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Russia is keeping the economy going by burning money on the war.
Maybe 3.2% growth is a bit better than expected, but investments can't be good with high National Bank interest rates, and AFAIK inflation is still hurting consumers in Russia. Consumer spending remains high, mostly because essentials is a high share of consumption.
Just because Russia has decent economic growth on paper, doesn't mean the economy is actually good or healthy if it's based on deficits.
Russia is keeping the economy going by burning money on the war.
The only way one can make money from a war is by selling weapons to others and not fighting it yourself. How can making explosives and throwing them away produce anything of value for their own economy?
The only way one can make money from a war is by selling weapons
Increasing the economy does not mean they make money, in this case it's rather that they spend money.
When the government pump money into weapons production and other military spending, that increases the economy immediately, then people get paid and buy other stuff.
In general government spending increases the economy.
But that money has to come from somewhere. Money printer go brrrr means massive inflation
Money printer go brrrr means massive inflation
It does. But that inflation doesn't hit instantly. Russia is banking they can weather this storm of their own making by draining their soverign wealth fund, emptying their Soviet stockpiles, and applying dizzying interest rates of 16%. These are short term boons that have very profound long term downsides for Russia.
That's pretty old school thinking.
As though your village only has so many carrots so giving everyone twice as much money means carrots will cost twice as much.
These days the thinking is, if everyone has a little money then more people will grow more carrots to sell.
The extra money floating around motivates people to produce value in order to win some of that cheddar.
Of course, this only works up to a point.
Of course, this only works up to a point.
Ah yes I recognize this economic model.
No mate, check the Americans for a masterclass on making money from a war you start:
https://www.npr.org/2003/12/22/1559574/examining-halliburtons-sweetheart-deal-in-iraq
government spending has remained high
War will do that.
Let's have a war
It'll jack up the Dow Jones
-Fear, circa 1981Building things and then blowing them up increases your GDP but it provides negative benefit to your society. All of that labor is wasted just for products that are destroyed and cause destruction.
And wage growth will be very robust if you force 1 million of your best workers to flee the country and then kill or cripple 300,000 more workers on top, and then create tons of jobs to build stuff that gets blown up instead of things people can actually use for something productive.
Neither of these metrics tell the real story for a wartime economy. Subsidizing useless production that gets blown up has to take largely from state coffers, robbing from essential services for the population.
And if you lose your revenue streams like oil because your refineries and pipelines keep getting blown up and you lose customers to sanctions, and you take workers from useful sustainable jobs with real benefit and move them to building things you blow up instead, eventually you will have to choose between any services for the population and funding the war.
You don't get tax revenue from state spending that you blow up. Take it far enough and you'll just run out of money for the war and will have to enter hyperinflation to keep printing the money to fund it.
These trends are under way in Russia, they spend 40% of their national budget on war already. They lost 20% of their refining capacity in the last couple months alone. It will take a while to reach a full disaster, but they can't continue this way indefinitely. They will hit the wall at some point in the next decade.
A lot of unseen costs of this war will take decades to be seen.
Reduced education spending? Less qualified workers to create added value.
Reduced social services? More people getting sick and dying.
Reduced infrastructure spending? Increased prices of transport and goods.
Yes. Enshittification on a national scale.
Sorry, I can't hear you over the sound of numbers going up.
It will take a while to reach a full disaster, but they can't continue this way indefinitely. They will hit the wall at some point in the next decade.
I'm curious to see if/how much those effects will be diminished by the war effort sabotage by the right will dampen the impact over the coming years
It's having a big impact right now. If they keep it going for another year, Ukraine will be in serious trouble.
The question is not whether Russia will hit a wall, the question remains whether there will be a Ukraine before that happens. Russia just like big corporations is too big to fail.
It all depends on NATO. NATO countries have 20 times the GDP of russia and 5 times the population. If NATO stays in, Russia will lose. If they don't, Ukraine will lose.
Collapse incoming
Kristalina Georgieva, Managing Director of the International Monetary Fund, born in Bulgaria. Bulgaria considered 16th Soviet Republic.
Probably just a coincidence.
But how will Oil exports remain sustainable once most of the population uses EVs?
Will not happen anytime soon.
In 30+ years
You will still need to charge those EVs, electricity production is still dominated by production via burning of hydrocarbons, by-products of oil.
A lot of oil is used to produce energy or heat homes and to produce plastics. Moving towards renewables and better home insulation will have a much stronger and faster positive effect on reduced oil consumption than a move to EV's would.
Turns out the intl sanctions have just shifted Russia towards domestic industries and massive govt spending, invalidating half a century of propaganda against domestic spending and indigenous industry, oops!
Yes, the war has its negative impacts hidden by this metric, but Russia did the objectively correct thing by not scrambling to replace lost intl trade. Compare with the UK that hasn't made up for lost intl. trade since brexit and is still suffering for it.
Yep. When you spend your sovereign wealth fund on massive quantities of military hardware, your GDP goes up. The negative is that you quickly drain your sovereign wealth fund and you aren't investing in the future of your country. This money could have gone to getting the last 20% of Russians indoor plumbing, but it instead went to refurbishing tanks to get blown up in Ukraine.
A flame that burns twice as bright
Burns only half as long
My eyes are growing weary as I finalize this song
Sooooooooo
Sit back, have a cup of Joe
And watch those wheels go round
Cause those damned blue collar tweekers are running this here town!
🎵🎶
Hyyyyuh
🎵🎶
Hyyyyuh
🎵🎶🎵🎶🎵🎶🎵
HYYYYYYUH!
Maybe other governments should take note and have high government spending?
I'm actually serious. Let's remove low density from cities build high density housing and loads of public transport. Spend money to decrease costs to population, thereby further increasing growth with more disposable income.
Please no, not like that. Their government spending is only on things that go BOOM!
While we are suffering with stagnant wages and inflation Russia China and Mexico were the only countries that had positive wage growth the last few years