Russia on the road to yet another economic disaster

[Symmetry]

http://www.independent.co.uk/news/world/europe/russia-set-for-grim-2016-due-to-plunging-oil-prices-a6814066.html
With oil prices slumping and sanctions gripping tightly, Russia is bracing for a grim 2016 as economic indicators point to an even more pessimistic scenario than a year ago. In the week after Russia’s long New Year’s holiday, the bad news could not have come faster.

First

Russia’s ruble swooned against the dollar. Then the grim prognosis for the nation’s economy worsened and policymakers announced plans for sweeping and sudden budget cuts to an already austere spending plan. Now the nation’s finance minister is warning that a key rainy-day piggy bank may be empty by the end of the year — and that if policymakers do not get the economy on track, Russians could see their savings wiped out in a repeat of their 1998 crisis.

Russia faces financial crisis if oil price falls below $30 a barrel
The blizzard of bad news is challenging leaders who once blithely said that 2016 would be a year of recovery rather than continued recession. Ahead of September parliamentary elections, policymakers are struggling to find a path that will not push too much pain onto voters, who are watching their diminished paychecks stretch even less at grocery stores where prices are rising rapidly.

“If oil prices fall any further, then the budget’s parameters will have to be adjusted,” Prime Minister Dmitry Medvedev said at an economic forum on Wednesday. “We have to understand this and prepare for the worst-case scenario,” he said.

Russia’s 2016 federal budget, of which half is paid for by oil and gas revenue, was designed with a price of $50 per barrel of oil. The price has dropped to $30. Its ruble has also dipped: The dollar has gained nearly 5 percent against the Russian currency since the beginning of the year, and many analysts expect that it will soon surpass the records set during a brief crash in December 2014. This time, the drop in the Russian ruble’s value is more enduring, with grinding consequences for ordinary Russians.

Worrying stuff.

[GoranZ]

You are mixing facts with fiction...

US has problems also... Wall Street in panic: Dow Jones, S&P 500 plunge 3 percent as oil prices fall. I wont even mention China.

So its not only Russia related, but its World related. We might be heading towards new world financial crisis

And in case of World crisis, Russians will not be the one that will lose the most. The biggest losers will be the Muslims

[Symmetry]

You are mixing facts with fiction...

US has problems also... Wall Street in panic: Dow Jones, S&P 500 plunge 3 percent as oil prices fall. I wont even mention China.

So its not only Russia related, but its World related. We might be heading towards new world financial crisis

And in case of World crisis, Russians will not be the one that will lose the most. The biggest losers will be the Muslims

Of course it's a global problem if Russia continues along this path. An economy as big as Russia relying mostly on oil and gas exports, relying on basically unrealistic projections for even a recession?

Definitely worrying.

[patches70]

The banks are the ones with the real problems. Goldman Sachs just release a report about the oil glut and how the bull market for oil is going to return and it's bad news for the banks.

GS goes on to say that the bull market will return after certain adjustments happen first. Of course GS maintains it's forecast for $40 p/b but that is just typical GS nonsense that murders muppets who listen. What truth GS offers is that the Bull returns after three phases.
The first phase they call the "survival phase" which they say just ended with the capitulation of several large offshore producers earlier this week.
The second phase which we are entering now they call the "inflection phase" in which the weakest producers enter into capital restructuring which means possible selling off of assets and closing facilities.
And then the "regeneration phase" in which those producers left standing see prices increase.

In a nutshell a bunch of companies have to go belly up before the bull market for oil comes back. None of this comes as any surprise. Why this is bad news for banks is because of significant exposure certain banks have to the energy sector. Wells Fargo for instance has over $17 billion in outstanding energy loans. But they aren't the only ones.

When the wave of defaults start happening it's the banks that get hit the hardest because they loaned out all the money. For the US we can expect a large swath of defaults domestically. The greater the swath the greater the bull will be later. Of course until then there is a whole lot of pain and when the banks feel the pain guess who pays?
The taxpayer.

Russia might be better positioned to endure this than the US. We'll see soon enough, but try and imagine the US government of all people trying to cut spending and if they did what the FSA* would do. There'll be riots in the streets.


