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Russia Is Next In Line To Restrict Cash Transactions

Tyler Durden's picture




 

The Russians are taking a page from the Europeans book (and not a positive one for libertarians). Given the substantial criminal activity and illegal entrepreneurship in Russia - the grey and black economies account for 50–65 percent of GDP and estimates that about $50 billion was taken out of Russia illegally in 2012 alone - the great and glorious leaders have decided to impose restrictions on cash transactions. As Russia Beyond The Headlines reports, Russia may ban cash payments for purchases of more than 300,000 rubles (around $10,000) starting in 2015 - starting with a higher ($19,500) restriction in 2014. They will also enforce mandatory cash-free salary payments (cash compensation accounts for 15% of GDP currently) in an effort to both bring some of the population's 'grey' income out of the shadow; and increase the volume of cash reserves in the banks. It would appear that wherever we look now, leadership are realizing that the limits of fiscal and monetary policy have been reached and now changing rules, limiting freedom, and outright confiscation are the only way to maintain a status quo. Ironic really, when the enforcement of said rules may just be the catalyst for the end of the status quo as the middle class suffers.

 

Via Russia, Beyond The Headlines,

Russia may ban cash payments for purchases of more than 300,000 rubles (around $10,000) starting in 2015. The move is expected to boost banks’ cash reserves and put a damper on Russia’s shadow economy. However, the middle class will most likely end up having to pay the price for the scheme.

 

Moscow is looking to kill two birds with one stone: Firstly, it wants to bring some of the population’s “grey” income out of the shadow; secondly, it wants to increase the volume of cash reserves in the banks. The government’s bill will introduce the new rule to the State Duma. The document was prepared by the Ministry of Finance and approved by the government.

 

The restrictions on cash transactions will develop in two phases. In 2014, a ban on cash payments for purchases worth more than 600,000 rubles (about $19,500) will be introduced; the limit will then be halved to 300,000 rubles in 2015. Furthermore, the document introduces mandatory, cash-free, salary payments.

 

...

 

Even now, cash withdrawals on payday account for around 85 percent of all ATM transactions. Moreover, in 2005–2011, cash flows more than quadrupled. According to Bank of Russia estimates, more than 90 percent of all commodity purchases in Russia are paid for in cash.

 

The government is now trying to bring the shadow economy into the light and increase money flows into the treasury, according to Investcafe analyst Yekaterina Kondrashova. In her words, as soon as the new rules come into effect, those using unofficial wage payment schemes will encounter certain difficulties, although there could be some ways to circumvent the law.

 

The Ministry of Internal Affairs and the National Anticorruption Committee estimate the market for money laundering and cash conversions at somewhere between 3.5 and 7 trillion rubles ($113–230 billion) — about 60 percent of the Russian federal budget.

 

Rosstat reports that the volume of the shadow economy (“grey” money from tax evasion, compensations paid as “cash in envelopes” and violations of currency and foreign trade regulations) is at least 15 percent of the GDP, according to Ricom-Trust senior analyst Vladislav Zhukovsky.

 

Given the substantial criminal activity and illegal entrepreneurship, the grey and black economies account for 50–65 percent of GDP. Even former Central Bank Chief Sergey Ignatyev had to admit that about $50 billion was taken out of Russia illegally in 2012 alone.

 

There is another side to the move toward plastic, however. Cash-free payments will result in higher prices for some goods and services. The middle class will suffer the most, because the “risk group” includes property and automobile transactions. The luxury segment will also be affected, including customized tours.

 

...

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Thu, 03/28/2013 - 21:44 | 3387527 Lost Wages
Lost Wages's picture

What the fuck do criminals care if they change the laws?

Thu, 03/28/2013 - 21:49 | 3387536 knukles
knukles's picture

Only criminals will care when other than criminals make the laws.
Knuckles Theory of Equitability

Thu, 03/28/2013 - 21:50 | 3387543 kaiserhoff
kaiserhoff's picture

You mean, Russia is about to go all Marxist, Leninist, Central Planning Idiot like Washington???

I'm so confused.

Thu, 03/28/2013 - 21:55 | 3387550 knukles
knukles's picture

People look at RT as a viable source of news....
Nobody is shaken by their behavior versus ours anymore...
We've come a long way, baby
Jesus people. .. . How the fuck'd we wind up here?

Thu, 03/28/2013 - 22:08 | 3387574 nmewn
nmewn's picture

Why, its almost as if the oligarchs have turned against us ;-)

Thu, 03/28/2013 - 22:11 | 3387578 12ToothAssassin
12ToothAssassin's picture

Heads we win, tails you lose.

Thu, 03/28/2013 - 22:20 | 3387600 nmewn
nmewn's picture

Nothing like a two headed coin to restore trust & confidence in their game ;-)

Thu, 03/28/2013 - 22:47 | 3387654 erg
erg's picture

Starting in 2015?

