Category Archives: Economics/Statistics

What Does this Look Like 10 Years From Now?

by Simon Black via Sovereign Research

On March 2, 1629, after years of escalating tensions with his own government, King Charles I of England dissolved parliament and ordered all the politicians to go home.

He was only in the fourth year of his reign, but Charles was already a very unpopular king. One of his worst habits was frequently abusing his power and taking unilateral executive actions– raising taxes or passing new regulations– which would ordinarily require the approval of parliament.

But Charles hated going through parliament, and he routinely found ways to bypass them; often he would creatively interpret obscure passages of ancient laws as justification to do whatever he wanted.

In one instance, Charles decided that a 400+ year old law, which had first been decreed under Henry III in the early 1200s, gave him the authority to demand payment from everyone in the country making more than 40 pounds per year. It did not.

In another example, he claimed that ‘tradition’ entitled him to collect customs and duties on various imports, even though English law clearly required parliamentary approval on all imposts.

Charles also famously demanded money from wealthy merchants and banks, calling them “forced loans”. He even seized literally TONS of silver from the Royal Mint that was being stored on behalf of wealthy individuals and foreign governments.

Parliament made attempts to block Charles; when he asked for money to raise an army and go fight in the Thirty Years War (which had been raging in Europe since 1618), parliament refused. When he wanted funds to bail out a close relative in Denmark, parliament again refused him.

Sometimes their disputes even spilled into the courts, where judges had to determine the legality of the king’s taxes and regulations.

But nothing was ever settled, and no compromises reached. In fact the conflict continued to escalate, until Charles finally dissolved parliament in 1629… effectively shutting down the government.

This is an often-repeated story throughout 5,000+ years of human history; there have been countless examples of dysfunctional governments and terrible leadership that fail to reach a rational compromise over the nation’s finances.

And such examples tend to be a hallmark of a nation in decline.

In the case of Charles, he would go on to be arrested, tried, and executed, and England plunged into a civil war.

Louis XV of France, and his successor Louis XVI, also routinely fought with their parliaments over royal finances. France would soon go bankrupt and dive head-first into revolution.

These are lessons worth noting, given that the United States government is once again at the precipice of default.

The national debt now stands at nearly $31.5 trillion. This is the current statutory ‘debt ceiling’,

meaning that the Treasury Department no longer has the legal authority to borrow more money.

This means that yet another government shutdown is potentially on the table, as is a default on the national debt.

If this story sounds familiar it’s because this has already happened in recent history– in 2011. And 2013. And 2018. And 2019.

Now it’s happening again. And unsurprisingly, both sides have dug in and claim they are unwilling to negotiate their demands.

To say this is yet another humiliation for the United States is a massive understatement. The entire world can see that, not only is the US government incapable of managing its finances… but also that its politicians cannot rationally solve problems. It’s pitiful.

What I really want to focus on today, however, is the future: what do you think this problem will look like 10 years from now?

Today it’s already a terrible embarrassment… and a major problem.

The national debt is so big that, this fiscal year, the Treasury Department will spend close to $1 TRILLION just to pay INTEREST.

This is happening at a time when:

1) Interest rates are rising (which means that the government’s annual interest bill will increase)

2) The economy is slowing (so tax revenues will decrease)

3) Government spending is still outrageous, with a $1+ trillion deficit expected this fiscal year

This is a pretty disastrous scenario. And if you plot this trend line starting from where we are today, it’s easy to imagine what might happen over the next decade.

If deficits are already $1 trillion per year right now, how high will they be in a decade? If the national debt is $31.5 trillion today– roughly 120% of US GDP– how high will it be a decade from now?

It’s silly to assume that the United States can simply keep growing the national debt forever without consequence. It’s silly to assume they can run trillion dollar deficits every year without consequence.

Today those consequences are just embarrassments and minor inconveniences. Ten years from now they may be major catastrophes.

This is the entire point of having a Plan B. The future is far from certain– and it’s possible that voters finally elect competent leadership who act responsibly and arrest the nation’s decline.

And that’s a nice hope, and it would be great if it happens.

But it’s a lot more rational to focus your energy on things that you can control. And that’s a Plan B.

If your government is on a clear path to more humiliation and fiscal ruin, it makes sense to ensure you don’t have all of your eggs in one basket.

