Apr 082015
 
 April 8, 2015  Posted by at 10:21 am Finance Tagged with: , , , , , , , ,


Harris&Ewing Less taxes, more jobs, US Chamber of Commerce campaign 1939

It wouldn’t be a first, but it would certainly be a – bigger – shock. That is to say, the Bank of England hijacked the head of Canada’s central bank some time ago, but, while unexpected enough, that would pale in comparison to the US hiring the present Governor of the Russian central bank, Elvira Sakhipzadovna Nabiullina. It would still seem to be a mighty fine idea, though.

Not that I think it will happen, not to worry if you think Yellen is just what it takes at the Fed. But Nabiullina is both razor sharp and fiercely independent. Yellen is obviously neither; she’s a cog in a machine that huffs and puffs and pumps and dumps to make sure her overlords in the blissful world of US finance make ever more profit no matter how bad things get in American society.

There’s no need to be particularly sharp in order to play that role, and she was picked exactly because she’s NOT independent. Or let’s just say she’s a good listener.

Nabiullina is a whole different story. Not that I have much confidence in western readers understanding that this is so, let alone why. Not after the 24/7 highly public media campaigns and sanctions and oil price wars and Ukraine war talk and chest thumping directed at Putin and Russia, and after everything else that we don’t even know that plays out behind the veils.

Enjoy your conspiracies while you can, I’d say. Because despite more than a year of intense efforts to make Russia look like the empire of unspoken evil, financial markets, yes, the same ones Yellen manipulates at her lords’ bidding, have now made the Russian ruble and the Moscow stock exchange the biggest winners so far this year.

And that is due to a substantial extent to Elvira Nabiullina. You see, if she were just a blind or scared servant of Putin, or of his economic ideas, that would mean it was he who masterminded the resurrection of the currency and the stock market.

Think about it: that should make one really scared of Vladimir Vladimirovych. If besides all his other qualities, pursuits and activities (whether you see them in a positive light or not), he could also do that: save a $2 trillion economy from intense outside attacks.

Fear not: Putin is a mere mortal human being. One quality he does possess, however (he wouldn’t last in his position for 5 minutes if he didn’t), is a keen sense of who he can trust. And he trusts Elvira Nabiullina. She’s only been central bank governor since 2013, when she wasn’t even 50 years old, but she’s been a confidant for quite a while, most importantly as Putin’s private economic advisor in the years leading up to her present job.

You can all look up her career on Google or Wikipedia, interesting, but not overly so. What’s really important in Nabiullina’s career are two defining moments. Moments that make her stand out, and that define the relationship she has with Putin.

Sure, you can claim that she’s less independent than Yellen at the Fed, but who do you think you’re kidding? Yes, she has a hot line phone on her desk, and everyone is ushered out of the room when Putin calls her on that phone. But Yellen has hot lines to the US Treasury as well as to Jamie Dimon and Lloyd Blankfein and whoever lead those other banks and primary dealers. Independence?

So, to get to those two moments that define Elvira Nabiullina. The first was described by Bloomberg last month. In mid December 2014, the ruble was under vicious attack from financial markets. Nabiullina had already spent tens of billions of dollars in foreign reserves to prop it up. Then, on December 16, she, in a move nobody had foreseen, yanked up the interest rate in one fell swoop from 10.5% to 17%.

And here it comes: after that she did nothing. Not a thing. No more foreign reserves. Bloomberg quoted her as saying: ‘Speculators needed a cold shower’.

Mario Draghi said in 2012 he would do ‘whatever it takes to preserve the euro’. Nabiullina didn’t even have to say it.

The attack on the ruble was over. In January she lowered the interest rate to 15%, it’s at 13% now. Nabiullina says she expects it to be at 9% by the end of the year. The ruble is up 19% against the US dollar in 2015. No other currency has that record.

Did Putin order her to do this? No. They talked about it, and a lot, no doubt. But he knows she knows better. And he trusts her.

