• ☆ Yσɠƚԋσʂ ☆@lemmy.mlOP
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      3 months ago

      Amusingly, we’re seeing history on repeat here. In the early 20th century, while western economies were becoming increasingly intertwined, the Soviet Union stood apart. As the sole communist state, its trade connections with the capitalist world were minimal. When the Great Depression struck, closely linked economies of the capitalist countries suffered devastating blows, while the Soviet Union’s closed system largely shielded it from the crisis.

      In fact, one could argue that the depression even benefited the USSR. Desperate times in the West created a unique labor pool for the Soviets. To fuel their ambitious industrialization plans, they recruited skilled workers, especially from the USA. Engineers, farmers, and industrialists flocked to the USSR, in search of opportunity.

      • CyberMonkey404@lemmy.ml
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        3 months ago

        Don’t think it’s an honest comparison. Russian economy basis is capitalist, with all the downsides it inevitably has. And it’s not even “decoupled” either, what with massive imports from China and increasing trade with Iran, plus the still ongoing business with Europe and USA. Heck, Russia is still pumping gas to Europe through Ukraine

        • ☆ Yσɠƚԋσʂ ☆@lemmy.mlOP
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          3 months ago

          It’s obviously not a direct comparison. That said, while Russian economy is capitalist nowadays, it’s quite different from the financialized western economies. There’s a focus on industry and self sufficiency that simply doesn’t exist in the west. Furthermore, Russia never fully embraced liberal policies and the state remains at the commanding heights of the economy. A 2023 World Bank study gives a pretty good overview of this. In particular, it distinguishes between businesses of the state (BOS), that are at least 10% government owned by some government, and state owned enterprises (SOE), which are majority owned or more, and controlled, by the government.

          Top line result is shown in the following chart:

          And here’s another chart showing SOE in Russia compared with China https://cepr.org/voxeu/columns/state-owned-enterprises-global-economy-reason-concern

          Russia’s high levels of SOEs is not far behind China by many measures.

          Central bank plays a big role in Russia as well, and has large influence over the funding of the private enterprise. FT even moaned about state directed economy standing up to sanctions back in 2022. Also, here’s an article talking deprivatization of Russian economy.

          Meanwhile, trade with China and Iran are unlikely to be hugely affected by an economic crash in the west. If anything, it’s going to make Russia a more important trading partner for these countries.

          Finally, energy exports, while much of the focus in the west, constitute a fairly small part of the overall economy in Russia. https://www.statista.com/statistics/1314532/gdp-share-by-industry-russia/

      • Jeena@piefed.jeena.net
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        3 months ago

        I’m just paraphrasing the article you linked:

        How long can the party last? Mr Putin’s attempts to blunt interest-rate rises will lead inflation to rise higher, and last longer, than it would have otherwise. At some point, people may get angry about the rising cost of living. He also cannot run budget deficits for ever. At current rates, Russia’s financial reserves will be exhausted in five years or so; meanwhile, the government faces high borrowing costs. But for now, Mr Putin has a war to win. And so the party goes on.

        • ☆ Yσɠƚԋσʂ ☆@lemmy.mlOP
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          3 months ago

          Parroting things without actually thinking about them doesn’t generally produce any interesting insights. As long as a country’s debt is denominated in its own currency and it has control over issuing that currency, it can create more of it to cover any outstanding obligations. This means there’s no risk of default because the government can simply print money to pay off its debts. That’s how US is able to have national debt of $34.4 trillion right now. If The Economist thinks that Russia’s financial reserves will be exhausted in five years or so, then they have some explaining to do regarding the US.

          • TranscendentalEmpire@lemm.ee
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            3 months ago

            This means there’s no risk of default because the government can simply print money to pay off its debts. That’s how US is able to have national debt of $34.4 trillion right now. If The Economist thinks that Russia’s financial reserves will be exhausted in five years or so, then they have some explaining to do regarding the US.

            The US is able to have a national debt of 34.4 trillion because people are still willing to lend them money. They aren’t just printing money, they are selling securities, which is similar to taking out a loan.

            Printing more money in your own currency without backing it with some sort of security is just going to devalue your buying power and increase inflation. The Russian government is currently utilizing their reserves to sustain their spending, but if they run through those reserves they’re going to have to stop spending, or start selling securities. Either way, deficit spending cannot be solved via printing press.

            • ☆ Yσɠƚԋσʂ ☆@lemmy.mlOP
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              3 months ago

              The US is able to have a national debt of 34.4 trillion because people are still willing to lend them money. They aren’t just printing money, they are selling securities, which is similar to taking out a loan.

              They’re very much printing money, meanwhile the demand for US bonds globally is in fact dropping.

              Printing more money in your own currency without backing it with some sort of security is just going to devalue your buying power and increase inflation. The Russian government is currently utilizing their reserves to sustain their spending, but if they run through those reserves they’re going to have to stop spending, or start selling securities.

              There’s absolutely nothing preventing Russia from backing its currency with securities as well. In fact, Russia is in a much better position to do so because they’ve been stockpiling gold.

              Either way, deficit spending cannot be solved via printing press.