Russia’s Economy in 2022

Main Statements by Russian Deputy Prime Minister Alexander Novak:

▫️Russian budget revenues from the oil and gas industry grew by 28% in 2022, despite the sanctions imposed by the West

▫️In 2022, coal production in Russia increased by 0.3%, to 442 million tons

▫️Russia increased LNG exports in 2022 by 8%, to 46 billion cubic meters.

▫️Oil exports from Russia in 2022 increased by 7%

▫️484 billion cubic metres of gas were supplied to the domestic market of the Russian Federation in 2022

▫️Gas supplies via the Power of Siberia to China in 2022 amounted to 15.5 billion cubic meters

▫️Electricity production in Russia grew by 0.7% in 2022, consumption by 1.5%

▫️In the new regions of the Russian Federation, more than 3.5 thousand kilometres of power lines and four power units at stations were restored

Had the Soviet Union Been Preserved . . .

With the Soviet Union intact, Russia could now have had 172 million people living in it, and a 67% higher economy and income.

As a result of the destruction of the Soviet Union, Russia has lost 26 million people, 40% of its economy, and 66% of its industry, various sources have estimated. This is the difference between the actual figures and the alternative figures that would have developed under the Soviet growth rate averaged over 1980-1989.

Population loss: – 26 million 

According to the USSR Goskomstat forecast of 1990, the RSFSR could have 172.4m people by the end of 2022. But in fact, it is now 146.4 million. 

Loss of income: – 41%

The average monthly disposable income of 80% of Russians (without the rich) in 2022 will be around 25,550 rubles. At the Soviet growth rate and level of inequality, they would have been 43,000 roubles, or 68% more.

Losses to the economy: – 40%

“As you know,” there was “stagnation” in the 1980s. In 1985, economic growth slowed to as much as 2.3%, which was used as an excuse to start perestroika. But at that rate of growth, the GDP would have been 2.1 times bigger now than it was in 1990, not 26%, as in fact it was. Russia’s economy (GDP at PPP) was $7.7 trillion instead of $4.6 trillion and would have ranked 4th in the world after China, the USA, and India.

Production losses – 66%

Agricultural losses – 44%

Asset losses – 56%

Geopolitical losses – 32%

A similar assessment of the effects of the 1941-1945 war showed that Russia’s population lost 20 million people, as estimated by Rosstat. The economy of Soviet Russia lost 44%, industry lost 41%, and agriculture lost 43%. The country lost 45% of its wealth, and the population lost 37% of its income.

As we can see, the destruction of the USSR and the transition from socialism to capitalism, that is, to a lower stage of social development, caused losses in Russia that are comparable to the losses from Hitler’s occupation in 1941-1945. If we look further and consider the split of the sister republics and the world-historical consequences, the destruction of the Soviet Union is the biggest geopolitical catastrophe in the history of mankind.

#research #USSR

U.S. Interest Expense UP 50% in Two Months

by SRSRocco Report

The U.S. government just released its November Treasury Statement with a shocker that the Debt-Service Interest Expense surged 50% in the first two months. This is a great deal of money when it equals nearly the same value for World Transparent Silver Holdings.

So, how much did the U.S. Interest Expense increase in the first two months of fiscal 2023? Let’s look at the following charts from the November Treasury Statements.

The U.S. government paid a total “Net Interest” Expense of $60 billion for October-November 2021.

Now, look at what was paid for October-November 2023:

The U.S. Treasury forked out an additional $30 billion for a total of $90 billion (just for October & November) to service the U.S. Debt, now at $31.3 trillion. Amazingly, this is a 50% increase year-over-year. Folks, $30 billion is a lot of money and represents nearly the same value as World Transparent Silver Holdings: Read More

A BRICS Reserve Currency?

