Wednesday, June 29, 2016

Russia: Progress with Sanctions and Import Substitution

"We pretend to work, they pretend to pay us."  Soviet era joke.

The EU placed sanctions against Russia for Russia's failure to surrender when undermined by the USA and the EU. As the only adult in the room, Putin is playing the situation well, and looking to "import substitution", that is having Russia make what was once imported.

The witless EU merchants will find the Russian market never to return, forcing prices down due to newly excess capacity, plus they can look forward to Russian competition in their foreign markets, as Russia re-learns to produce for real pay.

But here is a Russian bank official with sadly dead-wrong capitalist visions:
Will the reduction of the key rate of Central Bank influence the lending of enterprises?Loan rates have got rid of the key rate to a great extent. But its current level remains quite high and continues to control lending. But we go on reducing the key rates regardless of the actions of Central Bank.

Source :
No one needs finance, they need customers.  Once there are customers, there is vendor financing.  Anyone who needs a bank loan for business is simply engaging in another form of Wimpyism, that is to say, hoping to Tuesday for a hamburger today.  These loans are unnecessary.  And organic, asset based, interest free vendor finance system may be lost to Russia, and need be rediscovered.

What is interesting is in his interview, talking about all the business help available, is his anecdotes of how many companies with no help have done so well.  Indeed, check your stats: how many with help have failed?

The best thing Russia could for recovery is to maintain strict separation of business and state.  The state has no say so in commerce and industry, and on the other hand, commerce and industry can expect no assistance from the state.

Russia is already unbeatable, but then it could be wealthy and unbeatable.  Protect the borders against the USA, and let the Russians prosper.

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