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Russia Imposes Inflation-Driven Price Controls: Will Use Price Caps On "Socially Important" Commodities
Russia has just announced it would proceed with price caps on a variety of foodstuffs, from buckwheat, to potatoes, assorted fruits and vegetables and all other commodities it deems "socially important" accoding to Russian newspaper gazeta.ru. And so the big margin crunch goes up several orders of magnitude, as companies, desperate to pass through surging input costs, but prohibited from raising selling prices, are forced to eliminate any and all overhead, most certainly including such trivialities as labor, in order to stay in business. More importantly, experts now predict that full year inflation in Russia will hit double digits. Just in the first 17 days of January, inflation hit 1.4%, or 9% annualized (according to gazeta... our calculation indicates a notably higher number but readers get the idea). Luckily, Russia does realize just how futile this task of price controls is: "as soon as we introduce price controls, once a deficit, the product disappears from the market, followed by an even higher rise in prices on the shadow, not covered by official supervision, market." And so a vicious circle in which high prices beget even higher prices begins. But don't worry - this could never happen in the US: see Americans only eat gold and their iPods. There is therefore massive slack in the food vertical, and, furthermore, as Steve Liesman explains so well today, a 100% rise in the price of wheat would only translate to a 10% hike in the price of bread. What happens to the other 90% (which incidentally annihilates the producer's margin but Steve didn't get to page two in that particular Inflation for Dummies book), is apparently unclear to the CNBC head economist.
From Gazeta.ru, google translated:
Government has the right to limit the price for a period not exceeding 90 days. It's allowed to do in the event that within one month increase in retail prices for these products is 30% or more in one or more regions.
Relevant amendments have been adopted into law on trafficking in the past year, but authorities have never exercised their right. Although, for example, buckwheat because of the drought has risen over the past year 3 times. " It was inappropriate to "impose price caps on buckwheat in the autumn, when the harvest had not yet been finalized, said the official. " In addition, it was expected that the situation with buckwheat will be more favorable in view of admission of the Siberian harvest. But manufacturers and trade recorded a high level of prices, since many farms lost to the drought, the fall harvest - and wanted to compensate, where possible, "- noted the deputy minister.
A marked increase in the prices of foodstuffs began in the second half of last year, and to stop it have not yet succeeded. " the risk of significant price increases this spring and the grain - and, hence, the bread and meat for the group behind him, "- admitted Klepac.
As a result, inflation is once again at risk to go beyond the framework outlined by the Government. In 2010 it was 8,8% in the original forecast of 6-7%.
Inflation forecast for 2011 - 7%. But in January it can perform almost a third of the annual plan. According to the Ministry of Economic Development, which sounded at the end of last week, the head of department Nabiullina, consumer price inflation for the first month is 2,1-2,3%. According to the Federal State Statistics Service, from 1 to 17 January, inflation reached 1.4% ( in annual terms - 9%).
The Central Bank is also concerned about the acceleration of inflation. " I feel that in the first quarter we will see an acceleration of inflation. Perhaps the situation will change in the second quarter, I hope so "- said the first deputy chairman of the Central Bank Alexey Ulyukayev, speaking at a conference at Deutsche Bank in London on 21 January.
By mid-year inflation could reach double digits on an annualized basis, said Ulyukaev.
Double-digit inflation for the year - it's real, I agree the head of department of strategic analysis FBK Igor Nikolaev. " Our forecast for 2011 - 9% "- said the head of the Center for Macroeconomic Research of BDO in Russia Elena Matrosov. " My prediction is within 11% "- said Professor of Economics, New Economic School (NES) Konstantin Styrin.
Methods of fighting inflation are well known: not to increase the money supply, to limit profitability of financial investment, slow growth in demand, transfer the practice leader goskonsaltinga Alexei Kalinin. And besides, to restrict the growth rates, enhance and stimulate product offering and is not strongly restrict imports, adds Matrosov.
But in the current selection of tools is limited.
Sterilization of money to which the government actively resorted to crisis, to fight inflation, now threatens to undermine economic growth, which is already weak.
" Sterilize the money supply, as was done in the 2000's, is problematic. First, the deficit budget for 2011 has already been approved. Secondly, the surplus could be achieved either by raising taxes or reducing spending. And one, and another would reduce aggregate demand and would have slowed the recovery growth ", - said Styrin.
Involved will be primarily monetary policy: inflation will hamper the efforts of the Central Bank on monetary and foreign exchange markets, said Kalinin.
But this method of inflation control as the introduction of maximum prices for food, experts estimate unambiguously negative: it could lead to shortages or poor quality goods.
' Not only is the practice of the Soviet Union, with its empty shelves, but some experiments governors early 1990-ies have shown: "as soon as we introduce price controls, once a deficit, the product disappears from the market, followed by an even higher rise in prices on the shadow, not covered by official supervision of the market " Reminds Kalinin. More sensitive measure would subsidize producers and sellers, adds Styrin. But the practical implementation of such decisions in the Russian context is problematic, experts say.
