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.

[–] yogthos@lemmy.ml 5 points 3 months ago (1 children)

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 1 points 3 months ago (1 children)

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?

[–] yogthos@lemmy.ml 2 points 3 months ago (1 children)

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.

[–] TranscendentalEmpire@lemm.ee 0 points 3 months ago (1 children)

It's very obviously shrinking in the long run given that now there's a whole alternate world economy forming around BRICS

If US debt is growing at an ever faster past, that logically demands that us securities are being sold at an ever higher pace....

China is one of the largest buyers of US securities. Having a large foreign exchange reserve is beneficial for export economics whose government mainly relies on vat taxes for revenue.

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.

Sanctions failed because oil is still 80$ a barrel and the vast majority of governments are run by people wanting to line pockets.

It's an example of a tangible asset Russia can back securities with

The whole point of buying securities is that they are liquid assets that can be traded as or like currency.

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

It's not really a radical concept....? Especially considering that every major economy does some form of debt monetization.

There is a difference between domestic market and international trade. The value of the currency domestically is not directly related to its trade value.

I think "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." Is kinda proof that there is a direct correlation. In a globalized economy domestic and international markets are inherently intertwined.

These collapses all directly relate to the decline in material conditions.

You don't say..........so what is causing the decline in material conditions?

Meanwhile, the dissolution of USSR was primarily political in nature.

Isn't how we allocate productive forces always 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.

You really think that the current US economy is doing worse than the Soviet Union in the late 80's and early 90's?

Food shortages were rampant in the 90s, even in Moscow. If we were utilizing the same metrics as America for "starving" (aka food insecurity) then the majority of the Soviet Union would have been "starving".

Healthcare by the late 80s in the USSR had fallen tremendously, mostly because their transition to prioritizing outpatient care, which caused their hospital system started falling apart.

As far as housing.... Yeah, America is always gonna win that particular shitty trophy. Though that's not exactly because of an inability of production, moreso an inability to empathize with the working class.

I'm not claiming that America has a great economy, or that capitalism is the best economic system to distribute resources. Just that certain economic principals are relevant wether you have a command economy or not. China is a socialist state and they still back their debt with securities, because not doing so leads to currency instabilities in both the domestic and international sectors of the economy.

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.

Oh, like 39% of the federal budget going to the military? You don't think that might catch up with them at some point?

[–] yogthos@lemmy.ml 3 points 3 months ago (1 children)

China is one of the largest buyers of US securities. Having a large foreign exchange reserve is beneficial for export economics whose government mainly relies on vat taxes for revenue.

China has been actively dumping US securities for years now. Given the openly hostile stance US is taking towards China, I fully expect that this trend will only accelerate going forward https://www.globaltimes.cn/page/202303/1287406.shtml

Even Japan tried to sell off US bonds just recently, but had to stop because it was making the market panic. It's a perfect illustration of just how fragile the whole scheme is in practice.

Sanctions failed because oil is still 80$ a barrel and the vast majority of governments are run by people wanting to line pockets.

In reality, oil is a small portion of Russian overall economy. There seems to be disproportionate focus on Russian energy exports in the west which paints a distorted picture of how the economy in Russia actually works.

The whole point of buying securities is that they are liquid assets that can be traded as or like currency.

The whole point of buying securities is that you expect them to retain value, hence why it's important for them to be backed by something tangible. In case, of the US, the confidence has largely been built on top of the petrodollar. Every modern country needs oil to operate, and when it was only possible to buy oil in dollars, that meant there would always be a steady demand. Today, the situation is different, and that's a big problem for the US.

It’s not really a radical concept…? Especially considering that every major economy does some form of debt monetization.

That's a process of issuing currency, you're not borrowing anything from anybody.

I think “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.” Is kinda proof that there is a direct correlation. In a globalized economy domestic and international markets are inherently intertwined.

The dependence on international trade is very high for countries that are deindustrialized, such as western economies, it's a far less important factor for countries that are largely self sufficient. Fluctuations in trade obviously impact domestic economy, but they can be weathered and they're not catastrophic in the long run. That's precisely what Russia illustrated at the start of the war when the west put the most severe sanctions it could come up with.

You don’t say…so what is causing the decline in material conditions?

Misallocation of labour and resources as I've explained several different ways in this very thread. When the country stops producing things that the working majority needs, you start having problems.

Isn’t how we allocate productive forces always political in nature?

Politics encompass more than simply allocation of resources. In this particular case, the politics were that Yeltsin decided he'd rather be the president of Russia than a deputy of USSR, and a bunch of Baltic countries wanted to become independent. It's notable that when a referendum happened, over 70% of the people voted to keep USSR though. If economic decline was the core reason, then you wouldn't have seen high level of public support for USSR. You'd see a situation that's similar to what we see in US today where majority of the population no longer believes that their country is working in their interest.

