9 ms·

One reason that sanctions haven't had an apparent immediate effect is that the Russian economy was already in a slow downward spiral. The Russian economy peaked

One reason that sanctions haven't had an apparent immediate effect is that the Russian economy was already in a slow downward spiral. The Russian economy peaked in 2013 and has been going down hill since then. The Russian society has already been hardened by these 9 years of "hard times" and not to forget the much harder times in the 1990s. Another reason is that Western companies stopped their sales in Russia while the West continues to buy natural gas from Russia. Short-term macroeconomic numbers will regard this as an improvement of Russia's trade balance even slightly boost their GDP.

H8crilA 4y ago
Yeah, and consider the effect that it has on the rouble: with lots of sales (of mostly energy) but nowhere to spend that money the rouble is actually likely to appreciate rather than depreciate. I'm referring here to the premature celebration of the "death of the rouble", you may remember this narrative. This is still a bit obfuscated by the ongoing sale of the Russian foreign reserves (the ~50% that wasn't frozen). But generally speaking the rouble needn't decrease in value, despite the sanctions taking the intended effect. If you're still unconvinced then look at the granddaddy of all deflations, the great depression. Caused by the freezing of trade it was (in most countries) experienced through the appreciation of the value of currency - deflation, rather than inflation.
- 082349872349872 4y ago
  Heh. I sometimes wonder how vulnerable the US would be to a squeeze appreciating USD. You could probably even get large parts of the US political class to go along with it, as (in the short term) they'd be benefiting relative to their countrymen.
  - RC_ITR 4y ago
    Very invulnerable. This whole “Squeeze” thing is a function of liquidity. The reason that stocks like GME and AMC can experience the effects of a short squeeze is because of how relatively illiquid they are (i.e. point $1bn of consumer capital toward a $3bn stock with thin trading and you can do wild things). The USD is the currency in which nearly all middle eastern oil is priced, the currency in which $16tn of consumer spending is done, quadrillions of stock trades, etc etc etc. There’s no individual or group who can point enough capital at that to make for a squeeze, and even if they could, then why wouldn’t the treasury take advantage and start printing more dollars (see: Hertz issuing new shares and ruining wallstreetbet’s day)
    - H8crilA 4y ago
      It has happened in the 80s though. Soros (for example) has written a lot about this phenomenon and traded extensively on it, making a small truckload of money. It peaked in early 1985: https://tradingeconomics.com/united-states/currency https://tradingeconomics.com/united-states/currency It was bad for a lot of countries that had dollar-denominated debt, which is a bad idea precisely for this reason. Countries never learn though, it seems. But it was not too bad for the US actually.
      - RC_ITR 4y ago
        No, not even close. In 1985, Soros bet that the Plaza Accord (a market manipulation among a cartel of leading economies to weaken the dollar for political reasons) [1] would work and he was right. That has nothing to do with shorts or squeezes and everything to do with collusion among the Treasuries and Central Banks of something like 75% of the world economy at that point. Soros 'won' the trade because he realized how impactful this collusion would be while the rest of the market didn't. [1]https://www.nber.org/system/files/working_papers/w21813/w21813.pdf https://www.nber.org/system/files/working_papers/w21813/w218...
        082349872349872 4y ago
        Maybe you can answer a different question of mine: what, if anything, did Japan get out of the Plaza Accord? By weakening USD (and hence USD-denominated commodities?) West Germany got a strong DM and hence could LBO East Germany and reunify. Japan got a strong JPY and ... what, besides stagflation? edit: am I calculating this right? to do a Plaza today would need, not the G5, but pretty much the entire G20?
        RC_ITR 4y ago
        Japan got the opportunity to go on an international asset-buying spree (which is always less impactful to real GDP than it seems cough Belt and Road cough) [0] [1] [0]https://www.washingtonpost.com/archive/politics/1989/10/31/japanese-to-buy-51-of-rockefeller-center/d6cca3ff-9e5a-4593-b6f0-4f939f464624/ https://www.washingtonpost.com/archive/politics/1989/10/31/j... [1]https://www.latimes.com/archives/la-xpm-1987-11-19-fi-22750-story.html https://www.latimes.com/archives/la-xpm-1987-11-19-fi-22750-...
  - foverzar 4y ago
    Wouldn't inflation actually be much more harmful for a loan-based economy like the US?
    - 082349872349872 4y ago
      I don't believe so in the long run (but RC_ITR might have something much more accurate to say; thanks very much for the sibling analysis!). We're a much smaller economy than the US, and have a big problem that whenever there's geopolitical instability, flight to quality appreciates our currency massively (despite negative nominal rates; we've broken pegs before because although they would've been nice to keep, the cost would've been prohibitive), which then hoses our innovative sectors, because they had been counting on being competitive in global exports. I had been imagining that keeping a currency too elevated for too long would eventually stifle growth, and that would defo be more harmful than inflation. (for a loan-based economy, for example, substantial appreciation might mean that many borrowers would just default, for lack of any other option) Edit: see the cousin comment: ...it was extremely hard to build a sustainable business in Russia, due to the fact that it was just cheaper to buy something from abroad