"Do not limit price, and nurturing a competitive environment, elimination of administrative barriers to business - that's the best solution to the problem "- reminds Matrosov. But such work should be conducted regularly, experts say, but not when prices are getting out of control.
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As the problems come faster and faster from more angles....what will the big mistake be that brings it all down....this is better than watching a 3some on House.
Be jealous bitches!!! my new toy for 'the bernanke' apocalypse...
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What a Moron...you really don't have a clue
This is a $600-700 rifle at best.
Unfortunately, that weapon is nowhere near the value of that price. For the same fiat you could have had this.
http://www.wildwestguns.com/images/bigcopilotred1.jpg
And they make it in 45-70, 458 Alaskan or .50 Alaskan.
Price controls are the heart and soul of Obamacare so you know they really do work if utilized by enlightened bureaucrats.
Meanwhile, Obama still can't find his birth certificate.
I would like to thank all the folks like you for being so distracted with utter bullshit, as it's allowed me to build capital! Keep it up, you're doing a great job!
Coupling this with the recent announcement of the lawsuit between the biggest paper manufacturers on Earth, my estimation is that we've finally reached the juncture where it's fully warranted to say:
It's ON like Donkey Kong, BITCHEZ!
Full-retard, apeshit, weird-ugly, interesting times do approacheth.
(As a physician, I advocate a rigorous drug regimen to keep your mind limber. And I think it's safe to say we'll all be needing plenty of legal advice before this thing is over.)
So a few days ago the Iran nuclear talks in Istanbul achieved no breakthrough. There's a bomb in Moscow airport. Russia central bank fires back with publicized gold purchases. Geldedman Sucks fires off a note about the end of QE2. Now this.
Everybody getting the picture? Come on, let's raise the analytical skill level around here and quit it with Gold, bitchez!
Gold, bitchez!!!!
So a few weeks back the US and Europe went off on Putin over punishing Khodorkovsky and were trying to castrate him. Then the C!A'a wikiops takes on Berlusconi and his support for the Southstream pipeline from Russia by portraying him as a Putin goon.. Uncle scam doesn't like independent development.
Today, Russia delivered Ecuador military hardware for the first time in history (a great military advance Correa called it). Costa Rica, a US colony, accused "commie" Nicaragua of armed invasion.
The heat is on ! Finally, a counterweight to the banksters worldwide genocide.
Aw, zak...
The counterweight has always been there locally. This is a concrete indication that there just might NEED to be a concession to the folks who've rolled with the punches for the past 40 years.
This is big news. Could it actually be that there's recognition by the King that he doesn't get to stay King if people don't do what he says? Awhile back there was a Magna Carta.
This is the sound of the spiritual progress by our species. It's not a loud noise...but those who can hear it cannot pretend it's not real.
At least not convincingly.
The Bernank forgot to tell the Russkies, "there is no inflation, I'm 100% sure of it."
lol
"there is no inflation, I'm 100% sure of it."
Should read:
"there is no inflation, I'm 157% sure of it."
If inflation gets really bad then its goodbye dollar. The world will hate it so bad that the dollars reign as the reserve currency will come sooner than people can believe. To save the dollar Bernake will attempt to pull liquidity out of the markets. The only way he can do that is by selling treasuries. When he does that the interest rates are going to skyrocket anticipating inflation. When the rates go high, a section of the economy that has the highest margin pressure will sell its assets to pay its bills, but with the rates higher now they will get a lower price, this will cause defaults among some. This will push the cds and interest rates higher, and the cycle becomes self reinforcing. Too bad, this is why there is no going back once you are on this road. One thing is for sure, this will not end well.
Did Sarkozy really come to Washington to reaffirm Europe's commitment to the USD?
I highly doubt it.
He delivered an official Letter of Recission.
Food shortages and instability are on their way. This is not going to end well. I hope everybody is prepared.
While I believe that this was always going to happen, I believe that now it comes in handy (in the short-term) to rally people back inward to their govts. That means that the once global economy is withering (sorry to burst your bubble NWO supporters)happen!). If the global economy meant growth, then this all means non-growth, contraction.
People need to get off this roller-coaster ride once and for all and throw off ALL govts! And, hopefully, learn that concentrating power is a bad thing, be it govts, corporations, churches or whatever...
Bernack gunna kill us all...
2 major policy announcements on the same day:
- Price controls on food items
- Purchasing 100 tonnes of gold annually
Lock down mode
Russia's main exports are gas & oil. Main customers are Europe and China.
I just wish anytime someone mentions experts in any news item that they put the word: expert in quotations, you know, like: This analyst is an "expert" in fucking things up 50% of the time.
Then I want to create my own bumper sticker to sell:
My Child is an Expert.
Mainstream media is entirely composed of "experts." I tossed out my TV a LONG time ago (only garner my info from an array of Internet source, as well using my eyes and ears to hear and see what's around me). Best investment I ever made (added benefit was a big FU to Comcast as well)! And now I'm begining to completely bail on anything related to the "Stock Market"... heading for pure reality...
Comrades, your money is essentially worthless.
Price control will leave stores empty.
Russians with gold in hand can buy on the black market.
that became the effective reality after the USSR ruble collapsed.
