, a summit of Russia and the EU was held on the creation of a single economic space from Lisbon to Vladivostok? In general, they wanted to unite the economies and create a giant tariff-free, customs-free zone. And now they have become the grunting pigs in Medvedev's tweets. Why did this happen? Did the two presidents just quarrel with each other? No, economic interests clashed, the interests of corporations.
Previously, they could coexist and divide up world markets without stepping on the toes and, in fact, on the garden of their neighbor. And now, in order to grow, you need to bite off a piece from your competitor and enter into confrontation with him, relying on the institutions of the national state. Hence, the competition of corporations is the source of global instability.
The main stakeholders in a world war.
Pavlovich:
And who is the main beneficiary of the war, if we take it on a global scale now, well, I mean Russia, Ukraine? In my opinion, it was just the States, but I could be wrong, there could be many more stakeholders there.
Economist:
What is happening in the world now is a struggle for the place of the new hegemon of the world economy. This is the place at the top of this economic pyramid. Who will collect, so to speak, all the cream of the crop from the world economy. Before that, the United States played this role for decades. But the 2008 crisis showed that the old model had exhausted itself. It is impossible to live the old way. This dominance of American financial capital, well, it is simply not because it is bad, because this is how capitalism works, it led to the 2008 crisis.
And since then, the world has been in this turbulence, which is an expression of the struggle for the place of the new hegemon. Who will replace the United States on this path? Or will the United States retain its dominance? That is, in fact, China is now challenging the United States, trying to become the center of the world economy, to control its financial and production part, becoming a cultural hegemon, which is important. We also sometimes forget about culture, but this is also an important condition for reinforcing the dominance of a particular country in the world economy. That is, the question now is who will become the leader of the global economic system.
And what does a leader mean? It is some abstract concept. In fact, a leader imposes a relationship of unequal exchange with less developed countries. That is, the United States is not just a hegemon, because the dollar is in the world, everyone worships it, and everyone buys goods with it. With the help of the dollar and other instruments, the United States has been able to receive more from the world for decades than it gives in return. This is clearly visible in the American structure of foreign trade.
Exports are two times less than imports. This is, well, the most simple expression of unequal exchange. Get more - give less. This is what the largest actors in the world economy are striving for today, to take a dominant place in the global economic system. And all means are good for this. This is what they are fighting for now. And it is impossible to achieve this without technological leadership, cultural, military, political. And now, in fact, there are showdowns between criminal groups.
Who is the boss in the area? Who will oppress everyone, who will collect tribute? From smaller, weaker and incapable of defending themselves participants of world politics. That is, in essence, the struggle of capitals by the hands of ordinary people. As usual, it is not the children of oligarchs who die on the fronts of world wars.
Pavlovich:
But still between several main actors, that is, the USA, let's say, on one side, and the one that has joined, yes, partially, there, the European Union somehow, this weak and fragmented one after all. And the second is the axis of China plus satellites, what, well, we don't take India into account, it is a competitor. It turns out, China, Russia, the DPRK, Iran, probably four countries.
Economy:
In general, the DPRK is compared incorrectly with China in terms of the scale of its participation in the global economy. In general, these are the United States and China, the two main actors. They have allies who cling to the leader for various reasons. Why is Russia drifting towards China? Firstly, there is no one else to turn to. And secondly, with the help of China, relying on China, our ruling class hopes to regain its dominance in the post-Soviet space, to once again receive this label of reigning over Belarus, Ukraine, Moldova, Georgia, the Baltics.
But it is not at all a fact that China will allow this to Russian capital, that it itself will not want to reign and own everything in the territory of the post-Soviet space and even in the territory of Russia itself. Hence, an interesting conclusion for the future, to a question that is definitely worth returning to someday. And what are the prospects for Russian-Chinese relations? So far it seems that this is our closest ally, our best friend, into whose arms we must certainly rush. And Chinese capital has its own scales.
Pavlovich:
This is obviously not true.
Economist:
It lives by the laws of business. This is desirable, this is wishful thinking. And the fact that another conflict with China may soon occur, and it will turn from an eastern partner into a grunting piglet - this is a very likely scenario, which will most likely happen. It's just that both China and the United States live by the laws of capitalism, and capitalism requires expansion for constant development, accumulation of capital. And when you need to accumulate capital, you must certainly squeeze something out of your weaker neighbor.
Russia is weaker than China, and it will certainly be a future victim of Chinese expansion. It's just that maybe not directly, like through the seizure of territory. In the Middle Ages, they seized territory so that the peasants could collect corvee and work off their quitrent. Today, exploitation in the world is carried out through direct investment. The companies whose companies dominate the national market of a weaker country collect all the surplus value and the results of the labor of the local population.
Hence, direct investment and analysis of direct investment in the global economy is the most important tool of political analysis. In which market dominates investments of a certain country, that is where the political influence of this country on a weaker neighbor is observed. And all this is directly related to profit extraction, for which this entire system exists.
