[PEN-L:18] Fw: Russia's long awaited change of course

["Frank Durgin" <fdurgin1@xxxxxxxxxxxx>]

>
> ----------
> > From: Frank Durgin <fdurgin1@xxxxxxxxxxxx>
> > To: pen-1 <pen-l@xxxxxxxxxxxxxxxxxxx>
> > Subject: Russia's long awaited change of course
> > Date: Saturday, September 05, 1998 1:22 PM
> >
> > 	Chernomyrdin finally caught on!  He now proposes to change course and
> pay off the debts for government purchases, back wages to workers in the
state sector and pensioners by
> > printing money.
> >
> >       	Odd as it may seem, the genesis of Russia's problems is to be
found,
> > not in profligate  monetary policy, but rather in overly draconian
monetarism. The
> > relation of money supply (M2) to GDP in Russia has been the lowest in
the world. In October
> of 1995 it was 8.5% of GDP and in October 1996 it was some 10-12% of GDP.
(Finanscvoye
> > Izvestiya No 102, Oct. 31, 1996 p. 4.) versus  some 50%  or higher in
the West
> >
> > 	It is money shortages rather than efforts to evade the fisc that are
the
> > reason why  better than 50% of all transactions in Russia are
conducted via barter. Firms don't pay taxes
> > because they pay and get paid in kind and simply don't have the cash.
> >
> > 	To liken Russia's current financial problems to those of Asia and
South
> > America is to err.   For the past seven years Russia has been living
off the large capital stock inherited from
> > the Soviet era. In all sectors, human included, depreciation has
outstripped investment. Production, employment and
> > consumption have failed by enormous proportions; hunger, homelessness
disease and despair are widespread.
> >
> >     	Russia's problems are rooted in under-production, under-investment
> and under-consumption.  The progressivelytighter money and fiscal of the
past few years, policies have been
> > continually aggravating the situation. Could the
> > 	US have cured its depression of '29 via tight money (interest rates
> > running 50% or better) and ever more tightly balanced budgets. Russia
has long needed a Roosevelt
type new deal to get factories and workers back to work, and it needs U.S.
> World War II type budget deficits to wage an all out war against the
> > human misery which now pervades that nation.
> > 	The frightening prospect, however, is that to it will be some time
> before this reversal of policies can have an effect on living
> > conditions. In the meantime the doomsday clock clicks louder and faster.