You really think that the current US economy is doing worse than the Soviet Union in the late 80’s and early 90’s?

Unquestionably so. I grew up in USSR, so I'm speaking from personal experience here. The kinds of horrors that are happening in US today, were completely beyond imagination.

Food shortages were rampant in the 90s, even in Moscow. If we were utilizing the same metrics as America for “starving” (aka food insecurity) then the majority of the Soviet Union would have been “starving”.

The shortages started after the dissolution, and introduction of liberal reforms. One thing USSR did quite well was ensuring that everyone had a decent minimum standard of living. You don't have to take my word for it though, here's what the CIA had to say https://www.cia.gov/readingroom/document/cia-rdp84b00274r000300150009-5

As far as housing… Yeah, America is always gonna win that particular shitty trophy. Though that’s not exactly because of an inability of production, moreso an inability to empathize with the working class.

Again, that's my original point that labor and resources aren't being allocated in the interest of the majority which is leading to discontent and civil unrest among the public.

I’m not claiming that America has a great economy, or that capitalism is the best economic system to distribute resources. Just that certain economic principals are relevant wether you have a command economy or not. China is a socialist state and they still back their debt with securities, because not doing so leads to currency instabilities in both the domestic and international sectors of the economy.

I'm not arguing against backing debt with securities though. What I've been saying is that Russia is in a good position to do so.

[–] TranscendentalEmpire@lemm.ee 1 points 3 months ago (1 children)

China has been actively dumping US securities for years now. Given the openly hostile stance US is taking towards China, I fully expect that this trend will only accelerate going forward https://www.globaltimes.cn/page/202303/1287406.shtml

And yet there is obviously still enough demand for US securities to allow the US to borrow more money every year.

oil is a small portion of Russian overall economy.

It's like 30-40% of their federal revenue and funds the entirety of their national wealth fund... Which is what they are utilizing instead of issuing securities. I would hardly call it a small portion of their economy.

The whole point of buying securities is that you expect them to retain value, hence why it's important for them to be backed by something tangible.

The whole point of buying securities is to have a reserve of foreign currency with high liquidity at large volumes. Gold is tangible, but it holds no inherent value, it isn't exactly the easiest thing to move around the globe, and is a fairly easy market to disrupt if attempting to liquidate at significant volumes. There's a reason everyone moved away from the gold standard in the first place.

That's a process of issuing currency, you're not borrowing anything from anybody.

Ahh, yes. Lending value and then being paid back that value with interest isn't "borrowing". I have some calls to make to some credit card companies.....

Fluctuations in trade obviously impact domestic economy, but they can be weathered and they're not catastrophic in the long run.

I think you're moving the goal post here..... Also, "can be weathered and they're not catastrophic in the long run" requires supporting evidence.

That's precisely what Russia illustrated at the start of the war when the west put the most severe sanctions it could come up with.

How? The Russian government moved to a war time economy, growth isn't exactly a surprise in that scenario. The hard part is sticking the landing, what happens if they are succeeded or fail in Ukraine? It's not like war actually creates material value that is tangible and lasting for the majority of citizens.

Misallocation of labour and resources as I've explained several different ways in this very thread.

And what causes the misallocation of labour and resources.....? You are just utilizing cyclical logic.

Politics encompass more than simply allocation of resources. In this particular case, the politics were that Yeltsin decided he'd rather be the president of Russia than a deputy of USSR

So economic collapses are always caused by a misallocation of resources and productive forces..... but not in the case of the USSR. Their economic collapse was solely because of Yeltsin. Got it....

economic decline was the core reason, then you wouldn't have seen high level of public support for USSR.

We weren't talking about the dissolution of the USSR, when I brought up them as an example I was solely talking about the economic crisis of the late 80's and 90's.

You'd see a situation that's similar to what we see in US today where majority of the population no longer believes that their country is working in their interest.

You're conflating voting to keep the USSR and "believing the country no longer working for their interest". It's not like 30% of the country is voting to change their nationality/economic system.

grew up in USSR, so I'm speaking from personal experience here. The kinds of horrors that are happening in US today, were completely beyond imagination.

A bit anecdotal don't you think? I'm sure if I asked some nepo baby if America is doing well I'd get the same exact answer as someone who grew up in the projects.

The shortages started after the dissolution, and introduction of liberal reforms. One thing USSR did quite well was ensuring that everyone had a decent minimum standard of living.

