An economics, investment, trading and policy blog with a focus on Modern Monetary Theory (MMT). We seek the truth, avoid the mainstream and are virulently anti-neoliberalism.
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Tuesday, January 10, 2023
Russia’s budget deficit widens to a record
Now we got'em on the ropes!
Russia’s budget deficit widens to a record as revenues plunge amid oil export restrictions and spending on the invasion of Ukraine grew https://t.co/duUhiufXzP
So what? Russia’s budget occurs in rubles, which the Russian government creates out of thin air. An increased government deficit is only inflationary when a nation is experiencing shortages of goods and services. The West is experiencing shortages because the West is collapsing, and because the West is boycotting cheap Russia energy and commodities. Russia has no shortages, and therefore no short-term inflation.
“Russia’s budget deficit widens to a record as revenues plunge amid oil export restrictions and spending on the invasion of Ukraine grew.”
Which revenues? Those in domestic currency are irrelevant. Revenues in foreign currency are flooding into Russia.
The article falsely equates [1] government spending in the government's own currency for domestic purposes, with [2] national spending to buy imports, which (in Russia’s case) must mostly be purchased in foreign currencies.
Russia is now flush with foreign currencies, because Russia’s trade surplus has been growing since 1999, and it accelerated more than ever after the West went on a hunger strike against Russia.
The West imagines that because it is buying less from Russia, the whole world is doing the same. In reality, most of the world is now buying more Russian goods and commodities than ever before. Russia sells to everyone outside the West.
Compared to the West, the Russian economy is booming.
I don't understand the purpose of this blog, or who's running it. Who is "Matt Franko"?
This post has a sarcastic heading, and provides no context. Anyone finding it by chance would have no idea about what it's trying to say, and probably interpret the byline, and the article, literally. What was it attempting to achieve? It just seems lazy.
It would be better if content was limited to Mike, with a summary with each post of why he's selected it, specifically.
Konrad - your points are correct, but you're just preaching to the converted (including the OP). If you want to give people a new perspective, you need to post them to Bloomberg, rather than this echo chamber.
and as far as I can tell Russia's weapons industry is mostly (or maybe wholly) state owned. So much of the war-related deficit goes to state owned companies. So a circular flow of funds back to itself, while keeping people employed. Looks more financially sustainable than anything we got going on in the west.
"national spending to buy imports, which (in Russia’s case) must mostly be purchased in foreign currencies. "
This mistaken view keeps being propagated and it needs to stop.
In *all* cases the buyer pays with the currency they have and the supplier receives the currency they need. Otherwise no deal happens. Banks make money bridging the mismatch.
Which means Russians *always* pays for everything in Roubles because that's the currency they pay taxes in. The entity that initiates the exchange - that receives Roubles and pays something else is the boundary of the currency area on the import side, and that entity may be physically situated anywhere on the planet. It's also usually a bank or pair of banks and they just create the settlement funds by discount.
19 years of teaching MMT - hasn't made a dent where it counts: the electorate.
Teaching alone is not going to cut it. It will take a shift in the narrative, which requires both the "authority" of influencers and the cooperation of the media. That appears to be nowhere on the agenda.
The good news is that MMT is now being talked about and regardless of whether it is positive or negative the concept is now becoming a meme. Unfortunately, the meme has little to do with actual MMT. But at least the name is out there now.
Economics is surely too nerdy to have influencers...
Not really. Larry Summers is an influencer among Clinton Dems, for instance, and Peter Navarro in the MAGA crowd. But Media figures are also influencers that could play a role. Think Tucker and Rachel. If several or many influencers pick something up, it gets legs fast.
The problem is that MMT doesn't have a sexy narrative in an inflationary environment. Saying "sorry your buffer stock and auto-stabiliser system was too weak so now you're just going to have to let the semi-inflation work its way through the system" doesn't pass the "seen to be doing something" test.
Ruble going down.
ReplyDeleteYeah, as the Russians have wished.
ReplyDelete“Russia’s budget deficit widens.”
ReplyDeleteSo what? Russia’s budget occurs in rubles, which the Russian government creates out of thin air. An increased government deficit is only inflationary when a nation is experiencing shortages of goods and services. The West is experiencing shortages because the West is collapsing, and because the West is boycotting cheap Russia energy and commodities. Russia has no shortages, and therefore no short-term inflation.
“Russia’s budget deficit widens to a record as revenues plunge amid oil export restrictions and spending on the invasion of Ukraine grew.”
Which revenues? Those in domestic currency are irrelevant. Revenues in foreign currency are flooding into Russia.
The article falsely equates [1] government spending in the government's own currency for domestic purposes, with [2] national spending to buy imports, which (in Russia’s case) must mostly be purchased in foreign currencies.