              I mean the fact that it can is literally the premise behind MMT. That aside however, the very nature of currency is that it’s just a social contract. What actually matters is whether the country is able to allocate its productive forces effectively. As long as a country can continue to produce the things people need then the economy will be fine.

              • TranscendentalEmpire@lemm.ee
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                3 months ago

                They’re very much printing money, meanwhile the demand for US bonds globally is in fact dropping.

                Lol, I mean money is being printed in the literal sense. But, it’s still backed by securities.

                As far as bond demand goes, it tends to dip and surge in popularity based on its yield.

                There’s absolutely nothing preventing Russia from backing its currency with securities as well. In fact, Russia is in a much better position to do so because they’ve been stockpiling gold.

                Securities are only valuable if the buyer believes they will be paid out once they have matured. Russia could start borrowing and utilizing securities, but they don’t exactly have a wide market to borrow from. Basically they’d have to borrow from China or maybe India, and those two likely wouldn’t be interested in gold reserves.

                Gold isn’t a currency or even like a currency, it’s value declines the more it moves. It’s not exactly the best thing to back securities with, it’s more geared for purchasing when you have currency instabilities. More than likely they would have to back their securities with interest in oil/natural gass. However, that wouldn’t really help their problems too much, as that’s how they find their National Wealth Fund.

                mean the fact that it can is literally the premise behind MMT.

                Borrowing money is not the same as “printing money”.

                very nature of currency is that it’s just a social contract. What actually matters is whether the country is able to allocate its productive forces effectively.

                Yes, currency is a social contract, one that’s based on trust. How that currency performs and what it represents can influence that trust. Currency is not completely insulated from material realities, and the gap between the stated worth of the currency and the material realities of the country that determine that worth can determine how people outside the country will value it.

                What actually matters is whether the country is able to allocate its productive forces effectively. As long as a country can continue to produce the things people need then the economy will be fine.

                I mean… That’s a neat theory, but it kinda is easily disputed by nearly all economic collapses of the 19th century and onwards. If this is true, then did the Soviet Union’s economy explode simply due to an inability to allocate productive forces accordingly?

                Has there been an economic collapse outside of a major war that was caused simply by a country losing its production capacity?

                • ☆ Yσɠƚԋσʂ ☆@lemmy.mlOP
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                  3 months ago

                  As far as bond demand goes, it tends to dip and surge in popularity based on its yield.

                  It’s very obviously shrinking in the long run given that now there’s a whole alternate world economy forming around BRICS that’s entirely outside the dollar. As trade outside the dollar continues to grow the demand for dollar naturally starts to drop. That in turn shrinks US economy as well, so prospects for returns on the securities continue to diminish as a result.

                  Securities are only valuable if the buyer believes they will be paid out once they have matured. Russia could start borrowing and utilizing securities, but they don’t exactly have a wide market to borrow from. Basically they’d have to borrow from China or maybe India, and those two likely wouldn’t be interested in gold reserves.

                  BRICS is literally a bigger economy than the G7 already, and it’s only growing. Russia is also one of the biggest commodity exporters globally, hence why sanctions against Russia failed in the first place. So, it’s pretty clear that Russia would have no problem backing their security with tangible stuff that countries need. Frankly, Russia is in a far better position than US here.

                  Gold isn’t a currency or even like a currency, it’s value declines the more it moves. It’s not exactly the best thing to back securities with, it’s more geared for purchasing when you have currency instabilities.

                  It’s an example of a tangible asset Russia can back securities with. Russia also produces a lot of things, such as titanium, that even the west can’t get by without.

                  Borrowing money is not the same as “printing money”.

                  Borrowing money in a currency you yourself issue is a nonsensical concept.

                  Yes, currency is a social contract, one that’s based on trust. How that currency performs and what it represents can influence that trust. Currency is not completely insulated from material realities, and the gap between the stated worth of the currency and the material realities of the country that determine that worth can determine how people outside the country will value it.

                  There is a difference between domestic market and international trade. The value of the currency domestically is not directly related to its trade value. My point was that as long as Russia is able to allocate labor and resources in a way that meets people’s needs then it doesn’t actually matter how much currency the government chooses to issue. Not only that, but currency being valued lower internationally actually plays in favor of the government in a country that’s primarily an exporter of goods.

                  I mean… That’s a neat theory, but it kinda is easily disputed by nearly all economic collapses of the 19th century and onwards. If this is true, then did the Soviet Union’s economy explode simply due to an inability to allocate productive forces accordingly?

                  These collapses all directly relate to the decline in material conditions. So not sure how that’s disputed in your mind. Meanwhile, the dissolution of USSR was primarily political in nature. The economy of USSR was certainly in a far better shape than US is today where millions of people are currently starving, unable to get healthcare, or even afford housing.

                  Has there been an economic collapse outside of a major war that was caused simply by a country losing its production capacity?

                  Collapses aren’t caused by loss of production capacity, they’re caused by misallocation of resources that leads to an unacceptable decline in the standard of living for the majority. Very much like what we’re seeing happening in US at this very moment incidentally.