TrueValueMetrics ... Impact Accounting for the 21st Century

Date: 2025-11-28 Page is: DBtxt003.php txt00028628

GLOBAL OVERVIEW JOE BLOGS ... june 8th 2025 RUSSIA's Shock Decision Original article: https://www.youtube.com/watch?v=IKLNZCXgz0M Peter Burgess COMMENTARY Peter Burgess
RUSSIA's Shock Decision Joe Blogs 430K subscribers Jun 8, 2025 ✪ Members first on June 8, 2025 #russia #ruble #russianeconomy If you would like to support the Channel: https://www.buymeacoffee.com/JoeBlogs / joeblogsyt YouTube Membership - / @joeblogs YouTube Super Thanks (click below) In this video I discuss the recent decision by the Bank of Russia to reduce interest rates from 21% to 20% despite the fact that inflation continues to be above 10%. For specific details please check out the CHAPTER list below. Chapters: 0:00 Intro 0:40 INFLATION 3:10 INTEREST RATES 6:08 RUBLE 12:14 SUMMARY & CONCLUSION #russia #ruble #russianeconomy #gdp #rouble #ukraine #uk #pricecap #GLOBALFINANCIALCRISIS #RUBLE #SWIFT #RECESSION #CHINA #USA #NATO #WW3 #WORLDWAR3 Transcript ntro 0:00 hi welcome back to Joe Blogs in today's episode I want to talk to you about what's happening in the economy in Russia and specifically to talk about the shock decision that the Bank of Russia announced that it decided to cut interest rates from 21% to 20% and this is actually the first interest rate cut that Russia has announced since September 2022 so that's almost 3 years ago it's 2 years and 9 months and the reason why this is a surprise to the financial markets is because of what's happening with inflation because inflation has been persistently high in Russia for a long period if we have a Russian Inflation Rate INFLATION 0:40 look at what's been going on over the past 12 months with inflation you can see that 12 months ago in April 24 inflation was sitting at 7.8% however the most recent data that's been published for April 25 shows that it's now up to 10.2% and if you look at the trend of 1:01 this chart you can see that it has clearly been moving in one direction upwards and for the past 3 months February March and April they're the reported figures it's been above 10% and 10% inflation is extremely high for a developed economy now hang on a minute just before we go on a second I just wanted to say that a lot of people who are watching my videos are not subscribing i had a look at the data the other day and only around 60% of the people who are watching videos are subscribed so if you're one of those people if you haven't hit that subscriber button could you please do so now i don't ask this very often but just smash that button now because I'd like to get the subscribers up as high as possible it doesn't cost you anything it's not going to make a difference to your day but it will make a difference to mine and it'll make me a bit happier so if you could do that that would be really well appreciated but getting back to this inflation data what we're seeing here is a clear upward trend and if you follow the channel you'll be aware of 2:01 the interaction between interest rates and inflation traditional theory tells us that when you have a situation like this in Russia where inflation is rising month on month what you should do is to increase interest rates because by increasing interest rates firstly it makes the cost of borrowing more expensive so if you're a company or an individual thinking about taking out a loan maybe you're thinking about expanding your company or buying a car or going on holiday or refurbishing your kitchen or whatever it might be if interest rates go up then you're probably going to think twice about making that decision and currently because interest rates are above 20% in Russia I think that would deter most people because 20% interest per year is a lot of interest to be paying but if you want to bring inflation down that's what you should do as a central bank you should be increasing your interest rate 3:00 but as I said right at the start of today's video Russia despite the fact that inflation is sitting above 10% have just announced a reduction in interest Russian Interest Rates Russian Inflation INTEREST RATES 3:10 rates and if we look at what's been happening over the past 5 years you can see that it's been a really interesting movement in interest rates in Russia immediately following the invasion of Ukraine which started in February 2022 interest rates were increased to 20% and at that time it was announced that that was an emergency rate that was being brought in for a short period of time to reflect the special war situation that was going on in Ukraine it wasn't actually referred to as a war it was a special economic situation i can't even remember what the name of it was i'm sure lots of people send me a message reminding me what that was but the 20% at that point was seen to be a short-term measure you can see that interest rates did come down rapidly and interestingly they actually came down to 4:00 a lower level than they'd been at before the war started which was a surprise to everybody at the time because if we have a look at what was going on with inflation at that point you can see that at the start of 2022 inflation was sitting at around 5 or 6% now immediately following the invasion of Ukraine it spiked and it rose to above 16% but despite the fact that interest rates started to come down so did inflation and this caused a lot of head scratching in the Western world nobody could really fathom why inflation was going down at the same time as all of the sanctions that have been applied against Russia were making things much more expensive so inflation should have been going up for that reason and also the value of the ruble collapsed following the invasion of Ukraine and that should have made the all of imports way more expensive because if you're having to buy things in the rubble equivalent and your currency is falling in value