Isn't it time to print the jug?

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

Over the past month, there has been continuous talk about the economic crisis provoked by the "coronavirus pandemic". The "viral" hysteria launched the mechanism of destruction of the Russian economy and, if the process is not stopped, the country may face a real catastrophe. The victims will be tens of millions of citizens who have lost their jobs and, accordingly, their livelihoods.

However, it is not too late to "put on the brakes", i.e. to take urgent measures at the federal government level to prevent bankruptcy of companies and to compensate for the loss of citizens' income. The range of proposed measures is very wide. These are direct subsidies to legal entities and individuals; partial or complete cancellation of previously accumulated debts on taxes and loans; interest-free government loans to businesses; government guarantees against loans from commercial banks; subsidizing interest rates on bank loans; food cards to citizens (centralized state distribution of food resources); compensation at the expense of budgetary funds for salaries of employees of private companies during the quarantine downtime; cancellation of taxes or reduction of tax rates (at least during the acute phase of the crisis), tax holidays (deferred payment of taxes during the crisis), credit holidays (delay in repayment and servicing loans during crises), etc. But all these and other similar measures, ultimately, must be provided at the expense of public funds. And this is, first of all, the federal budget.

Taking into account the crisis situation, amendments were made to the Law on the Federal Budget of the Russian Federation, adopted last year. On March 18, the President of the Russian Federation signed the corresponding law, which provides for an increase in budget expenditures in 2020 by 162.7 billion rubles - up to 19.7 trillion rubles, in 2021 - by 556.9 billion rubles, up to 21.2 trillion rubles, in 2022 year - by 677.6 billion rubles, to 22.44 trillion rubles.

But these scanty increases in budget spending may turn out to be, as they say, "dead poultice".

As a result of the April total quarantine alone, according to experts, economic losses are expected to be from 2 to 4 trillion rubles. To stop these losses, financial assistance of comparable size is needed, and not spread out in time, but urgent, within the quarantine month.

And the aforementioned increase in budget expenditures for 2020 in the amount of 162.7 billion rubles. turns out to be exactly "smeared" until the end of the year. Homeopathic doses are obtained per month.

But there is one more state source, autonomous from the federal budget. This is the National Welfare Fund (NWF). Government officials like to call it a "safety cushion."

The NWF was born in 2008, when the RF Stabilization Fund was reorganized. It was split into the Reserve Fund and the NWF. The formation of both funds was envisaged at the expense of oil and gas revenues. The first fund was intended to cover federal budget deficits. Two years ago, it was exhausted and ceased to exist. The NWF remained. Let me remind you that it was created to improve the provision of pensions to Russian citizens. This is exactly what was written in the relevant regulatory documents. Today the authorities prefer not to remember this.

The NWF, in contrast to the Reserve Fund, not only did not deplete, but, on the contrary, significantly increased last year, exceeding 7% of GDP.

When the viral economic crisis arrived, politicians and businessmen called to direct all the resources of the NWF to combat the crisis and its consequences. Until recently, the authorities didn’t react to such calls and didn’t print the "currency box".

As of March 1, 2020, according to the latest official data from the Ministry of Finance, it contained $ 123.4 billion, or in terms of the national currency - 8.25 trillion rubles. In relative terms, this is 7.3% of GDP.

The other day, the government nevertheless made a decision to unseal the NWF's "currency box". But no, not to save the Russian economy and citizens. And … to buy the Savings Bank from the Central Bank. The legitimacy of the sale and purchase itself is questionable (after all, the Central Bank once received Sberbank for free). But the moment of the deal was chosen surprisingly "by the way". For the transaction amount is equal to 2, 14 trillion rubles. could help keep Russian business afloat during the difficult quarantine month of April.

Finance Minister A. Siluanov said last year that the NWF's "currency cushion" would allow Russia to hold out in the event of unfavorable external conditions (falling oil prices, economic sanctions, etc.) for ten whole years. The new Prime Minister Mikhail Mishustin in February named a more modest term - 4-6 years. Good too. And now it turns out that the NWF can completely melt by the beginning of summer, at most by the beginning of autumn.

The point is that Russia needs to pay off external government debts. First, the debt of the federal government. Secondly, the debts of state corporations and joint-stock companies with state participation in the capital of 50 percent or more. The sum of these two debts is called the extended government debt. According to my estimates, at the beginning of April its value was about $ 210 billion.

Previously, the Ministry of Finance and state-owned companies paid off their debts and serviced them through new borrowings in the global financial market. Today, such borrowings in the context of the global crisis are very problematic.

And the state clearly expects that it will carry out its external debt obligations at the expense of the same "currency box" of the NWF. It is also counted on by the companies included in the list of "immortals" - the list of "backbone enterprises", which was approved by the government last week. These are 646 enterprises to which the government promised assistance and some guarantees against bankruptcy. But it seems that not all lucky people on this list will have enough money from the NWF. And they may face the fate of "mere mortals", ie. small and medium-sized businesses.

It seems that we should act more radically. Namely, it is necessary to print a "money box" called "International reserves of the Russian Federation" (their other name is "Gold and foreign exchange reserves of the Russian Federation").