...right

Is it me or is this prognostication hopelessly optimistic?

Thu, 03/28/2013 - 22:56 | 3387671 nmewn
nmewn's picture

They've succeeded (so far) beyond my wildest nightmares.

Thu, 03/28/2013 - 23:43 | 3387734 merizobeach
merizobeach's picture

"the enforcement of said rules may just be the catalyst for the end of the status quo"

Like a fist full of sand, the tighter one squeezes, the more grains that slip through.

Fri, 03/29/2013 - 02:24 | 3387877 The Big Ching-aso
The Big Ching-aso's picture

I hope this works better than Chernobyl's controls.

Fri, 03/29/2013 - 14:15 | 3388961 Boris Alatovkrap
Boris Alatovkrap's picture

Chernobyl controls is melt.

Fri, 03/29/2013 - 03:15 | 3387891 q99x2
q99x2's picture

Globalists and banksters did it. The good news is that there aren't that many of them and they are will begin turning on one another once they encounter great difficulty enforcing their wills.

Thu, 03/28/2013 - 21:44 | 3387530 Major Major Major
Major Major Major's picture

Will work for Vodka

Thu, 03/28/2013 - 21:49 | 3387539 kaiserhoff
kaiserhoff's picture

More like, will get out of nice warm bed, for vodka.

What is work?

Thu, 03/28/2013 - 21:51 | 3387540 knukles
knukles's picture

Will remain comatose in nice warm bed with vodka for domestic tranquility

Thu, 03/28/2013 - 21:51 | 3387546 kaiserhoff
kaiserhoff's picture

Will share vodka for great blow job.

Thu, 03/28/2013 - 21:55 | 3387551 knukles
knukles's picture

Well don't look at me!

Thu, 03/28/2013 - 22:50 | 3387657 willwork4food
willwork4food's picture

I will give you Gutta who will give you a blow job for some food and silver. There is more of Gutta than the food I request. Deal?

Fri, 03/29/2013 - 14:17 | 3388968 Boris Alatovkrap
Boris Alatovkrap's picture

Boris is work many year in custodial engineering and once is fall asleep to get caught. Blow job, now is look for work.

Fri, 03/29/2013 - 04:17 | 3387936 AmCockerSpaniel
AmCockerSpaniel's picture

My salary covers attendance, all work is extra.

Thu, 03/28/2013 - 23:33 | 3387725 Bold Eagle
Bold Eagle's picture

You reminded me of this Russian anekdot.

Q: What is Russian business model?

A: Steal a case of vodka, sell it and spend all money on booze.

Thu, 03/28/2013 - 23:51 | 3387747 Godisanhftbot
Godisanhftbot's picture

old newz

Fri, 03/29/2013 - 04:14 | 3387934 Debugas
Debugas's picture

you can not even imagine how popular this currency iactually is and how widely used it is in the countryside in russia

Fri, 03/29/2013 - 12:32 | 3388658 thisandthat
thisandthat's picture

In soviet Russia, vodka will work for you!

Thu, 03/28/2013 - 22:35 | 3387622 AlaricBalth
AlaricBalth's picture

From the Federal Reserve Bank of St. Louis. It's a bit dated, 1999, but it offers a concise insight concerning capital controls. It's conclusions are as follows. I am certain this is one Fed paper that will soon be lost in the junk folder.

"In reality, capital controls rarely have been imposed in a well-thought-out way to correct clearly defined pre-existing distortions. Instead, capital controls most often have been used as a tool to postpone difficult decisions on monetary and fiscal policies.

The consensus of the research on capital controls has been that they can alter the composition of capital flows or drive a small, permanent wedge between domestic and offshore interest rates but they cannot indefinitely sustain inconsistent policies, and their effectiveness tends to erode over time as consumers and firms become better at evading the controls (Marston, 1995). Outflow restrictions, in particular, may buy breathing space, but that is all."

https://research.stlouisfed.org/publications/review/99/11/9911cn.pdf

Thu, 03/28/2013 - 22:51 | 3387655 Yen Cross
Yen Cross's picture

 Thanks. Appreciate you taking the time to forward the link AlaricBalth. I'm off to get some sleep, but it's bookmarked.

  You realize how dovish the St. Louis fed is?

https://research.stlouisfed.org/publications/review/99/11/9911cn.pdf

Thu, 03/28/2013 - 22:53 | 3387662 knukles
knukles's picture

I got a feeling all them folks at FedStLouis gonna be declared threats to the state for thinking and sent off to a long term learning camp in mountainous southern Baluchistan somewhere.

Thu, 03/28/2013 - 22:55 | 3387670 Yen Cross
Yen Cross's picture

  lulz. Rock on Knuks  ;-D

Fri, 03/29/2013 - 03:12 | 3387889 Manthong
Manthong's picture

1. Currency controls are a risky, stopgap measure, but some gaps desperately need to be stopped.
—Paul Krugman, “Free Advice:,  A Letter to Malaysia’s Prime Minister,” Fortune, September 28, 1998.