Your link is from 83', aka not the late 80s and early 90s. Here's one from 1990

Again, we were originally talking about a specific monetary policy. You seem to be wanting to bring this all back to a gish gallop about the Soviet Union, and not even about their economic policy.

Again, that's my original point that labor and resources aren't being allocated in the interest of the majority which is leading to discontent and civil unrest among the public.

And how does civil unrest connect back to debt monetization? How is modern Russia allocating nearly half of their federal spending on the military and "secret" spending, serving the interest of the majority?

I'm not arguing against backing debt with securities though.

What was the whole point of the entire conversation?

What I've been saying is that Russia is in a good position to do so.

I don't agree with your assessment. If they were able to sell securities they would be selling more securities, it's kinda a no brainer. However, securities are susceptible to sanction activities. They'd rather use their gold reserves as a way to move around sanctions than to give the US another easily trackable and sanctionable resource.

The main item with high liquidity that's not being heavily targeted by sanctions is oil and gas. But, utilizing those for securities would effect revenue already earmarked for the Fed and their national monetary fund.

I never claimed Russia is on the brink of collapse or anything. So long as oil stays above $60 a barrel, allowing them to fund their nwf and maintain wartime spending, they'll probably be fine for a while. But that doesn't mean they can solve indefinite deficit spending via "printing money like the US".

[–] yogthos@lemmy.ml 2 points 3 months ago (1 children)

And yet there is obviously still enough demand for US securities to allow the US to borrow more money every year.

The demand is very clearly declining, and the fact that US keeps printing money despite that will become a problem going forward.

It’s like 30-40% of their federal revenue and funds the entirety of their national wealth fund… Which is what they are utilizing instead of issuing securities. I would hardly call it a small portion of their economy.

You're once again conflating two separate things.. In 2021 they were 6.8 percent of GDP and accounted for 35.6 percent of total budget revenues; in 2023 they were just 5.3 percent of GDP and 30.9 percent of total budget revenues. In terms of the overall economy, oil and gas are indeed a very small percentage. https://www.atlanticcouncil.org/content-series/russia-tomorrow/oil-gas-and-war/

The whole point of buying securities is to have a reserve of foreign currency with high liquidity at large volumes. Gold is tangible, but it holds no inherent value, it isn’t exactly the easiest thing to move around the globe, and is a fairly easy market to disrupt if attempting to liquidate at significant volumes. There’s a reason everyone moved away from the gold standard in the first place.

Gold has value because it's a scarce resource, and it's used in many industries. There will always be demand for this resource, so it's a very safe commodity to invest in. Meanwhile, the whole idea of a currency being backed by a resource is that you don't move the resource itself around, it's about creating trust in the currency itself. The reason that US moved away from the gold standard was because US got in over its head in Vietnam, which forced the US to abandon it. As I've explained above, oil replaced gold as the guarantor of the dollar.

Ahh, yes. Lending value and then being paid back that value with interest isn’t “borrowing”. I have some calls to make to some credit card companies…

That's a really wordy way to say you don't understand what issuing currency actually means.

I think you’re moving the goal post here… Also, “can be weathered and they’re not catastrophic in the long run” requires supporting evidence.

I'm not moving any goal posts here. I've also given you a concrete example of this being the case in practice.

How? The Russian government moved to a war time economy, growth isn’t exactly a surprise in that scenario. The hard part is sticking the landing, what happens if they are succeeded or fail in Ukraine? It’s not like war actually creates material value that is tangible and lasting for the majority of citizens.

The Russian government did not move to a war time economy. Military spending in Russia is around 6% of the economy. An example of a war time economy was when the US had around 40% of the economy dedicated to military production during WW2. The fact that you think war spending is a major part of the economy in Russia shows that you're utterly uninformed on the subject you're attempting to debate here.

And what causes the misallocation of labour and resources…? You are just utilizing cyclical logic.

I'm doing no such thing. What causes misallocation of resources are the decisions made by people who control capital. The people who own businesses and factories are the ones who decide whom to employ, what the purpose of work is, and so on. The financial capitalists that own everything in the US have no interest in producing things people need, their primary goal is to increase their personal wealth with any social value being strictly incidental. A great write up on how this mechanic works out in practice here https://americanaffairsjournal.org/2021/08/the-value-of-nothing-capital-versus-growth/

So economic collapses are always caused by a misallocation of resources and productive forces… but not in the case of the USSR. Their economic collapse was solely because of Yeltsin. Got it…

Except what I actually said was that USSR dissolved due to political infighting, not due to an economic collapse. If you're just going to ignore what I say and put words in my mouth, there's no point having further discussion.