that should push up prices but 5:02 remarkably it didn't and inflation came down to a low of 2.3% by the middle of 2023 which was actually a lot lower than inflation was in most developed economies at that time so um nobody was really quite sure how that happened but since the middle of 2023 as you can see from this chart inflation has been on the rise and is now up above 10% as we've just discussed and in terms of what has been going on with interest rates since 2023 you can see that they've also been on the rise so this is following the traditional pattern that we would have expected we expect the Bank of Russia or any central bank to increase interest rates at a time when you have rising inflation so the fact that interest rates have now been reduced despite the fact that inflation is sitting at its highest point since the end of 6:01 2022 is slightly unusual so raises the question as to why this is happening now Value of Russian Rouble (2024-2025) Value of Russian Rouble (2005-2025) RUBLE 6:08 if we have a look at what's going on with the value of the ruble because whenever I make a video about Russia everybody sends me lots of messages about the ruble people who are supporting the Russian economy are always pointing out that the ruble is doing really well now we look at this chart that shows the movement over the past 12 months you can see that at the end of 2024 the ruble value had got down to its worst position for a long period of time against the US dollar it was trading at above 110 rubles which is an an absolute disaster from Russia's point of view now that actually proved to be um the turning point and you can see that since the start of 2025 the ruble has strengthened significantly and is now trading for around 80 to1 US scale of this chart to show what's been happening 7:00 over the past 5 years you can see that the current level is on par with where the ruble was trading back in 2021 which was before the war in Ukraine started um you can see that the invasion of Ukraine in February 22 had a disastrous impact on the value of the ruble it fell to almost 130 to1 US the Bank of Russia then stepped in and started buying rubles and artificially inflated the value and at one point in the middle of 2022 it was trading at around 50 to1 US which is the strongest it had been at for a long period of time but over the past 3 years we've seen a deterioration in the value of the ruble however that has turned around over the past six months and there's no real explanation for that the only explanation I can give you is that the size of the market for the ruble is now very very small because not many countries are dealing in rubles in fact it's pretty much only Russia and 8:01 countries that don't have a choice who are dealing with Russia that are basically being told to use rubles such as Cuba or Venezuela that they've been told to use rubles but India and China who are the biggest trading partners for Russia today have refused to make payments in rubles they basically said 'We're not doing it.' So China will only make payments in its own currency the Chinese yuan and India initially wanted to make those payments in Indian rupees russia said 'Well actually that doesn't work for us because nobody else wants to accept Indian rupees so we can't use that currency for anything else it's useless to us.' So they're now dealing in a mixture of Chinese yuan and United Arab Emirates dirhams so the market for the ruble is now really small and what that does is enables the Bank of Russia to be able to control the price because they can buy and sell rubles in the small market to keep it at the level that they want it to and it's interesting that it's now trading at 9:00 that sort of level that it was at in 2021 which clearly is a rate that the Bank of Russia is comfortable with but if we jump back and have a look at the last 12 months this strengthening in the value of the ruble in theory should have actually reduced inflation because if the ruble is worth more each month than it was previously then that means that you have more purchasing power the ruble equivalent of whatever the price is in the international market for things that Russia is importing is going up and therefore inflation should have been going down but if we look at the inflation chart for the past 12 months you can see that the opposite has been happening inflation has actually been going up and what that tells us is that the ruble isn't being used to buy anything it's not actually got any purchasing power in the global market so the value of the ruble is now disconnected from the Russian economy so anybody that's sending me messages saying the rubles's doing really well therefore Russia's doing really well isn't really looking at the data because 10:02 the data isn't telling us that the data is telling us that inflation is continuing to rise despite the fact that the ruble has been strengthening in value and if we go back to the interest rate chart the fact that Russia has now reduced its interest rates despite the fact that it's got persistently high inflation significantly higher than most developed economies around the world tells us that there are now problems in the Russian economy now we've been talking about problems in the Russian economy for a long period of time but Russia hasn't really been accepting that there's been no acknowledgement that Russia is struggling but the fact that interest rates are now being lowered tells us that there is a reduction in growth in the Russian economy because that's the other reason why you would reduce interest rates you'd reduce them if inflation was down at the level where you wanted it to be or if you're not seeing growth because reducing interest rates encourages companies and individuals to start borrowing again it 11:00 makes it cheaper and therefore it should mean that those companies and individuals then spend