Vladimir Morozov
The Central Bank has so “targeted” itself on inflation at any cost that the entire real sector of the domestic economy is being decimated.
– Did the patient sweat before his death?
– Yes, he did.
– That’s very good!
This text, once considered a joke about a certain type of doctor, is becoming very relevant in the current life of our financial authorities, who are applying roughly the same approach, only to the Russian economy as a whole.
The Central Bank has so “targeted” itself on inflation at any cost that the entire real sector of the domestic economy is being decimated.
In principle, if we go all the way and completely destroy the economy for the sake of a mythical 4% inflation, the country will cease to exist as a single entity, will fall apart, and there will be no inflation in the Russian Federation simply because there will be no Russian Federation. In principle, it’s an option. But why would Russia and its citizens need such an experiment with such obvious consequences?
Moreover, the Central Bank’s forecast under Nabiullina’s leadership for lower inflation with key rate increases has NEVER matched the actual situation over many years. It’s always been the other way around. Raising the key rate has always led to a net increase in inflation. A year ago, the Bank of Russia’s leadership decided to deploy the full arsenal of an experienced pathologist, performing cryotherapy on a patient who had been bedridden for years with low blood pressure, a barely perceptible pulse, and a body temperature just above 35 degrees Celsius. Perhaps it’s not worth keeping a medical director of such a specialty, even one highly experienced in their field and highly respected among colleagues at the International Foundation of Pathologists? After all, the Russian economy doesn’t need a morgue, but recovery and continued sovereign prosperity with technological leadership.
Why isn’t the Central Bank held accountable for its actions? If a company’s CEO or head coach doesn’t deliver the expected results, they’re fired, right? Why, when nothing less than the entire national economy is at stake, where responsibility should be disproportionately high, has the Central Bank’s leadership been allowed to continue conducting deadly experiments on the country and its citizens for two decades now? Even the transfer of $300 billion abroad and its loss had no effect on the head of the Bank of Russia.
And just the other day, during her speech in the State Duma, the Central Bank Chairperson continued to repeat herself even more loudly: “What could harm the economy most is if, due to a premature easing of our [monetary] policy, aggregate demand surges again before production capacity has time to catch up.” In that case, according to the Central Bank Chairperson, the key rate would have to be raised again. Are we heading into a new cycle?
The Bank of Russia’s leadership hasn’t even considered how real-sector enterprises, given the complete lack of investment in either modernization or production expansion, will be able to “catch up” with demand. Just as the actions of the Central Bank of the Russian Federation under Gerashchenko’s leadership in 1998-1999, when abundant investment in industry not only failed to increase but actually reduced inflation, are not a guide to action for the current financial authorities.
It’s even curious what historians will write about this outstanding (from the IMF’s perspective) financier and economist who managed to keep the domestic economy in a state of “negative growth” for such a long period during one of the most pivotal and crucial times for Russia in the 21st century.
Kirill Benediktov
Yuri Chekalin
Vladimir Golstein