    - dragonwriter 4y ago
      > Wouldn't inflation actually be much more harmful for a loan-based economy like the US? No, hence the speed and strength of Fed responses to anticipated deflation vs. anticipated above-optimal inflation. OTOH, the Fed is also why the theoretical adverse impact is unlikely to materialize in any real world scenario.
  - dragonwriter 4y ago
    > Heh. I sometimes wonder how vulnerable the US would be to a squeeze appreciating USD. Not very; it faced two (not deliberate) recently and dealt with them through QE; our monetary policy system is tuned to deal with that problem, the main failure mode is overshooting into inflation on the tail end.
gjsman-1000 4y ago
It would be so fun to be in IT in Russia right now. Software and film piracy is now completely legal because, if they aren’t selling it, it’s not theft. I could put pirated Windows on every workstation with no fear…
- jafarlihi 4y ago
  Except for the fact that most pirated copies out there contain rootkits.
  - rosnd 4y ago
    This isn't true.
- dr-detroit 4y ago
- ChuckNorris89 4y ago
  >It would be so fun to be in IT in Russia right now. Software and film piracy is now completely legal because I'm in EU, not in Russia and still pirate stuff. Granted, it's all for private use. I think what you mean is that now companies in Russia are free to pirate everything for professional/corporate use as well.
  - watwut 4y ago
    Afaik, it would not be exceptional in Russia even before war. And not just Russia for that matter.
- baybal2 4y ago
  An unfortunate Russian citizen here. I left Russia in 2006, but the passport is still like an iron beam on my neck. And you would also get the exit ban. FYI, people who worked for Russian biggest banks are now banned from leaving the country, and that is not only IT, real bankers are banned from leaving as well. Owners of biggest commercial enterprises, and their children were also forbidden from leaving. Russian FOREX, and crossborder transactions are nominally still open, but any outgoing transaction over $10,000 triggers an automatic account freeze. People are also unable to sell their property. There is no official ban, but the necessary paperwork for property sale is impossible to do now. Stock market is bust, but brokerages are also effectively shut down without declaring it publicly. Dividends are frozen because the electronic system controlling dividend transactions simply been physically switched off for months. Russian customs enforcement always been draconian, but now it went into total overdrive, with Russia-Kazakhstan border seeing kilometres long queues because now 100% of all cars, and cargo goes through full search. People been trying to save their last money by trying to get it over the border as gold bars, only to have them seized with zero paperwork.
foverzar 4y ago
> The Russian economy peaked in 2013 and has been going down hill since then Do you have anything substantial to back this claim? Cuz to me (actually living in Russia) it seems like exactly the opposite - the economy had been slowly decomposing up until the financial crisis of 2014, when the exchange rates had shifted so that roubles became cheaper. Until then it was extremely hard to build a sustainable business in Russia, due to the fact that it was just cheaper to buy something from abroad and the only reliably sustainable industries were food production and unprocessed resources. After 2014 - in my impression - quite a lot of entrepreneurs seem to have seized the opportunity of cheaper expenses, as I personally saw quite a lot of new businesses rising and blooming. So I'm having a hard time figuring out what exactly had peaked in Russian economy in 2013. Sales of unprocessed resources? This is hardly a success. Also, I don't get why are trying to reduce all the complexities of real world economics to some single number. This just feels kinda blunt. Why specifically GDP? GDP doesn't tell you anything about sustainability and self-sufficiency of some economy. Hell, all it basically tells you is how much money had changed ownership over the observation period. Why not PPP, for example? Cuz GDP number makes Russia look weak, but PPP makes it one of the world leaders, leaving behind GB, France and Italy? :P
- xtian 4y ago
  The US likes GDP because it lets us report growth based on all sorts of unproductive financial instruments like interest payments on medical debt.
  - yucky 4y ago
    You're saying the quiet part aloud!
- jcranmer 4y ago
  > Why specifically GDP? [...] Why not PPP, for example? PPP is effectively a currency conversion rate, it's not a meaningful metric by itself anymore than $1USD ~= 1000won or ~= 100 yen tells you anything about the South Korean or US or Japanese economies. So I'm assuming you're comparing nominal GDP versus GDP by PPP. To a first approximation, nominal conversion rates give you an idea of how an economy can interact with others on a trade basis, whereas PPP conversion rates give you an idea from the perspective of a domestic consumer. For what you tend to use total economic size for, nominal GDP tends to be a better reflection of the size of the economy, whereas PPP works better for something like GDP per capita.
DieAgainAli 4y ago