that money and when you start spending in the economy then hopefully that fuels growth and increases GDP so this is the fundamental reason why Russia has reduced interest rates and the reason why it has been a surprise to the markets is because of what's going on with inflation because as a central bank you always have that really difficult dilemma behind either controlling inflation or stimulating growth and if we talk about what's going on in the USA at the moment Donald Trump is very keen for the Fed to reduce interest rates because he wants to stimulate growth he wants to boost GDP but Jerome Powell from the Fed isn't doing that because he's watching what's going on with inflation and Donald Trump's tariffs and he's concerned that if he reduces interest rates it could cause inflation to get out of control so you've always got that trade-off between what's happening with inflation and what's going on with the economy itself 12:00 but what we're seeing in Russia right now is that the slowdown in the economy is overriding the problems with inflation and that's caused the central bank to reduce interest rates surprisingly so what's the summary and SUMMARY & CONCLUSION 12:16 conclusion today well I wanted to post this video because this announcement that the Bank of Russia has reduced interest rates was a surprise to me and the markets because of what's been going on with inflation because we've been expecting interest rates to actually rise to maybe 25 or even 30% at some point during 2025 if Russia wanted to get back to its target inflation rate of 4% cuz 10% is a long way above 4% but what we've seen is that the Bank of Russia which was coming under pressure from President Putin to reduce rates in exactly the same way as we're seeing in the USA where Donald Trump is trying to encourage the Fed to reduce interest rates despite inflation staying higher 13:00 than it wants it to be the Bank of Russia has now agreed with President Putin that interest rates do need to start coming down they've only come down by 1% though from 21% to 20% so I don't think that's going to make a material difference if I'm offering you a loan and I tell you that I could do it at 21% and then I come back to you a week later and say 'Actually I've looked at my numbers again I could do it for 20%.' Is that going to make a material difference to you i don't think it would i think you'd probably say '20% 21% doesn't really make any difference i don't want to take that loan it's too expensive.' But the Bank of Russia have reduced interest rates for the first time since September 2022 so what this tells us is that we're now likely to see a succession of interest rate reductions that was what we saw back in 2022 when interest rates rose to 20% we then saw a rapid reduction down to 7 12% and it might be that we see a similar thing 14:00 happening now and the big question is what's going to happen to inflation if the Bank of Russia does decide to do that because as we've talked about if you reduce interest rates usually you would expect inflation to start rising again and the last thing that Russia needs at the moment is higher inflation because it's still operating in a wartime economy because a lot of companies have been commandeered by the state and they're working directly for the Kremlin to produce things for the war in Ukraine that's driven up wages because all of those companies have been offering higher wages to attract in more staff to make sure that they're fully occupied and they can produce as much as they can to make the maximum amount of money from the Kremlin but that's driven up wages across the board and lots of companies are now struggling with those higher wages the higher wages have resulted in more spending in the economy which has driven up inflation so it is a surprise that the Bank of Russia have reduced interest rates as a result of the fact that the economy is now slowing 15:00 down because Russia has been self-funding itself it's been paying all of these higher wages to all of these companies which has been growing the economy but that growth is now running out of steam so the Bank of Russia is having to reduce interest rates to try to restimulate the economy and what this tells us is that the economy is starting to fracture in Russia the wartime economy can't last forever it won't be self- sustainable for the long term because Russia has to fund that from somewhere it's been funding it from its national wealth fund as I've talked about in previous videos the National Wealth Fund is now depleting it doesn't have enough money to carry on with this strategy forever and so the Bank of Russia is now stepping in trying to get the economy back on track to make sure that Russia is self-funding but what it tells us is that interest rate cuts are an indication of a slowdown in the economy that slowdown is because Russia isn't making the same amount of money from its sale of oil and gas and coal 16:00 that it was historically it's running short of cash and if this situation doesn't sort itself out in the near future Russia is going to have a serious problem so hopefully you've enjoyed today's video you found it useful informative and thoughtprovoking if you've liked what I've said then please give me a thumbs up thank you for watching this video all the way through to the end and thank you to anyone that has subscribed if you haven't please smash that subscriber button as I said right at the start of today's video and thank you so much to everyone that's supporting me if you've bought me a coffee or sent me a YouTube super thanks really appreciate that thank you so much and if you're a long-term supporter either through Patreon or YouTube membership or buy me a coffee membership thank you for that support really helps keep me motivated and here's something to put a smile on your face

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