Usury is a tool for turning people into slaves

2024 Author: Seth Attwood | [email protected]. Last modified: 2023-12-16 15:55

Capitalism in Russia, among all its other names, can also be called usurious. The diagnosis is disappointing: while officials are worried about the "rates of economic growth", the population is giving the last money to banks

Capitalism, which began to build in Russia almost thirty years ago, is called differently: "bandit", "comprador", "wild", "peripheral", "oligarchic", etc. Without rejecting all of the above definitions, I will give one more: "usurious capitalism."

99% of all socio-economic problems of modern Russia are generated precisely by the usurious character of capitalism, which has taken root in our country. Usury is customary to mean the practice of issuing loans and borrowings that will not be repaid in advance. Most often due to the high percentage. And sometimes due to the deliberate insolvency of the borrower. It all ends with the expropriation of the debtor's property and / or turning it into a "debt slave".

I am not going to talk about usury in general (as a global phenomenon). On this topic, I have written a book "On interest: loan, court, reckless", which was published back in 2011. The system of usurious lending in Russia is represented by a two-tier banking system (the Central Bank of the Russian Federation and commercial banks) plus microfinance organizations.

The main recipients of loans and borrowings are the banks themselves (the interbank lending market), non-financial organizations, the public sector, and the household sector. Households are you and me, individuals, the population.

Bank loans to individuals in the Russian Federation: rapid dynamics

Now I would like to draw your attention to the situation with lending to the population of Russia in the past few years and especially this year. I will cite some key indicators characterizing the dynamics of such lending and the levels of household debt.

In the period 2009–2014. there was a steady growth in lending to the population by banks. Here are the data on the volume of loans issued (trillion rubles):

2009 - 2, 6; 2010 - 3, 6; 2011 - 5, 4; 2012 - 7, 2; 2013 - 8, 8; 2014 - 8, 6.

Somewhere in the middle of 2014, the growth of lending stopped. Experts cite the economic sanctions of the United States and its allies as the main reason, which began in the spring of that year. Banks braced themselves for tough times and slowed down their credit expansion just in case. An additional factor behind the fall in lending was the collapse of the ruble exchange rate, which was allowed (or provoked) by the Bank of Russia in December 2014. But after a while, the growth of lending to the population resumed again. Here are the data for recent years (trillion rubles):

2015 - 5, 9; 2016 - 7, 2; 2017 - 9, 2; 2018 - 12, 5.

Already in 2017, the record figure of 2013 was surpassed, and in 2018 the volume of loans issued to the population increased by another 36% compared to the previous one. The Russian media called it a "consumer lending boom." Over the decade, the annual volume of loans issued by banks has increased almost five times (more precisely - 4, 8 times). The main types of loans used by the citizens of Russia: mortgage; by credit cards; car loans; consumer (for the purchase of various goods and services). An increasing proportion of bank card loans and consumer loans go not to meet the needs for goods and services, but to pay off previously taken loans, i.e. to refinance debts.

Interest on loans - usurious

Now the next question: at what interest rate do banks issue loans to citizens? Here are the data of the Bank of Russia on the weighted average interest rate on ruble loans to individuals in May 2019: for loans up to 1 month - 15.81%. And for loans from 1 to 3 months - 14, 40%; from 3 to 6 months - 18, 38%; from 6 to 12 months - 15, 23%. In many countries of the world there are restrictions on the interest rates of loans, and there such interest rates would be classified as "usurious".

Let me remind you that in tsarist Russia at the beginning of the twentieth century, the maximum rate was set at 12 percent. Everything that was from above was considered a usurious loan, and such creditors were punishable by law. The power as a mantra has been pronouncing incantations for many years about the need to lower interest rates on all types of loans (not only to individuals, but also to legal entities). And nothing has changed.

