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Jun 26, 2021
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“This is some kind of mockery”

The statements of the head of the Central Bank Elvira Nabiullina were made in an interview she gave to Komsomolskaya Pravda. The first dealt with monetary policy and inflationary growth:

The main instrument by which the Central Bank influences inflation is the key rate. The higher it is, the more attractive the deposits become. And the less people are inclined to take loans. Thus, we influence demand. But inflation can be influenced by creating conditions for the growth of supply. If there is a market where prices rise, we should not have barriers for new producers to enter this market and old ones to expand production. Then they will earn more, and prices will rise at a modest pace. But if there are any barriers or monopoly, this does not happen and prices remain high. Competition is very important in keeping inflation down. The government is working on this. And monetary policy only affects demand. Incidentally, this is the answer to the question of why, for the sake of economic growth, not print and distribute money to everyone. Demand will grow, but supply will not, and there will only be an increase in inflation instead of economic growth.

You don’t need to print anything, take it from the NWF – and that’s it.

Yuriy Pronko: Yan, doesn’t it seem strange to you to say that aid to the population has almost catastrophic consequences, at least in relation to our economy?

Jan Art: This statement raises a lot of questions. First, our government does not have the right to print money, the Central Bank is engaged in this. The postulate that if you just print and distribute money, it will cause inflation, raises a counter question: why should it be printed?

No need to print, let’s take 20% of our National Welfare Fund. And after all, these 20% allow each average family to pay one-time 200 thousand rubles. Accordingly, about 10 thousand rubles a month for two years, or 20 thousand rubles for one year.

It is obvious that the injection of money causes inflation. And we can see this in the example of the United States. But you can also sacrifice inflation by choosing what is more important to us.

– In the end, the level of this inflation. After all, it is possible to predict everything mathematically. After all, Elvira Sakhipzadovna underwent calculus and probability theory.

– Sure. In addition, this statement that inflation will accelerate due to the fact that there will be a mass of buyers, and the supply will not increase – it also looks strange. The economy in all countries is traditionally driven by demand. Actually, this is an order from business, from the economy to the government: give us a demand, and we will respond with a proposal. So why didn’t we answer?

There is a deliberate substitution of concepts

– Don’t you think that there is a deliberate substitution of concepts? I carefully looked at how the press reacted to Elvira Sakhipzadovna’s statements in an interview with Komsomolskaya Pravda. So, there the most common word in publications was “to distribute”, and “distribution” of money would lead to some negative consequences.

And if I replace the word “distribute” with the concept of “financial assistance to the population”? It would seem that I change only one word. To distribute is a freebie, to distribute is some kind of threat. But it was help!

Agree, the replacement of just one word “distribute” for “financial assistance” changes everything. And who will be against it then? And then the question arises: when is President Vladimir Putin provided at least twice 10 thousand rubles each to families with children, he violated the covenant of Nabiullina, is it so?

– Moreover, if demand and money supply do not increase supply, and this is bad for the economy, then Putin’s proposal to return capital to Russia under the amnesty is simply undermining the country’s economy. This capital would come and undermine everything for us. If we speak at the level of absurdity, if we are so afraid of the demand in the domestic market, then let’s use this money to buy every family in Russia a vacation in Antalya already. And the Turks will be happy, and we will not have any inflation.

– That is, you are linking the second statement of Elvira Sakhipzadovna about the closed borders and the two trillion that were not exported.

– We, as a country, became richer in the 2000s. We went through the first decade at an excellent pace. And the demand has increased – supposedly it does not cause supply. Do we have new, modern airports? Have we not got hotels that are no worse than European or American ones? It is not clear to me why Mrs. Nabiullina is sure that demand in this case will not cause supply.

– She will say that people will run to the foreign exchange market, enterprises will stop investing, and that’s all … That is, she demonstrates her logic, which has guided all these years, she does not believe in either the ruble or the economy. She says: you all rush into the buck, which we refuse.

– You can stop this distribution. In this regard, Russia is no worse than the advanced countries; we have a system of state services. Here’s your personal account, here’s your money. Let’s say you spend them on loan repayment. Or pay in advance with a discount for housing and communal services. Money from the bank and housing and communal services companies will go to the market. Although let’s not lie? They will go offshore. So there will be no pressure. It’s just that banks and housing and communal services will receive this money, and people will feel better.

Indeed, Nabiullina’s position is strange. She surprises me. For 15 months we have continued to return to the question of whether we should apply the same mechanisms in Russia that were used in America and Europe. The financial authorities tell us: we cannot use it. However, they return to this topic again and again. And they tell us: we have thought it over here – no, it is impossible. Then again: we thought it over, no, no options at all.

– And they themselves answered this question: because there is both demand and supply. We can build on demand, or we can build on supply. We can stimulate this, but that – cool. And vice versa. But Elvira Sakhipzadovna says: no, I don’t want to do this

Enough to remind about money, if God did not vouch for the people to help!

