Andrew Batson — The resource curse is alive and well in Mongolia

The [Chinese] province of Inner Mongolia of course does not have its own currency and does not borrow internationally, so it is not going to experience the same type of fiscal and currency problems as the independent nation of Mongolia. And while the governing institutions in the two places are quite different, neither place is exactly pursuing Norway-type best practices for managing their resource wealth. So there is also some evidence of the resource curse playing out in Inner Mongolia, essentially meaning bad economic decision-making during commodity booms….

Andrew Batson's Blog
The resource curse is alive and well in Mongolia
Andrew Batson

Victor Ivanter — It’s Not Oil That’s Russia's Curse, It’s Excessive Imports

A widespread explanation of the economic crisis is that it’s Russia’s resource curse, and we’ve arrived at the day of reckoning. Of course, this a metaphor; everyone knows that to have resources is not a curse, but a gift from God. But resource availability can work against the economy.

Russia needs to rebalance its economy using import substitution (but not aiming for import displacement and autarky) and reindustrialization after the collapse of the USSR and the disastrous liberal period that colonized Russia.

This could take place quickly if Russian policy makers were in paradigm with MTT, since the needed real resources are already available.

Russia Insider
It’s Not Oil That’s Russia's Curse, It’s Excessive Imports
Victor Ivanter, director of the Institute of Economic Forecasting
Originally appeared at IA Devon - Oil news from the Volga and Urals. 

Translated by Svetlana Kyrzhaly and Rhod Mackenzie

Jon Hellevig — Russian Economy – The disease is not Dutch but Liberal

There has lately again been a slew of articles in the Western business press denigrating Russia’s efforts to develop its industry condemning the drive for import substitution to failure and casting the curse of Dutch disease over it.

I have taken part of these stories just as I was preparing my own article reporting in fact on the success of Russia in these fields. I must say that I am a bit tired of arguing with those witless self-styled experts regurgitating the same old propaganda lines, but nevertheless I decided to take up the challenge and combine my report with a discussion of the Russian import substitution program and the imaginary Dutch disease.

The gist of my account is that Russia is not suffering and has never suffered from the fabled Dutch disease, which perhaps is nothing more than an academic platitude to start with. I will explain why I would much rather say that what Russia has been suffering is from something best termed the Liberal disease. 

While Russia has now largely cured itself from that affliction, it continues to suffer the effects of the Liberal disease, this time in form of being subject to the foolish harangues of Western liberal economists and their stage-managed opposition mouthpieces back home in Russia (or Paris, or wherever they happen to be perched from time to time). – In fact, it is not even as clear as that, because it seems to me that a large portion of the ruling elite, including those in government, are still very much advocating the failed Liberal disease.

One gets the feeling that President Putin and his administration is in this respect on the sane pragmatic side whereas the other parts of the government still pull to the liberal side, which is not good at all.

Before I launch into a more detailed discussion on that subject, I would like to set out the facts as they are presently.….

Awara Blog

Russian Economy – The disease is not Dutch but Liberal
Jon Hellevig

Sputnik — Russian Economy Needs to Lower Dependence on Oil Prices - Putin

Russia's economy needs to lower its dependence on oil prices, the country's President Vladimir Putin said Tuesday.

"It is necessary to ensure the balance and sustainability of public finances, significantly reduce the budget's dependence on oil prices, [financial] quotes," Putin said during a budget meeting.

The Russian leader assessed the economic situation as challenging but not critical and called on economic policymakers to preserve the role of the federal budget as the leading instrument of development.

"In the current circumstances it is particularly important to have a package of measures to overcome a recession in the economy," Putin addressed the heads of the Presidential Administration, Federation Council, State Duma, and ministers of the government's economic bloc.…

Also Russian leader stated that Russia's budget deficit must stand at under 3 percent of GDP in 2016….

Quickly perusing the Russian sectoral balances, a relatively low deficit is indeed indicated, given a persistent trade surplus (although shrinking somewhat) and relatively low private debt to GDP ratio. So Putin's figure is not way out of line here, it might appear.

It looks like Russia could do more stimulus without affecting inflation substantially, but it is being forced to ramp up military expenditure owing to present circumstances, which means it doesn't have discretion over the flow. However, nothing that could not be addressed by functional finance, it seems.

A Fitch senior analyst recently said that he would rate Russia investment grade were it not for the uncertainty of the current geopolitical situation. Russia has a strong balance sheet.

The major exposure is foreign debt held by Russian firms, about 500 billion US. But has Pepe Escobar observes, that is also a financial nuclear weapon, since Russian companies can just default if the government refuses to bail them out with foreign reserves, and it is under no obligations to do so. That would devastate the European economy, which holds much of the Russian private debt.

Sputnik

Russian Economy Needs to Lower Dependence on Oil Prices - Putin

Alexander Mercouris — Financial Times Says Sanctions Already Eroding

1. Economics and finance speak louder than politics.

2. Russia still gets to restructure by import substitution to escape Dutch disease.

Russia Insider
Financial Times Says Sanctions Already Eroding
Alexander Mercouris

Alexander Mercouris — Russia's Recession: A Necessary Re-Balancing

...the Central Bank ever since 2012 has made it clear that its priority is inflation reduction over growth, with a medium term inflation target of just 4%. The Central Bank has also repeatedly made it clear that it will pursue a tough interest rate policy to achieve it however hard that is and however long it takes.

Experience of other economies with chronic inflation problems (such as Britain in the 1970s to 1990s) suggests that for inflation to be squeezed out of the system economic policy must be geared to that objective. This inevitably reduces growth, at least in the short term.

That seems to be the situation Russia is in now. It has been clear since 2012 that the Russian authorities have prioritised inflation over growth....

Russia Insider
Russia's Recession: A Necessary Re-Balancing

Alexander Mercouris

TASS — Russia begins recovering from the 'Dutch disease' — Finance Minister Siluanov

Russia's economy is not as heavily dependent on energy exports as is widely believed, and sanctions have resulted in a speedup in restructuring. This is a step that Russia needed to take, just as China needs to develop its domestic economy and is now doing. But Russia is a resource-rich country, and it will provide resources to both Europe and China for a long time to come, especially with the development of high-speed rail across Eurasia ("heartland" of "the world island: Makinder), linking the Atlantic and Pacific.

"The investments that previously went to the oil industry, are now beginning to decline. And the capital will be directed to other, non-oil industries," Siluanov said. According to him, agriculture is currently receiving significant investments, as well as import substitution industry. "And it is a right thing. This is the main motive of all the changes that are taking place, and we support it as a part of anti-crisis plan," the Minister said.

TASS
Russia begins recovering from the 'Dutch disease' — Finance Minister Siluanov

Marc Lavoie and Mario Seccareccia — Has Canada contracted "Dutch disease"?

Has Canada contracted "Dutch disease"?

The Progressive Economics Forum
Selective Amnesia at the Bank of Canada
Marc Lavoie and Mario Seccareccia, Department of Economics, University of Ottawa