Here are the data of the Bank of Russia on the weighted average rates of ruble loans for January 2011: for loans up to 1 month - 14.0%; from 1 to 3 months - 19.5%; from 3 to 6 months - 31.8%; from 6 to 12 months - 30.4%. Yes, on loans for more than 1 month, interest rates have decreased since that time. But on short ruble loans (up to 1 month) not only did not decrease, but even increased slightly (from 14.0 to 15.81%). This is due to the fact that today citizens are demanding, first of all, for short periods of time (up to 1 month). They are afraid to take longer loans, and banks are also afraid to give. It is also noteworthy that loans from large banks are more expensive than from others.

As of May 2019, the weighted average interest rates for ruble-denominated loans of 30 leading Russian banks were as follows: up to one month - 17.53%; from 1 to 3 months - 20, 19%; from 3 to 6 months - 17.06%; from 6 to 12 months - 15.66%. As you can see, money for the population from large banks (such as Sberbank, VTB, Alfa, Rosbank, etc.) is more expensive than credit institutions that are not part of the banking "elite". These bank moneylenders are monopolists in the short-term loan market. For example, in many remote regions of the country, the only credit institution that has its own branches is Sberbank.

Growth in debt and debt load

The volume of debt of the population on loans taken out is growing rapidly. According to the Bank of Russia, at the end of the first quarter of 2018 it was 12.5 trillion rubles. And exactly one year later, i.e. at the end of the 1st quarter of 2019, it grew to 15.4 trillion rubles, i.e. by 23.3%. And as of May 1 of this year (the latest data from the Bank of Russia), the figure rose to 15.74 trillion rubles. By the way, at the beginning of 2013 the volume of debt on loans was only 8.5 trillion rubles. It turns out that in a little over six years, the debt has almost doubled. These are extremely high rates of debt growth, especially against the backdrop of a stagnating economy (GDP growth last year, according to Rosstat data, was 2.3%, and in 2013–2017 there was almost no growth at all). And also against the background of falling real incomes of the population for several years. If at the end of the 1st quarter of 2018 the average amount of debt per family was 221.8 thousand rubles, then a year later it was already 273.6 thousand rubles.

These are absolute figures. How, for example, does the volume of credit debt compare with the official income of households? According to the Bank of Russia estimates, at the end of the 1st quarter of 2017, the debt was 23% of annual income, and a year later it had already grown to 28% (an indicator of the level of the population's debt load). The debt noose around the neck of bank debtors is tightening more and more. By the end of this year, according to experts, the volume of credit debt of individuals may grow to 16.6 trillion rubles, and real income, according to government statements, - by 1% (A. Kudrin, however, called the last figure “too optimistic”). It is obvious that by the end of the year the indicator of credit debt in relation to annual income will exceed the level of 30%. In some regions, the level of debt load already exceeds 50%. Experts consider Kalmykia and Tuva to be such "leaders". Over 40% the level of household debt in Chuvashia, Irkutsk region.

An important indicator is the “share of persons with credit indebtedness to banks in the total number of employees”. At the beginning of this decade, this share was much less than 50%. At the beginning of 2016, there were already half of such working debtors (about 40 million people). And at the beginning of 2017, their share has already exceeded 60% (in absolute terms, the number of debtors is 44, 7 million people). Last year, the number of debtors on loans to banks was about 45 million people.

It is noteworthy that at the beginning of this year, the number of loan agreements between banks and citizens amounted, according to the Central Bank of the Russian Federation, to 110.7 million. An interesting situation emerges: there were more than two loans per debtor. According to the United Credit Bureau (OKB), 26% of the total number of borrowers had three or more loan agreements. About 6% of debtors had more than five loans. Often, a person seeks to obtain a new loan in order to refinance debts on previously taken loans with its help.