Advice to viewers. Deep recession.
Pavlovich:
The last question. But we have a target portrait of viewers on the channel - 96% men, 25-34. Well, I know many of them personally, very many. These are mainly temshchiks of all kinds, yes, who earned capital in a not entirely transparent way, many former hackers and so on. And many people, many security officials of all kinds, according to my calculations at least 3000 of all kinds from the FSB and the Ministry of Internal Affairs.
Economist:
Good afternoon, comrade major.
Pavlovich:
Also, subscribe to Oleg's channel, use numbers more, and there's a link in the description. And these are people from all sorts of digital businesses, that is, SEO specialists and so on, that is, the Internet environment, plus a few bank managers and so on. In general, not the worst, but I would say the best, probably, the public on the Internet. Their income, in principle, is probably average. I would take 1,150 rubles in total, probably, per month.
And what would you advise young people, such as 30 years old, let's say, with such an income, at about this time regarding investments, savings and generally some kind of passage with minimal turbulence of this path that awaits us all in the next few years, well, those who live in Russia, I mean.
Economist:
Well, if you give investment recommendations, then you have to bear responsibility for them. But this is still not my area of expertise, I am not an investor. I am not talking about investment, but rather savings, I guess. Saving is one of the forms of investment. That is, ultimately, investment is savings for a household. But since I do not deal with this issue specifically, that is, it is impossible to cover the immensity, I deal with investments in the political economy sense. I am interested in this on the scale of global political economy, global economic ties. If we talk about the situation within the country, then I have already, in general, voiced the problem that our society faces.
This is the prospect of a deep economic recession. And in these conditions, any participation in the financial market becomes extremely risky. Because you will not be able to pay off your obligations, and they will not be able to pay off your obligations. Who suffered the most in the 2008 crisis? Those who invested money in banks that seemed to be the leaders of the American economy, issued mortgage loans, issued derivative financial instruments, seemed to have deceived the laws of economics.
Well, they went bankrupt, and the debtors were left with nothing. Well, somewhere there, of course, the state paid money for them. But the state does not have its own money, it operates with public income. And thus, if the state acts as a protector and insurance agent for big business, then it simply takes money from one pocket and transfers it to yours. In this sense, you will not become richer from this. Therefore, in general, well, it depends on how prone a person is to risk. If you have spare money that you do not mind losing, then individual projects in conditions of instability can bring colossal profitability.
Well, it always happens that way. High risks, the highest return. But along with this highest return, there is a high probability of losing everything if the economic pendulum shifts in the opposite direction. Therefore, in fact, it is impossible to give universal advice. If you are ready to take risks, take risks. If you have fundamental problems with housing, health, children, education, some kind of everyday inconvenience, then, of course, you need to solve them first, because it is easier to do this now than tomorrow.
Prices are always rising. And now in Russia they are rising even more, and the inflationary spiral will not end anytime soon. Much should change even before the end of the SVO. This is obvious. Because the consequences have accumulated, they will not go away. After the war ends and peace comes, this excess money supply, a gigantic money overhang, it will not dissolve by itself in an instant with a magic wand, it will have to be put somewhere, and this will be a problem for the entire economy, or colossal inflation, or, as we said, a crack in the banking system with an outflow of depositors from them.
That is, in general, all this will hit the population hard, which means that if you want to save, you really, really need my investment advice, then this is obvious, people understand this even without an economic education. Save money in the dollar, because now, of course, the dollar is much more stable relative to the ruble, a predictable and growing currency than any other, even than the yuan. We see this in the global economy. Despite all sorts of upheavals, the dollar remains the main, the main form of savings for states, corporations, and households, and here the mass consciousness quite clearly catches the trends.
If you really want to save, then it's better to save in cash dollars or, I don't know, in some foreign account in some distant, quiet country. But this is only to protect yourself from the crisis in Russia. If the entire world economy goes boom, there will be no safe haven there, you won't be saved anywhere. You just need to understand that this is capitalism.
If you are ready to live in this system and are not ready to fight it for a better world, then be ready to accept all its costs when all the consequences of the crisis fall on your shoulders, and the main beneficiaries of this entire system, on the contrary, will emerge from it with growing incomes and increased prosperity, and with even more strengthened political power.
Results.
Pavlovich:
Well, if you are not ready, then get in like old lady Agafya, yes, and live there, basically, with wolves. Excellent advice, thank you. I'll sum it up. Send your children to the best schools and sit in cash. Well, if somewhere you can buy something at a good price and sell it quickly, then see for yourself.
Well, that's all. Thank you very much Oleg Kamolov, author of the absolutely wonderful channel "Prime Numbers". Thank you for the informative conversation. And if you have any other economic questions, please write them under this episode. We'll collect enough, so maybe we'll do a second episode. And also, please, write your region and the average salary for your region and for you specifically.
Hugs. Bye.