by Yaroslav Lissovolik via Valdai Club

The new BRICS reserve currency can act in concert with the stronger role performed by BRICS national currencies to take on a greater share of the total pie of currency transactions in the world economy, writes Valdai Club Programme Director Yaroslav Lissovolik.
The issue of the creation of a BRICS reserve currency has taken on particular significance in recent months after President Putin declared that the creation of such a currency was in the process of discussion. This was followed by a series of statements coming from Russia’s legislative branch on the expediency of creating a new reserve currency — most recently from the Federation Assembly speaker Valentina Matvienko. While the debate on the possibility of creating such a reserve currency is only starting in Russia and more broadly across the global economy, the implications of such a move on the part of the BRICS could have transformational consequences for the global financial system. [category economics/statistics]
Initially, the proposal to create a new reserve currency based on a basket of currencies of BRICS countries was formulated by the Valdai Club back in 2018 — the idea was to create an SDR-type currency basket composed of BRICS countries’ national currencies as well as potentially some of the other currencies of BRICS+ circle economies. The choice of BRICS national currencies was due to the fact that these were the among the most liquid currencies across emerging markets. The name for the new reserve currency — R5 or R5+ — was based on the first letters of the BRICS currencies all of which begin with the letter R (real, ruble, rupee, renminbi, rand).
The recent debates concerning the prospects for the creation of a new reserve currency focused more on the risks, fragilities and outright impossibility of the R5 project. Less attention has been accorded to estimating the benefits (including in terms of hard figures) to BRICS economies and EM more generally. There has also been scant attention with respect to the actual modalities of launching the BRICS reserve currency.
What is clear at this stage is that the BRICS reserve currency will not be created to replace the national reserve currencies of the BRICS economies — rather it will complement these national currencies and will serve to improve the possibilities for more EM currencies to attain reserve status. Accordingly, the attainment of high trading shares among the BRICS economies is a desirable but not altogether an indispensable condition for launching the new reserve currency. In fact, the new BRICS currency does not have to service all trade transactions among BRICS economies in the very near term. Initially, the new BRICS currency could perform the role of an accounting unit to facilitate transactions in national currencies. In the longer run, the R5 BRICS currency could start to perform the role of settlements/payments as well as the store of value/reserves for the central banks of emerging market economies. 
Within the composition of the R5 currency basket the share of the Chinese renminbi may be initially set at a relatively high level in order to take advantage of the already advanced reserve status of the Chinese currency. This share may be reduced progressively in stages later on along with the inclusion of new EM national currencies. Outside of the BRICS economies some of the potential candidates that with time could be included into the R5+ currency basket may feature the Singaporean dollar or the UAE’s dirham.
One of the potential risks associated with the use of EM currencies in reserves is their high volatility. The basket mechanism of the BRICS reserve currency will allow for reducing some of this volatility via averaging out the exchange rate dynamics of currencies that follow different market trends — if the currencies of Russia, South Africa and Brazil follow the commodity cycle, the opposite is true with respect to commodity importers such as India and China.
Importantly, the scope for employing the new reserve currency in the world economy is sizeable given the tremendous potential for de-dollarization. The new BRICS reserve currency can act in concert with the stronger role performed by BRICS national currencies to take on a greater share of the total pie of currency transactions in the world economy. This greater role can be gradually extended from servicing foreign trade transactions to investment flows across the developing world. In line with the original R5 concept developed by Valdai Club in 2018 one of the possible venues for boosting the use of national currencies and the BRICS reserve currency could be the creation of a platform for regional development banks in which BRICS economies are members. Such a platform could develop a portfolio of common/integration projects that may be financed in national currencies.
In the end, the launching of a new reserve currency if successful will impart a transformational effect on the international financial system. The Central Banks in the global economy are experiencing a notable shortage of reserve currencies in managing their reserve holdings. In this respect, the emergence of additional reserve currencies from among the EM economies will serve to expand the possibilities for diversifying reserve holdings and reducing the vulnerabilities associated with the dependence on a narrow range of currencies. The R5 project can thus become one of the most important contributions of emerging markets to building a more secure international financial system. 

World Population, just over 8 Billion and Growing

The world’s population is on the brink of eight billion, with worldometers offering a handy widget allowing users to count down to the moment 7,999,999,999 hits that magic number.
According to the statistical service, which aggregates data from official national and international organizations like the UN, the WHO, and the OECD, at the time of this writing, the planet is currently carrying over 7,999,507,000 people, with over 115.9 million born this year, including 280,000+ of them over the past 24 hours alone. Over 58 million people passed away this year, 140,000+ today, with a net annual population increase approaching 58 million.
The United Nations expects the world’s population to top 8 billion on November 15. In a report published in July, the agency forecast a population of 8.5 billion by 2030, and 9.7 by 2050, and a peak of 10.4 billion in the 2080s before a gradual decline begins.
Growth and growth projections differ radically depending on country, with the UN calculating that globally, the population increase has actually slowed to its lowest levels since 1950 and the start of the agricultural Green Revolution. Moreover, two thirds of the world already lives in a country where the fertility rate per woman is below 2.1 births – equivalent to net zero growth. The UN projects that just eight countries: the Democratic Republic of the Congo, Egypt, Ethiopia, India, Nigeria, Pakistan, the Philippines and Tanzania will account for more than 50 percent of global population growth to 2050, with India expected to surpass China as the world’s most populous nation by 2030.
Zimbabwe Farmers - Sputnik International, 1920, 11.11.2022