*the Free Shit Army

[Symmetry]

The banks are the ones with the real problems. Goldman Sachs just release a report about the oil glut and how the bull market for oil is going to return and it's bad news for the banks.

GS goes on to say that the bull market will return after certain adjustments happen first. Of course GS maintains it's forecast for $40 p/b but that is just typical GS nonsense that murders muppets who listen. What truth GS offers is that the Bull returns after three phases.
The first phase they call the "survival phase" which they say just ended with the capitulation of several large offshore producers earlier this week.
The second phase which we are entering now they call the "inflection phase" in which the weakest producers enter into capital restructuring which means possible selling off of assets and closing facilities.
And then the "regeneration phase" in which those producers left standing see prices increase.

In a nutshell a bunch of companies have to go belly up before the bull market for oil comes back. None of this comes as any surprise. Why this is bad news for banks is because of significant exposure certain banks have to the energy sector. Wells Fargo for instance has over $17 billion in outstanding energy loans. But they aren't the only ones.

When the wave of defaults start happening it's the banks that get hit the hardest because they loaned out all the money. For the US we can expect a large swath of defaults domestically. The greater the swath the greater the bull will be later. Of course until then there is a whole lot of pain and when the banks feel the pain guess who pays?
The taxpayer.

Russia might be better positioned to endure this than the US. We'll see soon enough, but try and imagine the US government of all people trying to cut spending and if they did what the FSA* would do. There'll be riots in the streets.


*the Free Shit Army

Hmm, interesting. Russians are pretty tough. Not with dissenting, but with the economic failure they have form. Good point.

[patches70]

Hmm, interesting. Russians are pretty tough. Not with dissenting, but with the economic failure they have form. Good point.

Correct. The Russians are pretty good at dealing with misery, Americans, not so much....

[Symmetry]

Hmm, interesting. Russians are pretty tough. Not with dissenting, but with the economic failure they have form. Good point.

Correct. The Russians are pretty good at dealing with misery, Americans, not so much....

I agree, Russians are, as I said, more inured to terrible economic planning. Plus I suppose there's greater state control over the media, so less blame on the government.

[Symmetry]

http://mobile.reuters.com/article/idUSKCN0UO0KB20160110

From Reuters,,

Investors' appetite for Russia is further dampened by continuing Western sanctions imposed to punish Moscow's actions in Ukraine, although the sanctions do not directly prevent Russia from borrowing.

The two sovereign funds are already being depleted. In early December, they contained $130 billion, down from mid-2014 peaks around $180 billion. The government also has to find a trillion roubles, some 1.2 percent of GDP, that has been promised to bail out state development VEB.

"The national savings buffers are worth around 6.5 percent of GDP at present and that's the basis of saying they will run out of cash by the middle of next year - unless the oil price goes up," said Granville, who had adjusted the paper value of the funds to reflect off-budget commitments.

"But to eke out the buffers until the election will require meaningful spending cuts now... Desperate times call for desperate measures."

Many Russians will return from the holidays only too aware that life is about to get harder.

Civil servants' salaries will be frozen for the third year, pensions are to rise less than inflation; foreign goods and vacations will become even more expensive.

The blow to living standards is leading some to draw parallels with Russia's previous financial crisis in 1998, when the government defaulted and the rouble lost three-quarters of its value.

"It feels like the 1998 crisis all over again. My salary's value in dollars has more than halved, I now earn less than I did in 1997," said Yelena, a Moscow-based newspaper journalist who asked that her surname not be used.

[Bernie Sanders]

Sorry to disagree, but Americans are benefiting from low oil and gas prices. Most Americans are not directly affected by the minor roller coaster ride of the stock market. It's the rich fat cats who like to speculate who are being effected including the CEOs and employees of the oil/gas industries. The money saved by American consumers will continue to make the American economy to grow.

Russia on the other hand will start seeing some unrest with it's citizens. This dissent will grow, as oil prices stay low. It will escalate as Russian unemployment grows. This could be great news for the neighbors of Russia, if Putin becomes the casualty of his reckless behavior and total disregard for human rights.

[Symmetry]

Sorry to disagree, but Americans are benefiting from low oil and gas prices. Most Americans are not directly affected by the minor roller coaster ride of the stock market. It's the rich fat cats who like to speculate who are being effected including the CEOs and employees of the oil/gas industries. The money saved by American consumers will continue to make the American economy to grow.