Debt load, or a tight noose around the neck of debtors

Another important indicator reflecting the alarming situation is the level of the current debt burden. This is the share of monthly expenses for servicing credit debt in the monthly income of individuals. According to the National Bureau of Credit Histories (NBCH), the level of the current debt burden - the ratio of monthly payments on all loans to monthly income - as of April 1 was 23%. In the just published S&P report on the situation with problem loans in the CIS countries, a higher debt burden is called - 25% (apparently, it reflects the situation at a later date). But the value of 23 or 25% is the "average temperature in the hospital."

The figures reflect the cost of servicing credit debt in relation to the income of all working citizens. And if these expenses are correlated with the income of only those who use loans and have a debt to the bank, then the figure will be 44%. These are the official data of the Bank of Russia. And here are some interesting data provided by the United Credit Bureau (OKB). At the end of last year, about 8 million people paid more than half of their income for monthly loan payments. And 4% of borrowers (almost 2 million people) spent over 90% of official income on loan payments. And here is the latest data for June of this year: as follows from a survey of the World Bank and Rospotrebnadzor, every fourth debtor spends 75% of his income on debt service to the bank.

It turns out that even the average level of expenses for servicing credit debts today is comparable to the level of expenses for paying various direct and indirect taxes, which make up 30-35% of income. Thus, the state and banks deprive a person of most of his income.

You can estimate. For those who have debts to banks, the share of alienated income is equal to: 30% (taxes) + 44% (servicing credit debt) = 74%. In the best case, a person has ¼ of income, at the expense of which he needs to cover housing and communal expenses, his needs for clothing, food, other vital goods, as well as transport, medical and other services. Obviously, only a few succeed in doing this, whose incomes are several times higher than the national average. Here is the source of poverty and misery.

Troubled loans: the situation is alarming and carefully camouflaged

It is becoming more and more difficult for citizens not only to repay, but even to service loans. Even according to the data of the Bank of Russia, at the end of the first quarter of this year, the amount of problem loans to individuals amounted to 1.6 trillion rubles. This is more than 10% of the total debt of citizens to Russian banks.

Problem loans - those for which the delay in payments exceeded 60 days. Experts say the figure is grossly underestimated. I have met expert assessments, according to which there are real failures in payments for every second loan (just for many, the delay has not yet exceeded the threshold of 60 days).

Difficulties with servicing and even more so with repayment of loans by individuals are growing. Banks are trying to camouflage the escalating situation, hiding it from the Central Bank as a banking regulator. For example, by restructuring the loan (changing the terms of the loan agreement). It is also not uncommon for a second loan to be issued to a client in the same bank in order to refinance the first one with its help.

Kudrin and Oreshkin are just waiting for the crisis, but for millions of citizens it has already come

The retail lending situation is becoming dire. Yesterday, the head of the Accounts Chamber, Alexei Kudrin, spoke at the State Duma. He drew attention to the dangerous growth of consumer lending in Russia, which in 2019 and 2020 may be 20% each. He said that this could bring the economy of the Russian Federation to a critical point. It is noteworthy that even the Minister of Economic Development Maxim Oreshkin began to sound the alarm. He has already stated several times that the growth of consumer lending carries the risks of a recession in the Russian economy. In addition, he points out that half of consumer loans are unsecured. And this is dangerous for commercial banks as well.

In turn, the head of the Central Bank Elvira Nabiullina remains calm, believes that the Bank of Russia "keeps the situation under control" and that now there is no "bubble" in retail lending.

It should be noted that Kudrin and Oreshkin quite rightly saw the threat posed by retail lending. But they only talk about the threat to the rates of economic development, perceive it as a macroeconomic one (apparently, they are primarily concerned about the implementation of the directives of the May presidential decree on the rate of economic growth).

But even before the expected economic collapse begins, many bank clients find themselves in debt traps. For them, the crisis has already arrived. And there are already millions of such victims of domestic usury. Both government officials and the leaders of the Bank of Russia do not notice this crisis. And as for the fact that not all retail loans are secured (which Oreshkin is worried about), banks will be able to rip off what is owed to individuals. But I will talk about this “microeconomic” level of the problem sometime next time.