Underestimating the Russian Economy

by Emmanuel Todd via Marianne

Why did the West underestimate the Russian economy? The problem is the false calculation of GDP, — Marianne

▪️ Why is the Russian economy not collapsing? After all, all the sanctions that the West was capable of have been applied against it. Why, on the contrary, is the European economy in danger of collapse on the eve of winter, as evidenced by a record surge in inflation, asks French Marianne

▪️ The answer, according to Marianne, is that economic power, measured on the basis of GDP calculated according to the current rules, is fictitious. This tool for measuring the economic success of a country is outdated. It no longer measures the aggregate production of steel, cars, refrigerators and televisions, that is, real goods. It measures primarily the production of intangible assets, which some sometimes (and others very often) they are considered useless. And therefore they represent only nominal value

▪️ As an example of the fictitiousness of the GDP indicator, Marianne cites the example of the US economy, whose GDP is 40% of the GDP of the entire West. Healthcare in the United States “sucks in” 18% of “national production”, which is almost 2 times more than in other Western countries. But let’s look at the efficiency indicators of these costs, Marianne suggests: life expectancy in the United States is only 77.3 years compared to 80.9 in Germany, 82.2 in France, 82.4 in Sweden, 84.6 in Japan.

▪️ How can this be explained? And the fact that more than half of American health care costs (from 10 to 13% of the total GDP) are the unreasonable incomes of their doctors (which account for fewer residents than in France), as well as the insane cost of medicines offered to Americans (half of world spending)

▪️ Reverence for the dollar and reverence for the euro make the West mistake banknotes for real wealth. But these money bags will not change the fact that wheat production in America fell from 65 to 47 million tons between 1980 and 2021, and production in Russia increased from 36.9 to 80 million tons from 1987 to 2020

▪️ Wheat together with gas give Russia more power than the notorious “intangible assets” give the United States, Marianne believes. This is the whole problem of reserve currencies: they can be created for cheap (in fact, for nothing), but what can you buy with them in the countries producing these currencies if they sacrificed their industry on the altar of globalization?

▪️ The false system of assessing economic potential leads to the fact that now we resemble a military pilot who flew on faulty instruments and thought he was flying at an altitude of 10,000 m. Until he saw that it was actually at an altitude of 350 m. And there is no runway visible on the horizon,” Marianne concludes

Russian Corporate Profits Jump 25% as Sanctions Hit Muted

  • Net income gain came despite economic contraction, inflation
  • Data are latest sign of economy’s resilience amid sanctions
Moscow's International Business Center. 
Moscow’s International Business Center. 
Source: Bloomberg
Russian corporate profits jumped 25% in the second quarter, even as sweeping US and European sanctions imposed over the Kremlin’s invasion of Ukraine pushed the economy into recession.
Profits jumped to 9.5 trillion rubles ($144 billion at the average rate for the period), with the year-on-year increase outpacing the 17% rise in consumer prices over the period, according to Sberbank CIB calculations based on data from the Federal Statistics Service. 

“The second quarter results were very good, demonstrating the resilience of the Russian economy,” analysts at the state-owned lender wrote. “The solid profit growth provides hope for a revival in corporate investment.”

Profits Surge

Russian corporate profits jumped in 2Q, defying sanctions

Source: SberCIB, Rosstat

Percentage increase from previous year

The manufacturing sector, which was hit especially hard as sanctions cut off key imported components, still managed a 44% profit gain, while transportation and storage were up 168%. Profits in real estate and construction surged, as did earnings in hotels and catering, as Russians stayed home as international air service was limited. 

Putin’s War Sends Russian Economy Back to 2018 in Single Quarter

Wholesale and retail trade suffered with the drop in sales, with profits off 13%, the report said, while earnings in mining were down 51% as sanctions hit key producers. In the tech sector, where western companies pulled out en masse, profits were down 48%.