Russia is now flush with foreign currencies, because Russia’s trade surplus has been growing since 1999, and it accelerated more than ever after the West went on a hunger strike against Russia.
The West imagines that because it is buying less from Russia, the whole world is doing the same. In reality, most of the world is now buying more Russian goods and commodities than ever before. Russia sells to everyone outside the West.
Compared to the West, the Russian economy is booming.
Bloomberg is full of crap.
I don't understand the purpose of this blog, or who's running it. Who is "Matt Franko"?
ReplyDeleteThis post has a sarcastic heading, and provides no context. Anyone finding it by chance would have no idea about what it's trying to say, and probably interpret the byline, and the article, literally. What was it attempting to achieve? It just seems lazy.
It would be better if content was limited to Mike, with a summary with each post of why he's selected it, specifically.
Konrad - your points are correct, but you're just preaching to the converted (including the OP). If you want to give people a new perspective, you need to post them to Bloomberg, rather than this echo chamber.
“So what? Russia’s budget occurs in rubles,”
ReplyDeletelol tell them that… they’ll think you’re nuts…
lol people here advocating for Russias new commodity backed currency scheme…
ReplyDeleteAnd think it’s a good thing…
#MMTfail
Who is "Matt Franko"?
ReplyDeleteMatt Franko is a chatbot... stuck in a loop writing "Art Degree morons"...
There isn't much more to it than that.
“What was it attempting to achieve? It just seems lazy”
ReplyDeletelol… and doing the same thing, expecting a different result is insane…
Ahmed, it's writing such nonsense in this thread that I almost believe you! :D
ReplyDeleteBut Mike can't even get his website working properly, so I doubt he'd be able to implement a chatbot.
and as far as I can tell Russia's weapons industry is mostly (or maybe wholly) state owned. So much of the war-related deficit goes to state owned companies. So a circular flow of funds back to itself, while keeping people employed. Looks more financially sustainable than anything we got going on in the west.
ReplyDelete"national spending to buy imports, which (in Russia’s case) must mostly be purchased in foreign currencies. "
ReplyDeleteThis mistaken view keeps being propagated and it needs to stop.
In *all* cases the buyer pays with the currency they have and the supplier receives the currency they need. Otherwise no deal happens. Banks make money bridging the mismatch.
Which means Russians *always* pays for everything in Roubles because that's the currency they pay taxes in. The entity that initiates the exchange - that receives Roubles and pays something else is the boundary of the currency area on the import side, and that entity may be physically situated anywhere on the planet. It's also usually a bank or pair of banks and they just create the settlement funds by discount.
Hey, Unknown...
ReplyDeleteYou come on here to criticize. You don't need to come here if you don't like it. Get lost and get a life.
My website is working fine. What do you care anyway? If you want to subscribe, you seem to know how to find me. Otherwise, get lost.
Oh yeah, Putin is on the ropes, struggling to maintain consciousness. Lets go Brandon!
ReplyDeleteHere’s Bill down thread:
ReplyDelete“ We are back for another year – the 19th in this blog’s existence.”
19 years of this dialogic exchange … ie dialog ain’t workin’…
Maybe try a different methodology?
19 years of teaching MMT - hasn't made a dent where it counts: the electorate.
ReplyDeleteWhat textbooks are they using for freshman Econ at their institutions?
ReplyDeleteThe electorate is derived from all walks of life. Textbooks are not enough.
ReplyDelete19 years of teaching MMT - hasn't made a dent where it counts: the electorate.
ReplyDeleteTeaching alone is not going to cut it. It will take a shift in the narrative, which requires both the "authority" of influencers and the cooperation of the media. That appears to be nowhere on the agenda.
The good news is that MMT is now being talked about and regardless of whether it is positive or negative the concept is now becoming a meme. Unfortunately, the meme has little to do with actual MMT. But at least the name is out there now.
Economics is surely too nerdy to have influencers...
ReplyDeleteEconomics is surely too nerdy to have influencers...
ReplyDeleteNot really. Larry Summers is an influencer among Clinton Dems, for instance, and Peter Navarro in the MAGA crowd. But Media figures are also influencers that could play a role. Think Tucker and Rachel. If several or many influencers pick something up, it gets legs fast.
The problem is that MMT doesn't have a sexy narrative in an inflationary environment. Saying "sorry your buffer stock and auto-stabiliser system was too weak so now you're just going to have to let the semi-inflation work its way through the system" doesn't pass the "seen to be doing something" test.
ReplyDeletePerhaps Vlad Zelenskyy can be hired as MMT's man of action.
ReplyDelete