Russia on the other hand will start seeing some unrest with it's citizens. This dissent will grow, as oil prices stay low. It will escalate as Russian unemployment grows. This could be great news for the neighbors of Russia, if Putin becomes the casualty of his reckless behavior and total disregard for human rights.

I dsagree, the state controls the media, and control over protest. Putin is here to stay. It's more likely that he will lash out, as Goranz suggests, against exterior forces to blame his government's ridiculous economic plans on them.

[Bernie Sanders]

Sorry to disagree, but Americans are benefiting from low oil and gas prices. Most Americans are not directly affected by the minor roller coaster ride of the stock market. It's the rich fat cats who like to speculate who are being effected including the CEOs and employees of the oil/gas industries. The money saved by American consumers will continue to make the American economy to grow.

Russia on the other hand will start seeing some unrest with it's citizens. This dissent will grow, as oil prices stay low. It will escalate as Russian unemployment grows. This could be great news for the neighbors of Russia, if Putin becomes the casualty of his reckless behavior and total disregard for human rights.

I dsagree, the state controls the media, and control over protest. Putin is here to stay. It's more likely that he will lash out, as Goranz suggests, against exterior forces to blame his government's ridiculous economic plans on them.

Putin can crack down harder on dissent or find another war to wage among his neighbors. Yep, wars do help that strong nationalistic feeling among it's citizens. But, if things get worse with the Russian economy and people can't afford to feed their families, anything can happen.

[GoranZ]

Sorry to disagree, but Americans are benefiting from low oil and gas prices. Most Americans are not directly affected by the minor roller coaster ride of the stock market. It's the rich fat cats who like to speculate who are being effected including the CEOs and employees of the oil/gas industries. The money saved by American consumers will continue to make the American economy to grow.

Russia on the other hand will start seeing some unrest with it's citizens. This dissent will grow, as oil prices stay low. It will escalate as Russian unemployment grows. This could be great news for the neighbors of Russia, if Putin becomes the casualty of his reckless behavior and total disregard for human rights.

I dsagree, the state controls the media, and control over protest. Putin is here to stay. It's more likely that he will lash out, as Goranz suggests, against exterior forces to blame his government's ridiculous economic plans on them.

Putin can crack down harder on dissent or find another war to wage among his neighbors. Yep, wars do help that strong nationalistic feeling among it's citizens. But, if things get worse with the Russian economy and people can't afford to feed their families, anything can happen.

Bernie Russians are not Americans What you say can happen to US, but not in Russia.
And in the field of Economics, you are dumber then a mule

[Symmetry]

I don't know, I kind of assumed that the Russian economiy relied on imports for a lot of stuff.

[GoranZ]

I don't know, I kind of assumed that the Russian economiy relied on imports for a lot of stuff.

It used to, but a lot of things are cheaper to be made in Russia now because of low value of the ruble. For example agricultural sector is flourishing atm.

[Bernie Sanders]

I don't know, I kind of assumed that the Russian economiy relied on imports for a lot of stuff.

The EU and American embargo on many goods is hurting Russian consumers.

GoranZ is quite the cheer leader for Putin and his ridiculous support for him laughable.

[notyou2]

IT'S A RACE TO THE BOTTOM!!!!!







RUSSIA'S WINNING!!!!!!

[Symmetry]

I don't know, I kind of assumed that the Russian economiy relied on imports for a lot of stuff.

It used to, but a lot of things are cheaper to be made in Russia now because of low value of the ruble. For example agricultural sector is flourishing atm.

Good to know. Do you feel that it will balance the other miscalculations? Russia has never really been an agriculture powerhouse.

[GoranZ]

I don't know, I kind of assumed that the Russian economiy relied on imports for a lot of stuff.

It used to, but a lot of things are cheaper to be made in Russia now because of low value of the ruble. For example agricultural sector is flourishing atm.

Good to know. Do you feel that it will balance the other miscalculations? Russia has never really been an agriculture powerhouse.