2. “One of the architects of those articles, John Maynard Keynes, was a strong proponent of capital controls and the IMF often was seen as such during its early years.”

"By a continuous process of inflation, governments can confiscate, secretly and unobserved, an important part of the wealth of their citizens. By this method, they not only confiscate, but they confiscate arbitrarily; and while the process impoverishes many, it actually enriches some.... “The process engages all of the hidden forces of economic law on the side of destruction, and does it in a manner that not one man in a million can diagnose."

Economic Consequences of the Peace, 1920
https://research.stlouisfed.org/publications/review/99/11/9911cn.pdf
http://www.knology.net/~bilrum/keynes.htm

http://oll.libertyfund.org/?option=com_staticxt&staticfile=show.php%3Ftitle=303

-if any of this is true, it is just too freaking bizarre.

 

 

Thu, 03/28/2013 - 21:46 | 3387535 kliguy38
kliguy38's picture

 

Well..........that didn't take long

Thu, 03/28/2013 - 21:47 | 3387537 howenlink
howenlink's picture

Learning to weave bacon.

Thu, 03/28/2013 - 21:50 | 3387538 Number 156
Number 156's picture

Can you hear that noise?

That's the Shit hitting the fan.

Thu, 03/28/2013 - 22:35 | 3387628 wee-weed up
wee-weed up's picture

Yep, and it's splashing across borders everywhere!

Thu, 03/28/2013 - 22:30 | 3387552 CPL
CPL's picture

LOL.

 

The end result isn't what anyone believes it will be.

 

Everyone betrayed.  No body wins.  Now because of the decisions made all die.  Sorry humans, the future is written in pencil until you figure it out.  Don't bother with the holes inthe mountains either.  Enjoy the methane you pricks...screw us, we screw you.  Give us back our friends assholes. or you lose alot on monday again.   Assholes keep friend in lock up...well, assad is dead as a bag of rocks.  We wre betrayed.  You are next.

Let our friends go.  all of them.

Thu, 03/28/2013 - 21:57 | 3387554 FLUSA.com
FLUSA.com's picture

Did Putin clear this with the mafia?

Thu, 03/28/2013 - 22:10 | 3387576 nmewn
nmewn's picture

Yes.

Thu, 03/28/2013 - 22:36 | 3387632 wee-weed up
wee-weed up's picture

Pooti-Poot ALWAYS wins!

Fri, 03/29/2013 - 00:39 | 3387809 Lore
Lore's picture

"I looked the man in the eye. I was able to get a sense of his soul." - GWB, June 2001

Fri, 03/29/2013 - 00:00 | 3387749 eXMachina
eXMachina's picture

Yes, he sent the memo to himself and CC to the Fed!

Thu, 03/28/2013 - 21:59 | 3387558 Professorlocknload
Professorlocknload's picture

Again. The game is changing,

They are going to do it Bercrankers way.

http://www.businessinsider.com/trucks-carry-cash-for-cypriot-banks-2013-...

Thu, 03/28/2013 - 22:04 | 3387564 CheapBastard
CheapBastard's picture

These laws are like gun control...only affects the law abiding citizens...the Small Fries. Criminals by definition don't care what the law states.

Thu, 03/28/2013 - 22:16 | 3387593 nmewn
nmewn's picture

I've been going in this direction.

When the law abiding are made criminals by the law, all is criminal.

Fri, 03/29/2013 - 07:17 | 3388023 disabledvet
disabledvet's picture

"as all exist for solely for entertainment purposes now." how ironic that what needs to be banned is cash. Since it can't be done via inflation "we now will proceed the old fashioned way by banning cash transactions." wow...we all must be too rich. This increases the cash reserves in banks? So the money is more easily stolen?

Thu, 03/28/2013 - 22:07 | 3387569 johngaltfla
johngaltfla's picture

Good news. We have an old fashioned PIIGS story not involving a geography pop quiz for the uninitiated! For once Russia is not involved even though it is SSDD....

 

An Old Fashioned PIIGS story as Portugal Mises Deficit Targets Again
Thu, 03/28/2013 - 22:17 | 3387592 knukles
knukles's picture

Where is Piigs?

Thu, 03/28/2013 - 23:24 | 3387718 Hulk
Hulk's picture

Upside down in a chinese river without a paddle...

Fri, 03/29/2013 - 13:01 | 3388739 thisandthat
thisandthat's picture

Long toxic-waste seasoned bacon!

Fri, 03/29/2013 - 12:57 | 3388716 thisandthat
thisandthat's picture

Missed deficits? Pfff... as if that was news... Constitutional Tribunal is (finally) about to deliver it's ruling on the constitutionality of current national budget - if it's anything as the previous (2012), now that will be news...

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