The second big moment came over the past few days, when Nabiullina announced that Russia will not get on the global central bank QE treadmill. Her reasoning, as Bloomberg reports, is that she sees problems with using debt to spur growth (eat your heart out, Krugman):

Nabiullina Sees ‘Limits’ in Using Debt Financing to Fund Growth

Russian central bank Governor Elvira Nabiullina raised questions about the use of debt financing to fund economic growth, underscoring the need to harness long-term capital as investment slumps. “We need to think about some other ways to finance growth, because financing economic growth with debt, in my opinion, has its limits,” Nabiullina said at a conference in Moscow on Thursday. “There won’t be long-term investment growth in Russia” without such sources of financing as pension savings and life insurance, she said.

“An excessive debt burden may be not only a catalyst for development and investment but also a hindrance,” Nabiullina said. Regardless of the high level of interest rates, the ratio of debt to Ebitda (Earnings Before Interest, Taxes, Depreciation and Amortization) “is already a considerable burden for companies, entire industries,” she said. Banking loans account for 57.6% of the Russian economy, according to Nabiullina. “Mandatory pension savings are of critical importance for sources of long-term financing and Russia’s capital markets,” the governor said.

Let me add some more from Reuters, so you get the full picture:

Russian Central Bank Chief Confident On Inflation, Banks, Ruble

“The acceleration of inflation… has in our view a temporary character. We expect quite a rapid fall in inflation if there are no new unforeseen circumstances..” Nabiullina said the central bank would continue cutting interest rates insofar as inflation risks receded. The bank has already cut rates twice this year. “On the whole we judge the situation in the banking sector as stable,” she said. “The banking sector maintains a substantial capital buffer and the banking sector is able to counter serious shocks even if crisis phenomena deepen.”

She said central bank stress tests showed that even if the oil price were to fall to $40 per barrel the sector would maintain capital levels above the regulatory minimum. Nabiullina also said the factors which had been weighing on the rouble had now passed, saying that repayments of foreign debts could be financed without this having a significant effect on the rouble’s value. “Thus the influence of those factors which were influencing the exchange rate and inflation last year are gradually receding to nothing..”

The entire financial markets attack ‘gradually receding to nothing’. The girl got style. Here’s thinking Nabiullina is right on this one too. Crippling sanctions? Crippling oil prices? Russia has survived it all so far.

There may well be negative growth in the country this year. But even if that were so, who would you choose to deal with that where you live? Yellen, Bernanke, Mario Draghi? Or would you go with a woman who’s shown she can not only think outside the box, but act outside of it too?! Who has both the guts and and the brains for it?!

She may well be one of Putin’s biggest weapons if the west elects to continue pestering Russia. It seems obvious: we need to hire her. But, caveat, to serve the American people, not Wall Street. Then again, I don’t think she’d want to do either.

Home Forums Russia’s Central Bank Governor Is Way Smarter Than Ours

This topic contains 11 replies, has 9 voices, and was last updated by  Raleigh 4 years, 3 months ago.

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  • #20387

    Harris&Ewing Less taxes, more jobs, US Chamber of Commerce campaign 1939 It wouldn’t be a first, but it would certainly be a – bigger – shock. That is
    [See the full post at: Russia’s Central Bank Governor Is Way Smarter Than Ours]

    #20388

    V. Arnold
    Participant

    If I may be so bold as to claim some understanding of the Russian mindset (having been married to a non-U.S. born Ukrainian). Both her parents fought in and survived WWII.
    That should be the first hint regarding what, especially, U.S. citizens will never be able to understand.
    Russia retains that cultural memory, war, dying, privation, and practically, single handedly, kicking Hitler’s ass.
    I could go on about how my ex-wife’s parents had two houses (one a rental), a payed for car (new), and owed no money to anyone. Oh, and a garden, the likes of which I’ve never seen before or since. Both were minimum wage earners in 1967.
    You, me, and the western world are witnessing THAT, with every move Russia makes.
    But, if you do not know history; how could you know the thing staring back at you?
    Cheers

    #20390

    Dr. Diablo
    Participant

    “We need to think about some other ways to finance growth…”

    Because there’s this thing called “savings” that we can use to build with. And compared to borrowing, it’s both safe and relatively free. But when the product your industry sells is “loans”, it’s heresy to suggest there is any means of payment but debt. –Where you pay a 5% toll to the gatekeepers to do what could be done for free.