Not sure how many transactions were actually conducted in metal, simply because there were DMs and dollars still around that inspired confidence
It worked for Nixon, Comrades
The only thing driving up commodity prices are speculators armed with cheap money and super fast computers. This is causing a havoc in the lives of rest of the population and pushing them towards poverty as they can no longer afford the basic necessities of life.
Regulators are too slow to react and take ages to identify and take measures to solve the problems.
Total ban on speculation is strictly required all over the world to bring relief to the common man.
http://www.marketoracle.co.uk/Article24581.html
There is a major geoengineering/chemtrails component in this, also.
Space aliens and time traveling ghosts from the future, yo!
do you have a daily quota for copy and paste actions??
do you even understand that prices are up cause the 'paper aint worth dick'?
"This is causing a havoc in the lives of rest of the population and pushing them towards poverty as they can no longer afford the basic necessities of life."
Huh? 2/3 of the world's population lives on $3/day or less. I'm thinking that you're NOT talking about them, but rather the others, the poor folks who might not be able to upgrade to the latest iPods...
Inflation???? Tell them to look at our CPI
In Russia you don't control price, price controls you.
This is a seriously good resource, a page in my blog devoted entirely to Euro Debt of various durations, Bond, Euro Bonds. I would say perception of risk is very apparent.
http://oahutrading.blogspot.com/p/euro-bond-charts.html
Good idea. Socialism worked so well the last time they tried it.
And Capitalism is doing better? And, people, spare me the "but we don't really have capitalism" argument, because I could turn that around and say that there's really never been "socialism." They ALL F-A-I-L because they're based on perpetual growth; capitalism just happens to represent a quicker way to exhaustion, but man is it efficient in doing so!
Don't confuse capitalism with corporatism/fascism. If the US was a truly capitalist society, Bank of America, AIG, JP Morgan, et al. would no longer be in business. Failure, after all, is supposed to be an important tenet of capitalism.
I'm not suffering from any confusion, thank you :-)
IF a bullfrog had wings, the saying goes... If the world would only operate based on chalkboard theory we could make things wonderful. All the "isms" are merely theories. The bottom line is this (and I have yet to run into anyone who can dispute my contention), if it's fundamentally based on growth then it's guaranteed to fail.
Everyone is so eager to blast something else: I'm sure that if ONLY "true" capitalism was operating and there were problems people would blame something else (rather than the system). But, heaven forbid that we question the very system that so many worship.
And to think, From Russia with Love was on BBC America last night. How flashbackerific.
YAY! For all the old timers the empty store shelves will seem like old times! What a great idea. Given that the vast majority of state assets were sold to black marketeers, they can dust off their old hats as well.
This isn't new. My girlfriend (I live in Moscow now) says it happens every three months. Business here is done in cash behind closed doors. This is just for the kiddies who read and watch the news, the end user prices will increase.
My fav coffee joint in Moscow, Coffiemania, just slipped a 15% price increase through in Jan on a latte. It went from 150 Rubles December 2009 to 230 Rubles today. Expect another 15% price increase mid year and close to a $10, 8 oz cup of coffee.
Damn, move to Kazan, Ufa or Ekaterinberg and you rubles will go a LOT farther tovarische.
Yeah, but then how do you make the rubles?
BTW, has everyone seen the new $1 BILLION RESIDENCE PUTIN IS BUILDING FOR HIMSELF ON THE BLACK SEA?????
http://ruleaks.net/1901
Fuck your couch putin.
Double post
I happened to catch that CNBS piece with the human dildo Liesman. The logic that spews out of that idiot leaves me.
Tyler, if I may recommend a better translation:
should be
The article does not seem to be about what they can do but rather about what they can't. Since the other options they discuss as limited: easing of money supply and what not, are out of the question, and price controls, if my memory serves me correctly, did not work at the turn of this century in the old mother country. Or anywhere else, or at any time, for that matter.
Price controls are great. I love the dollar menu. And I will fucken riot if it goes any higher I swear.
The dollar menu isn't going higher, the bang for the buck is getting less. Pretty soon you will need tweezers to pick up your McDees ratburger.
I thought that the solution was always pretty clear: Make the pie higher! (pole vaulting for food, anyone? :-) )
uk prelim gdp just turned negative -.5 as opposed to a .5 estimate
index of services .5 as opposed to .6 estimate
public sector net borrowing down down to 15.3 Bil from 19.7 Bil
UK economy unwinding awesome ...
we need more QE stat!
"Economies of scale" in reverse! This won't be a linear decline.
Interesting that Steve Liesman used Bread as an example. Is it because the Yeast inflates the dough by 90%. Kind of like the Money supply. Too bad you cannot put yeast into aaples, beef, vegtables to inflate the amount of product.
Bullshit. This is more of the "government knows best." A free market is a free market. Government interference only makes matters worse, ALL THE FUCKING TIME!
South Africa is a major corn producer. Hit by heavy flooding which will disrupt the crop, either by damaging infrastructure or just destroying the crop itself.
post deleted by author
In my opinion, that’ll work. Price controls always work. Great idea!
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