H8crilA 4y ago

Yeah, and consider the effect that it has on the rouble: with lots of sales (of mostly energy) but nowhere to spend that money the rouble is actually likely to appreciate rather than depreciate. I'm referring here to the premature celebration of the "death of the rouble", you may remember this narrative. This is still a bit obfuscated by the ongoing sale of the Russian foreign reserves (the ~50% that wasn't frozen). But generally speaking the rouble needn't decrease in value, despite the sanctions taking the intended effect. If you're still unconvinced then look at the granddaddy of all deflations, the great depression. Caused by the freezing of trade it was (in most countries) experienced through the appreciation of the value of currency - deflation, rather than inflation.

082349872349872 4y ago
Heh. I sometimes wonder how vulnerable the US would be to a squeeze appreciating USD. You could probably even get large parts of the US political class to go along with it, as (in the short term) they'd be benefiting relative to their countrymen.
- RC_ITR 4y ago
  Very invulnerable. This whole “Squeeze” thing is a function of liquidity. The reason that stocks like GME and AMC can experience the effects of a short squeeze is because of how relatively illiquid they are (i.e. point $1bn of consumer capital toward a $3bn stock with thin trading and you can do wild things). The USD is the currency in which nearly all middle eastern oil is priced, the currency in which $16tn of consumer spending is done, quadrillions of stock trades, etc etc etc. There’s no individual or group who can point enough capital at that to make for a squeeze, and even if they could, then why wouldn’t the treasury take advantage and start printing more dollars (see: Hertz issuing new shares and ruining wallstreetbet’s day)
  - H8crilA 4y ago
    It has happened in the 80s though. Soros (for example) has written a lot about this phenomenon and traded extensively on it, making a small truckload of money. It peaked in early 1985: https://tradingeconomics.com/united-states/currency https://tradingeconomics.com/united-states/currency It was bad for a lot of countries that had dollar-denominated debt, which is a bad idea precisely for this reason. Countries never learn though, it seems. But it was not too bad for the US actually.
    - RC_ITR 4y ago
      No, not even close. In 1985, Soros bet that the Plaza Accord (a market manipulation among a cartel of leading economies to weaken the dollar for political reasons) [1] would work and he was right. That has nothing to do with shorts or squeezes and everything to do with collusion among the Treasuries and Central Banks of something like 75% of the world economy at that point. Soros 'won' the trade because he realized how impactful this collusion would be while the rest of the market didn't. [1]https://www.nber.org/system/files/working_papers/w21813/w21813.pdf https://www.nber.org/system/files/working_papers/w21813/w218...
      - 082349872349872 4y ago
        Maybe you can answer a different question of mine: what, if anything, did Japan get out of the Plaza Accord? By weakening USD (and hence USD-denominated commodities?) West Germany got a strong DM and hence could LBO East Germany and reunify. Japan got a strong JPY and ... what, besides stagflation? edit: am I calculating this right? to do a Plaza today would need, not the G5, but pretty much the entire G20?
        RC_ITR 4y ago
        Japan got the opportunity to go on an international asset-buying spree (which is always less impactful to real GDP than it seems cough Belt and Road cough) [0] [1] [0]https://www.washingtonpost.com/archive/politics/1989/10/31/japanese-to-buy-51-of-rockefeller-center/d6cca3ff-9e5a-4593-b6f0-4f939f464624/ https://www.washingtonpost.com/archive/politics/1989/10/31/j... [1]https://www.latimes.com/archives/la-xpm-1987-11-19-fi-22750-story.html https://www.latimes.com/archives/la-xpm-1987-11-19-fi-22750-...
- foverzar 4y ago
  Wouldn't inflation actually be much more harmful for a loan-based economy like the US?
  - 082349872349872 4y ago
    I don't believe so in the long run (but RC_ITR might have something much more accurate to say; thanks very much for the sibling analysis!). We're a much smaller economy than the US, and have a big problem that whenever there's geopolitical instability, flight to quality appreciates our currency massively (despite negative nominal rates; we've broken pegs before because although they would've been nice to keep, the cost would've been prohibitive), which then hoses our innovative sectors, because they had been counting on being competitive in global exports. I had been imagining that keeping a currency too elevated for too long would eventually stifle growth, and that would defo be more harmful than inflation. (for a loan-based economy, for example, substantial appreciation might mean that many borrowers would just default, for lack of any other option) Edit: see the cousin comment: ...it was extremely hard to build a sustainable business in Russia, due to the fact that it was just cheaper to buy something from abroad
  - dragonwriter 4y ago
    > Wouldn't inflation actually be much more harmful for a loan-based economy like the US? No, hence the speed and strength of Fed responses to anticipated deflation vs. anticipated above-optimal inflation. OTOH, the Fed is also why the theoretical adverse impact is unlikely to materialize in any real world scenario.
- dragonwriter 4y ago
  > Heh. I sometimes wonder how vulnerable the US would be to a squeeze appreciating USD. Not very; it faced two (not deliberate) recently and dealt with them through QE; our monetary policy system is tuned to deal with that problem, the main failure mode is overshooting into inflation on the tail end.