    Imagine: whole industries earning “profits” that they then use to invest in themselves and their countries from “savings” without burdening their economies with the unnecessary overhead of debt. It could happen.

    #20391

    Variable81
    Participant

    @V.Arnold,

    “But, if you do not know history; how could you know the thing staring back at you?”

    I once thought I had a pretty decent understanding of history. Then saw stuff like this:

    thegreateststorynevertold.tv

    It’s not to suggest Germany did not commit atrocities during (and leading up to) WWII, but it was a staunch reminder that victors write the history books, and that uncomfortable or inconvenient facts are sometimes edited out of our collective memories.

    As far as understanding the Russian mindset, I suspect many of today’s Russians aren’t that far a cry from today’s Western cultures: raised on books full of lies & half-truths to glorify the sacrifices of the Allies during the war while demonizing the Axis powers (though when it comes to ignorance, I’m sure North Americans – being so far from the battlefields of Europe and the Pacific – take the cake in terms of ignorance).

    Given their proximity to the most tragic wars the world has ever known, one would think European and Eastern European nations would know that the path they’re currently walking down leads to all-out war. Unfortunately, humanity has demonstrated time and time again that we simply cannot learn from the past, and look to be doomed to repeat the same mistakes every human generation or so (80 – 100 years).

    C’est la vie.

    Cheers,
    -GBV

    #20393

    V. Arnold
    Participant

    @ Variable81

    As far as understanding the Russian mindset, I suspect many of today’s Russians aren’t that far a cry from today’s Western cultures.

    Suspect? Interesting word. One can be modern and still a child of one’s culture.
    I suggest you greatly over estimate the west effect.
    Read the Saker, Sputnik, and Fort Russ; just to name a few sources.
    I think we were raised on far more lies than the gritty realities of Russia’s history. It would be difficult to exaggerate the realities they lived. I heard it first hand for years and it wasn’t bullshit.
    My point in the aforementioned post, was to back up Ilargi’s contention that Nabiullina was more than competent. Russia couldn’t possibly see economics with a western eye; unless a sycophant of the west was doing the looking. She isn’t that.
    Your closing paragraph is not anything I’d argue against. It’s just evidence of the failure of the human condition and why we are where we are.
    Russia hasn’t forgotten…

    #20394

    Ex-PFC Chuck
    Participant

    It’s my understanding that estimates of the percentage of German battle deaths that occurred on the Eastern Front range from about 70% to 93%. The exact figure is unknown because Wehrmacht record keeping collapsed in the last weeks of the war.

    #20395

    V. Arnold
    Participant

    @ Ex-PFC Chuck

    Yes, but ask most Americans (north Americans) who won WWII and they will say “we” did.
    Thus history according to the least injured on the side that wasn’t defeated; but certainly not the true victors…
    Just the vultures cleaning up…

    #20396

    Professorlocknload
    Participant

    Smarter Central Planners,,,just what we need?

    #20397

    John Day
    Participant

    I love strong, competent women.
    🙂

    #20398

    Raleigh
    Participant

    Good for her! Bernanke pales in comparison, and yet his new book is entitled (are you ready for a good laugh?) “The Courage to Act: A Memoir of a Crisis and its Aftermath”. Yes, and in which direction did he act? Why, with all this courage just dripping off him, he acted to bail out the banks so that his buddies could get back to big bonuses and stock options. Ben’s new book, which will no doubt net him a ton of money (perhaps he’ll have the courage to walk into a bank again in order to secure the mortgage he was so sadly denied – boo hoo), when added to his enormous fees for speaking engagements at sometimes $200,000.00 a pop, will delightfully illustrate that crime DOES pay.

    This bearded Santa Claus, who somehow was only able to squeeze down rich men’s chimneys, exhibited “courage”? Against what? Being lynched by the public? Because I don’t see a lot of courage in handing out gifts to your friends.

    https://money.cnn.com/2015/04/08/news/economy/ben-bernanke-book-federal-reserve/

    #20399

    gezelle
    Participant

    Raleigh, thank you so much for the Santa Ben image…can’t tell you how much I laughed, which is about all one can do now reading the “news” these days.

    #20412

    Raleigh
    Participant

    gezelle – glad you had a laugh! It’s good for the soul.

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