Last year around this time the exchange rate for $1 was ~70 rubles and there was a panic among the investors, and the price of oil was ~$50. Now the exchange rate is $1 for ~78 rubles and the price of oil is bellow $30.
The effects of the low oil prices are obvious but they are not that dramatic(as last year for example). There were few good fiscal measures made during previous 1 year which helped the situation. Regardless of the previous good measures, more good measures are needed, as with any other country during emerging crisis.

[Bernie Sanders]

I don't know, I kind of assumed that the Russian economiy relied on imports for a lot of stuff.

It used to, but a lot of things are cheaper to be made in Russia now because of low value of the ruble. For example agricultural sector is flourishing atm.

Good to know. Do you feel that it will balance the other miscalculations? Russia has never really been an agriculture powerhouse.

Last year around this time the exchange rate for $1 was ~70 rubles and there was a panic among the investors, and the price of oil was ~$50. Now the exchange rate is $1 for ~78 rubles and the price of oil is bellow $30.
The effects of the low oil prices are obvious but they are not that dramatic(as last year for example). There were few good fiscal measures made during previous 1 year which helped the situation. Regardless of the previous good measures, more good measures are needed, as with any other country during emerging crisis.

Wait.....oil will continue to drop in price, perhaps down to $20 per barrel and maybe lower. Russia needs $50 a barrel to pay it's bills.

What you call "good measures" is really "painful measures" to ordinary Russians.

[Symmetry]

I don't know, I kind of assumed that the Russian economiy relied on imports for a lot of stuff.

It used to, but a lot of things are cheaper to be made in Russia now because of low value of the ruble. For example agricultural sector is flourishing atm.

Good to know. Do you feel that it will balance the other miscalculations? Russia has never really been an agriculture powerhouse.

Last year around this time the exchange rate for $1 was ~70 rubles and there was a panic among the investors, and the price of oil was ~$50. Now the exchange rate is $1 for ~78 rubles and the price of oil is bellow $30.
The effects of the low oil prices are obvious but they are not that dramatic(as last year for example). There were few good fiscal measures made during previous 1 year which helped the situation. Regardless of the previous good measures, more good measures are needed, as with any other country during emerging crisis.

I agree that it's how Russia deals with this emerging crisis.

[GoranZ]

I don't know, I kind of assumed that the Russian economiy relied on imports for a lot of stuff.

It used to, but a lot of things are cheaper to be made in Russia now because of low value of the ruble. For example agricultural sector is flourishing atm.

Good to know. Do you feel that it will balance the other miscalculations? Russia has never really been an agriculture powerhouse.

Last year around this time the exchange rate for $1 was ~70 rubles and there was a panic among the investors, and the price of oil was ~$50. Now the exchange rate is $1 for ~78 rubles and the price of oil is bellow $30.
The effects of the low oil prices are obvious but they are not that dramatic(as last year for example). There were few good fiscal measures made during previous 1 year which helped the situation. Regardless of the previous good measures, more good measures are needed, as with any other country during emerging crisis.

Wait.....oil will continue to drop in price, perhaps down to $20 per barrel and maybe lower. Russia needs $50 a barrel to pay it's bills.

What you call "good measures" is really "painful measures" to ordinary Russians.

I know your knowledge in economics is awful so here is one free lesson for you.
Russian budget is projected in Rubles, not in US Dollars, so the figures you are mentioning are changeable. That is why "painful measures" you are mentioning are not as painful as you think

I agree that it's how Russia deals with this emerging crisis.

Yup so far the measures are more then proper, but there is a need for continuation of the reform of the Russian economy to become less dependent of its oil industry. And the emerging economic crisis might give the motivation to correct what was thought difficult previously.

[Bernie Sanders]

I don't know, I kind of assumed that the Russian economiy relied on imports for a lot of stuff.

It used to, but a lot of things are cheaper to be made in Russia now because of low value of the ruble. For example agricultural sector is flourishing atm.

Good to know. Do you feel that it will balance the other miscalculations? Russia has never really been an agriculture powerhouse.

Last year around this time the exchange rate for $1 was ~70 rubles and there was a panic among the investors, and the price of oil was ~$50. Now the exchange rate is $1 for ~78 rubles and the price of oil is bellow $30.
The effects of the low oil prices are obvious but they are not that dramatic(as last year for example). There were few good fiscal measures made during previous 1 year which helped the situation. Regardless of the previous good measures, more good measures are needed, as with any other country during emerging crisis.