– We also discussed the option to distribute money only to rural residents. After all, traditionally, the most terrible situation in recent years has developed in our villages. But here again: no, it is necessary to distribute only to the needy. Or let’s distribute docked. And so from time to time in the press the same thing sounds: “you must not distribute.” This is some kind of mockery, a madhouse. If there are no options, then why is this topic raised all the time?

– And they used to say: there is no money. Now everyone understood that there was money. But they keep saying to us: they are not there.

– It turns out that our citizens are constantly receiving such signals. Not only are they not given help, but someone will remind you once a month that it is not an option to help you. Yes, they would have ceased to remind you of this if God did not vouch for you to help!

– I agree with Jan. And that’s why. We have a so-called budget rule. This is a commandment that is strictly observed. And changes can be in the “fiscal” or in the currency regulation. But not in the budget rule. This is the axiom that does not require proof, as Elvira Nabiullina and Finance Minister Anton Siluanov believe.

When they were fat years, they said that they shoveled “for later”, for a “rainy day”. Well, then we accepted this argument: indeed, somehow we need to be saved from the “experience”. But this “oops” has come. But we are told: no, no, we save it for later, when it will be completely “opa-opa”. But the worst thing is, if suddenly this very total “opa-opa” comes, they won’t give us anything again, they will find arguments why the budget rule cannot be canceled and it is “absolutely impossible” to spend this money.

– And if the people for 20 years have never seen that at least 5% of these reserves came some kind of help, then there is disbelief in these reserves. Many people have been thinking for a long time: we understand that there are no reserves for a long time.

– Yes, and people really write to me who are sure that there is no money in the reserves for a long time. There is! The fact of the matter is that the loot was taken abroad, it is already on someone’s correspondent accounts in the euro or dollar zone.

– At the same time, let’s not forget that at the end of last year the government was unable to master a trillion rubles!

Elvira Nabiullina, who believed in a fairy tale

– Yes, and budget execution is in surplus, that is, we are going in positive territory. I liked how Elvira Sakhipzadovna shoves off the issues of, say, the development of competition, the development of the economy in general. She says: “Competition is very important to keep inflation down, the government is working on it.” And monetary policy only affects demand.

That is, it has occupied a very convenient niche for itself: I am responsible for this, but I am not responsible for that … More precisely, this way: I am responsible only for inflation and, as it were, for the stability of the ruble. But we know very well how she is responsible for all this. And for everything else, Nabiullina translates the arrows, the government is responsible. And if the government cannot cope with this, what does Neglinnaya have to do with it? This is the position.

This is how, in fact, Elvira Sakhipzadovna assessed the help to the population, saying that it would cause inflation:

It’s hard for me to guess. But it would definitely be double-digit numbers. There would be several grave consequences at once. First, the ruble would fall. Because people would begin to divert their savings into foreign currency. Second, businesses would stop investing in development. Because long-term predictability is very important for this. As for the developed countries, the explanations for this are different. But one of the main things – the developed countries are saved by the fact that they have inflationary expectations of both people and businesses, as they say, are anchored. They are used to the fact that their prices do not rise. They have been living with such a system for 50 years, they have accumulated experience and trust in the authorities. Therefore, no one runs to the shops. Everyone understands that even if there is a leap, inflation will quickly return to normal.

Look, again we are not what she would like. Again you and I have never lived. We have no historical memory of living with low inflation. Again Elvira Sakhipzadovna was unlucky with the people …

– Apparently, yes. Because it turns out that we are all money addicts and we cannot return to normalcy. But since I remember that a ticket for, say, a tram or a bus in my second grade and in my tenth or even my fifth year at the institute cost the same amount, I want to raise my hand: I remember, I can.

– Is that an excuse too? Sorry for this jargon.

– Probably not an excuse. She probably sincerely believes in it. But it seems to me that a lot depends on how this whole mechanism of assistance would be implemented. And, in principle, the people, oddly enough, have a certain degree of confidence in certain measures.

– Can you identify them?

– Matkapital. This Putin’s decision is definitely a plus. The harshest critic will put this clearly as a plus. Deposit insurance, when people began to receive everything that they lost. Unfortunately, the tax breaks that people enjoy are few.

We have pluses to believe in. The people, in general, are always ready to believe in a good plus. The same “Gosuslugi” is an example of the plus of a powerful administrative technical solution that people use and, in general, most likely say yes, great.

– Actually, everything is not so complicated as it might seem. I do not want to offend anyone, but still I will express this thought. Elvira Sakhipzadovna is a monetary fanatic. I assume that she knows that inflation in Russia is not monetary, because she has words about competition, and about demand, and about supply.

But she once learned a fairy tale, or rather, believed in it. And now he is trying to make us all believe in this fairy tale. Of course, there is some truth in every fairy tale. But by and large, this is a myth.



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