— With assistance by Benjamin Harvey

The Vassal Europe in Numbers

The main buyers and sellers of US securities over the past 4 years.

The list is divided into two parts, first buyers with cumulative purchases of all types of bonds over 5 billion dollars in 4 years, below the main sellers with cumulative sales of more than 1 billion over 4 years. For shares, the change in market value is the main factor in the revaluation.

All bond purchases occur only in the first 12 countries and offshore zones: the UK, Japan, Canada, Belgium, the Cayman Islands, Luxembourg, France, Taiwan, South Korea, Singapore, Hong Kong and India. This means that all other countries have integrally zero balances. It also shows that the main flow of purchases is concentrated from American allies.

Sales come from Russia, which is the absolute leader, then Ireland (as part of tax maneuvers and repatriation of assets back to the US), China, Turkey, Saudi Arabia and Kazakhstan.

Therefore, the United States can only count on its allies in terms of the accumulation of financial flows.

ZradaXXII, [Jun 22, 2022 at 11:52 PM]

So far, the main losers in all this geopolitical fuss are the EU countries – it is they who pay the highest price, and they pay all the bills. They are the main provider of capital in the US, buying back US securities. The EU is subsidizing Russia like never before – they crashed their exports and increased their imports from Russia to a record and took full support of Ukraine.

Confirmation of accumulated imbalances came out the other day – record trade deficits across all countries.

In Germany, there is still a surplus of 2 billion euros against the norm of 18-20 billion per month, but the Germans have not had such a low surplus since the formation of the Eurozone. France, Poland, Romania, Hungary, Czechia, Belgium, and Portugal have all-time-high trade deficits, with Belgium and Czechia usually running surpluses. Italy and Spain hit their trade deficit lows.

All the leading EU countries have lost. This is a wonderful example when, instead of your own interests, you begin to serve the interests of the USA.

So far, the main losers in all this geopolitical fuss are the EU countries – it is they who pay the highest price, and they pay all the bills. They are the main provider of capital in the US, buying back US securities. The EU is subsidizing Russia like never before – they crashed their exports and increased their imports from Russia to a record and took full support of Ukraine.

Confirmation of accumulated imbalances came out the other day – record trade deficits across all countries.

In Germany, there is still a surplus of 2 billion euros against the norm of 18-20 billion per month, but the Germans have not had such a low surplus since the formation of the Eurozone. France, Poland, Romania, Hungary, Czechia, Belgium, and Portugal have all-time trade deficits, with Belgium and Czechia usually running surpluses. Italy and Spain hit their trade deficit lows.

All the leading EU countries have lost. This is a wonderful example when, instead of your own interests, you begin to serve the interests of the USA.

US Oil Reserves Running Low – Bloomberg

The stockpile is forecast to dwindle to a 40-year low by October

Washington has been actively selling from its Strategic Petroleum Reserve (SPR) over the past year to keep energy prices from rising even higher, Bloomberg reported on Friday, noting that the government can’t keep tapping the reserves forever.

According to the report, over the past year almost 115 million barrels were released into the market. Those sales have soared to a record high of nearly one million barrels per day since mid-May. At the current rate, the United States is selling more barrels from its reserve than the production of most medium-sized OPEC countries, such as Algeria or Angola.

The SPR contains two kinds of crude: medium-sour, which is the quality of crude pumped by Russia, most Middle Eastern countries and Venezuela, as well as light-sweet crude.

Bloomberg’s analysis of official data showed that 85% of the oil sold from the SPR over the past year has been medium-sour. Those sales have reduced the amount of crude inside the reserve “dramatically.”

If Washington sticks to its current pace, the reserves will shrink to a 40-year low of 358 million barrels by the end of October, when the releases are due to stop. A year ago, the SPR, located in four caverns in Texas and Louisiana, reportedly contained 621 million barrels.

“As the oil market looks today, it’s difficult to see how Washington can halt sales in October. Removing that additional supply would mean commercial inventories quickly deplete, putting upward pressure on oil prices,” says the report.

According to OilX estimates, cited by Bloomberg, by the end of October the SPR will hold only 179 million barrels of medium-sour crude. This means that during the period from June 2021 to October 2022, the US is likely to sell about 180-190 million barrels of medium-sour crude from its reserves.