According to the Bank of Russia data, as of March 13, 2020, Russia's international reserves amounted to 581.0 billion dollars. This is a record value in recent years. A week later, on March 20, their value dropped to $ 551.2 billion, i.e. by almost $ 30 billion. But on April 3 (latest data) they amounted to $ 564.4 billion. in two weeks, despite the viral economic crisis, they grew by $ 13.2 billion.

One could assume that the international reserves of the Russian Federation are the reserves of the state. But it is not so. If we dive into the documents of the Central Bank of the Russian Federation, we will understand that the Central Bank manages all gold and foreign exchange reserves and only part of them belongs to the state, and the other part is the reserves of the Bank of Russia itself.

The Bank of Russia and the state of the Russian Federation are two, as they say in Odessa, big differences. In article 2 of the Federal Law on the Bank of Russia we read: "The state is not responsible for the obligations of the Bank of Russia, and the Bank of Russia is not responsible for the obligations of the state."For the most dull, the Bank of Russia website provides additional explanations: “The Bank of Russia acts as a special public-law institution with the exclusive right to issue money and organize money circulation. It is not an organ of state power, at the same time, its powers, by their legal nature, relate to the functions of state power, since their implementation presupposes the use of measures of state coercion”(italics by V. K.).

The Ministry of Finance of Russia places its "currency box" on the deposit of the Bank of Russia, and the latter controls the state currency. In the total amount of international reserves, the part that belongs to the Ministry of Finance has accounted for approximately 20-25% in recent years. The rest is the reserves of the Bank of Russia, which is not state-owned and is not responsible for state obligations. As of March 1 of this year, the size of the NWF, as I noted above, was $ 123.4 billion, and all international reserves managed by the Bank of Russia amounted to $ 570.1 billion. It is easy to calculate that the Ministry of Finance's part in reserves was only 21.6%. The reserves owned by the Central Bank are almost 4/5, or in absolute terms $ 446.7 billion.

A natural question arises: why does the Central Bank need such gigantic reserves? When the Central Bank was created and the law on the Bank of Russia was adopted, it was envisaged that it would maintain a stable exchange rate for the ruble. And he will do this with the help of foreign exchange interventions, i.e. buying or selling foreign currency. And what is in practice?

Under the pretext of the need to accumulate “patrons” for interventions, the Bank of Russia systematically increased its international reserves. Until 2013, foreign exchange interventions were indeed carried out. But Elvira Nabiullina came to Neglinka almost seven years ago in the chair of the chairman of the Bank of Russia. And she said that she was sending the Russian ruble to "free float." Those. it refused to maintain a stable ruble exchange rate. By the way, this was an open challenge, because ensuring the stability of the ruble exchange rate was imputed to the Bank of Russia as the main task of Article 75 of the Constitution of the Russian Federation. Nobody noticed that the chairman of the Bank of Russia had committed the gravest state offense. One entails another. And in December 2014, there was a severe currency crisis, which was expressed in the fact that the ruble rate fell twice in a few days. The blow to the country's economy was hardest. And the chairman of the Bank of Russia got away with it.

After that, the Bank of Russia, as if nothing had happened, continued its policy of free floating of the ruble. But foreign exchange reserves continued to accumulate without any explanation. The explanation is very simple: such accumulation is beneficial not for Russia, but for those countries that issue the corresponding foreign currencies. Those. The United States, the countries of the eurozone, Japan, Switzerland, Canada, etc. It is surprising that none of the government bodies (the State Duma, the Federation Council, the Government of the Russian Federation, the Supreme Court, the Prosecutor's Office, the Constitutional Court, the Accounts Chamber) have seemed did not notice the unlawful and strange behavior of the Bank of Russia with regard to the exchange rate of the ruble and international reserves.

Today, when the country is on the brink of a real catastrophe, the authorities continue to say: "There is no money, but you are holding on." No, there is money. And there are a lot of them. These are international reserves on the balance sheet of the Bank of Russia and ultimately working for Russia's geopolitical opponents.

These gigantic reserves, which the Bank of Russia has effectively privatized, should indeed regain the status that derives from their official name “International Reserves of the Russian Federation”. The international (gold and foreign exchange) reserves of the Central Bank should be nationalized and transferred to the management of the Government of the Russian Federation.

By the way, let me remind you that the gold and foreign exchange reserves that the Soviet Union had were mainly on the balance sheet of the USSR Ministry of Finance and were intended to cover extraordinary expenses (purchases of certain goods on the world market). Not a single dollar or pound sterling was spent from these reserves to maintain the exchange rate of the Soviet ruble. For the reason that the exchange rate of the ruble was fixed, it was determined by the State Bank of the USSR and was revised extremely rarely. And in order for the exchange rate of the ruble to be stable, a state currency monopoly was established in the Soviet Union. And without a stable exchange rate of the monetary unit, it is generally difficult to build an economy, be it socialist or capitalist (let me remind you that the cornerstone of the international monetary and financial system, adopted at the Bretton Woods conference in 1944, was the fixed exchange rates of national monetary units).

In general, if we want to survive in this crazy world, we will inevitably have to rely on the experience of the USSR, which built its economy in such an international environment that was no less difficult than today. And one of the first and extremely urgent steps in the light of this experience should be the nationalization of the gold and foreign exchange reserves of the Bank of Russia.