gjsman-1000 4y ago

It would be so fun to be in IT in Russia right now. Software and film piracy is now completely legal because, if they aren’t selling it, it’s not theft. I could put pirated Windows on every workstation with no fear…

jafarlihi 4y ago
Except for the fact that most pirated copies out there contain rootkits.
- rosnd 4y ago
  This isn't true.
dr-detroit 4y ago
ChuckNorris89 4y ago
>It would be so fun to be in IT in Russia right now. Software and film piracy is now completely legal because I'm in EU, not in Russia and still pirate stuff. Granted, it's all for private use. I think what you mean is that now companies in Russia are free to pirate everything for professional/corporate use as well.
- watwut 4y ago
  Afaik, it would not be exceptional in Russia even before war. And not just Russia for that matter.
baybal2 4y ago
An unfortunate Russian citizen here. I left Russia in 2006, but the passport is still like an iron beam on my neck. And you would also get the exit ban. FYI, people who worked for Russian biggest banks are now banned from leaving the country, and that is not only IT, real bankers are banned from leaving as well. Owners of biggest commercial enterprises, and their children were also forbidden from leaving. Russian FOREX, and crossborder transactions are nominally still open, but any outgoing transaction over $10,000 triggers an automatic account freeze. People are also unable to sell their property. There is no official ban, but the necessary paperwork for property sale is impossible to do now. Stock market is bust, but brokerages are also effectively shut down without declaring it publicly. Dividends are frozen because the electronic system controlling dividend transactions simply been physically switched off for months. Russian customs enforcement always been draconian, but now it went into total overdrive, with Russia-Kazakhstan border seeing kilometres long queues because now 100% of all cars, and cargo goes through full search. People been trying to save their last money by trying to get it over the border as gold bars, only to have them seized with zero paperwork.

foverzar 4y ago

> The Russian economy peaked in 2013 and has been going down hill since then Do you have anything substantial to back this claim? Cuz to me (actually living in Russia) it seems like exactly the opposite - the economy had been slowly decomposing up until the financial crisis of 2014, when the exchange rates had shifted so that roubles became cheaper. Until then it was extremely hard to build a sustainable business in Russia, due to the fact that it was just cheaper to buy something from abroad and the only reliably sustainable industries were food production and unprocessed resources. After 2014 - in my impression - quite a lot of entrepreneurs seem to have seized the opportunity of cheaper expenses, as I personally saw quite a lot of new businesses rising and blooming. So I'm having a hard time figuring out what exactly had peaked in Russian economy in 2013. Sales of unprocessed resources? This is hardly a success. Also, I don't get why are trying to reduce all the complexities of real world economics to some single number. This just feels kinda blunt. Why specifically GDP? GDP doesn't tell you anything about sustainability and self-sufficiency of some economy. Hell, all it basically tells you is how much money had changed ownership over the observation period. Why not PPP, for example? Cuz GDP number makes Russia look weak, but PPP makes it one of the world leaders, leaving behind GB, France and Italy? :P

xtian 4y ago
The US likes GDP because it lets us report growth based on all sorts of unproductive financial instruments like interest payments on medical debt.
- yucky 4y ago
  You're saying the quiet part aloud!
jcranmer 4y ago
> Why specifically GDP? [...] Why not PPP, for example? PPP is effectively a currency conversion rate, it's not a meaningful metric by itself anymore than $1USD ~= 1000won or ~= 100 yen tells you anything about the South Korean or US or Japanese economies. So I'm assuming you're comparing nominal GDP versus GDP by PPP. To a first approximation, nominal conversion rates give you an idea of how an economy can interact with others on a trade basis, whereas PPP conversion rates give you an idea from the perspective of a domestic consumer. For what you tend to use total economic size for, nominal GDP tends to be a better reflection of the size of the economy, whereas PPP works better for something like GDP per capita.

DieAgainAli 4y ago