Wait.....oil will continue to drop in price, perhaps down to $20 per barrel and maybe lower. Russia needs $50 a barrel to pay it's bills.

What you call "good measures" is really "painful measures" to ordinary Russians.

I know your knowledge in economics is awful so here is one free lesson for you.
Russian budget is projected in Rubles, not in US Dollars, so the figures you are mentioning are changeable. That is why "painful measures" you are mentioning are not as painful as you think

I agree that it's how Russia deals with this emerging crisis.

Yup so far the measures are more then proper, but there is a need for continuation of the reform of the Russian economy to become less dependent of its oil industry. And the emerging economic crisis might give the motivation to correct what was thought difficult previously.

Ever heard of "petro dollars? Oil is priced in dollars.

Dollar is increasing in value against the ruble, got it so far? Ok.

Ruble is decreasing in value against the dollar, right? Ok! Oil is falling in value and dollars can buy more oil, right? Ok!

Russia is an exporter of oil and natural gas. The effects to the Russians will be quite alarming as oil continues to fall in price. Regardless of your views on how hard headed you think Russians are, they are already feeling the effects of RISING PRICES and soon jobs will become scarce with falling wages. Whether the Russians receive payment in dollars, euros or yuans, they'll be getting a lot less.

Count on the ruble to continue it's drop in value against the major currencies.

[GoranZ]

It used to, but a lot of things are cheaper to be made in Russia now because of low value of the ruble. For example agricultural sector is flourishing atm.

Good to know. Do you feel that it will balance the other miscalculations? Russia has never really been an agriculture powerhouse.

Last year around this time the exchange rate for $1 was ~70 rubles and there was a panic among the investors, and the price of oil was ~$50. Now the exchange rate is $1 for ~78 rubles and the price of oil is bellow $30.
The effects of the low oil prices are obvious but they are not that dramatic(as last year for example). There were few good fiscal measures made during previous 1 year which helped the situation. Regardless of the previous good measures, more good measures are needed, as with any other country during emerging crisis.

Wait.....oil will continue to drop in price, perhaps down to $20 per barrel and maybe lower. Russia needs $50 a barrel to pay it's bills.

What you call "good measures" is really "painful measures" to ordinary Russians.

I know your knowledge in economics is awful so here is one free lesson for you.
Russian budget is projected in Rubles, not in US Dollars, so the figures you are mentioning are changeable. That is why "painful measures" you are mentioning are not as painful as you think

I agree that it's how Russia deals with this emerging crisis.

Yup so far the measures are more then proper, but there is a need for continuation of the reform of the Russian economy to become less dependent of its oil industry. And the emerging economic crisis might give the motivation to correct what was thought difficult previously.

Ever heard of "petro dollars? Oil is priced in dollars.

Dollar is increasing in value against the ruble, got it so far? Ok.

Ruble is decreasing in value against the dollar, right? Ok! Oil is falling in value and dollars can buy more oil, right? Ok!

Russia is an exporter of oil and natural gas. The effects to the Russians will be quite alarming as oil continues to fall in price. Regardless of your views on how hard headed you think Russians are, they are already feeling the effects of RISING PRICES and soon jobs will become scarce with falling wages. Whether the Russians receive payment in dollars, euros or yuans, they'll be getting a lot less.

Count on the ruble to continue it's drop in value against the major currencies.

Ok mister "economy" expert, when will Russia get destabilized according to you?

[Bernie Sanders]

It's already happening. Russians are already selling off their rubles for dollars. The currency leaving Russia is panicking the Russian bankers. Russian cash reserves are falling and most experts are saying Russia may have no cash reserves at the end of 2016. Inflationary forces are increasing monthly. When is the tipping point? Not sure. What can Putin do to halt the decline? Cut military spending, healthcare and pensions?

[GoranZ]

It's already happening. Russians are already selling off their rubles for dollars. The currency leaving Russia is panicking the Russian bankers. Russian cash reserves are falling and most experts are saying Russia may have no cash reserves at the end of 2016. Inflationary forces are increasing monthly. When is the tipping point? Not sure. What can Putin do to halt the decline? Cut military spending, healthcare and pensions?

Then why Russians are not revolting? Or the Russian government is managing to cover all up?