We weren’t talking about the dissolution of the USSR, when I brought up them as an example I was solely talking about the economic crisis of the late 80’s and 90’s.

Here's what a US economic historian has to say about the origins of the crisis. TLDR, it was caused by liberalization and privatization https://www.noemamag.com/how-china-avoided-soviet-style-collapse/

You’re conflating voting to keep the USSR and “believing the country no longer working for their interest”. It’s not like 30% of the country is voting to change their nationality/economic system.

It was a vote of confidence in the existing system. Vast majority of people thought the system was generally correct.

A bit anecdotal don’t you think? I’m sure if I asked some nepo baby if America is doing well I’d get the same exact answer as someone who grew up in the projects.

USSR didn't have the levels of inequality that US has, so your comparison is nonsensical. Furthermore, there's recent polling showing how people feel now that they're able to compare their lived experience under both systems:

75% of Russians have expressed increasingly positive opinions about the Soviet Union over the years. Only a small portion of those surveyed said they had negative associations with the Soviet Union. The economic deficit, long lines and coupons were named by 4% of respondents each, while the Iron Curtain, economic stagnation and political repressions were named by 1% each, the Levada Center said.

Your link is from 83’, aka not the late 80s and early 90s. Here’s one from 1990

I encourage you to read the article from Tooze that I linked above to see what actually led to the economic disaster.

Again, we were originally talking about a specific monetary policy. You seem to be wanting to bring this all back to a gish gallop about the Soviet Union, and not even about their economic policy.

I have no idea what you're trying to say here to be honest. My original point was that the economy in USSR was in a far better shape than it is in the US today. I've stated that the economy is fundamentally a measure of how labor and resources are allocated, and whether the country is able to meet the needs of its citizens. I've given you numerous examples of how USSR was able to meet the needs of the people better than US is able to. I'm not sure what part of that you're struggling with.

And how does civil unrest connect back to debt monetization? How is modern Russia allocating nearly half of their federal spending on the military and “secret” spending, serving the interest of the majority?

I've already addressed this above. Military spending is a tiny percentage of the overall economy. The whole context of this discussion is how the economy in Russia is currently booming and living standards are rising. This isn't happening due to military spending but because decoupling from the west created many business niches that are currently being filled domestically.

What was the whole point of the entire conversation?

You tell me. I'm frankly unable to understand what it is you're trying to argue here as it seems to be largely incoherent to me.

I don’t agree with your assessment. If they were able to sell securities they would be selling more securities, it’s kinda a no brainer. However, securities are susceptible to sanction activities. They’d rather use their gold reserves as a way to move around sanctions than to give the US another easily trackable and sanctionable resource.

Securities are no more subject to sanctions activities than any trade Russia does outside the dollar. Russia is trading completely outside western financial system, and the countries it trades with are outside western control as well. As I've already pointed out, BRICS is already a bigger economic bloc than the G7, and the disparity continues to grow. What western sanctions regime is accomplishing in practice is to isolate the west from the rest of the world.

I never claimed Russia is on the brink of collapse or anything. So long as oil stays above $60 a barrel, allowing them to fund their nwf and maintain wartime spending, they’ll probably be fine for a while. But that doesn’t mean they can solve indefinite deficit spending via “printing money like the US”.

Oil and gas are obviously not going to fall out of demand any time soon, so Russia can continue leveraging them for federal income indefinitely. However, if for some reason the demand started dropping, then the government can just start using other commodities the same way they use oil and gas today. The fact that Russia is one of the major commodity exporters means that its currency has value because countries holding roubles can always trade them in for something tangible they need.

[–] TranscendentalEmpire@lemm.ee -1 points 3 months ago (1 children)

Lol, I'm not gonna bother breaking down your arguments again. You clearly aren't interested in any kind of honest discourse. The constant flip flop between being purposely obtuse and then aggressively pedantic is a wild way of trying to get your point across.

It's actually kind of impressive that you can work in a variety of different logical fallacies into so many of the responses while never addressing the original topic.

Have a great rest of your day.

[–] yogthos@lemmy.ml 1 points 3 months ago

Lol, I’m not gonna bother breaking down your arguments again. You clearly aren’t interested in any kind of honest discourse. The constant flip flop between being purposely obtuse and then aggressively pedantic is a wild way of trying to get your point across.

The feeling is mutual bud. I've clearly and repeatedly explained to you what I mean, and you just proceed to ignore that, put words in my mouth, and make bad faith arguments. People reading this thread can make up their own minds on who's being a troll here.

It’s actually kind of impressive that you can work in a variety of different logical fallacies into so many of the responses while never addressing the original topic.

A self referential comment if there ever was one.

Have a great rest of your day.