April 17, during the online press conference of the Chairman of the Bank of Russia declared that 63% of households in the country have no savings. However, Elvira Nabiullina has noticed that the measures of “quantitative easing” and the more active direct injection into the economy from the funds of the Central Bank – the so-called “helicopter money”, is not relevant for Russia.
“If you imagine that we as a Central Bank print the money and distribute them at a zero rate. What is the result? I recall the 1990-ies. This will result in a “burst” of inflation, and people who receive these moneys, it will be hard for them to buy something,” said Mrs. Nabiullina already at the press conference following the meeting of the Board of Directors of the Central Bank on April 24.
However, already on April 30 in an interview with RTVI, the press Secretary of the President Dmitry Peskov admitted that the Russians can get a one-time financial assistance during the period of the pandemic coronavirus. This Peskov said that all the measures of social support, which is currently accepted by the government, primarily aimed at the continuation of economic life in the country.
By way of direct distribution of money to the population already gone to some other country.
In March 2020 in the United States in the framework of measures to stimulate the economy during a pandemic virus Kovid-19 was provided for direct payments to citizens whose adjusted gross income does not exceed $ 75,000 per year, in the amount of $ 1,200 per adult and $ 500 per child.
Greece: a lump sum of 800 Euro each
Germany: Considered citizens – to 5 thousand euros.
Hong Kong: every citizen is US $ 1300.
Japan: all citizens of Japan for 100 thousand yen ($926 USD).
Singapore: every citizen 21 years or older will receive 425 U.S. dollars.
the Distribution of money among individuals as the final consumer in the form of direct grant payments and in the form of tax cuts. In any case, the goal is to increase consumer demand and stimulate economic activity.
In our opinion, the government should choose as such measures the direct distribution of money to all adult citizens of the country the same amount or a lump sum, or monthly and half that amount for children under 18 years of age. And here’s why.
To explain our position calculation accuracy is not required so all the numbers are rounded for easier perception.
Obviously, the direct distribution of money is the fastest way to be put to use.
Russia’s GDP in 2019 amounted to 110 trillion.
the Money supply aggregate M2 (cash, deposits and balances on accounts of natural and legal persons) by the end of 2019, according to Bank of Russia, was at the level of 51.6 trillion rubles.
Very primitive formula soonSTI treatment of funds in the economy involves the determination of the ratio of GDP to M2, that by the end of 2019 gives a ratio of 2.13.
According to published by the Bank of Russia’s weekly “Monitoring of sectoral financial flows” “the deviation of the volume of incoming payments from a “normal” level in April was about 20%. This approximately means a reduction in the velocity of money for the same 20%, from 2.13 to 1.7 times.
it is Obvious that the real overall slowdown in the velocity of money is much higher – every reader is sufficient to assess the dynamics of personal spending in the last two months. But even assuming the official figures, given the current level of inflation of 2.5% drop in the turnover of funds to 1.7 times may mean the reduction of inflation to 2% or even lower.
With zero growth in 2020 to reach targetirovanie purpose of the Bank of Russia’s inflation, which is stated in the 4% of GDP in rubles are needed in the amount of 114.5 trillion rubles (level 2019 + 4%).
So, to maintain the necessary level of inflation, the money supply in circulation must be of 114.5/1,7= 67,3 trillion rubles. Given the level of money supply at M2 on April 1, according to the Bank of Russia in the amount of 52.3 trillion rubles, the difference is 15 trillion.
That is actually talking about the need for infusion in the turnover of the additional 15 trillion just to maintain economic processes in the framework of zero growth.
In the context of a pandemic, the primary goal is a speedy recovery.
However, any distribution of money to some limited number of enterprises for any complex scheme means the actual delay in receipt of money in turnover because of the conjunction of several necessities: definition of industries, screening of applicants on their eligibility, administration, distribution of money, putting money into circulation, etc., etc.
on the Contrary, form a speedy injection of money into circulation is distributing money to the population directly.
Given that the population of the Russian Federation on January 1, 2020 was declared at 147 million people, required the infusion of 15 trillion rubles into the economy through their direct distribution of the population in terms of each citizen gives $ 100, 000!
This means that the Russian Federation can without much damage to economic processes in the country to give every adult citizen 120 thousand and 60 thousand rubles for each child.
the Velocity of circulation of money supply will soon reach its previous level because of quite objective reasons, such as: reduction of production, imports, exports, economic activity, unemployment growth, the inevitable changes in the behaviour of enterprises and households in the expenditure of funds, etc. Therefore, with the direct lack of money in the economy needed 15 ��RLN rubles can be issued just…!
Since we are talking about using exclusively electronic forms of money infusion through the issuance does not require a physical increase of cash just made the necessary entries on account balances of the citizens.
as the recovery in economic activity (including by increasing the velocity of money) the “extra” money will be withdrawn using any of the mechanisms or financial (e.g., sale of bonds of the Ministry of Finance) or administrative (taxes, fines), or by reducing state and local spending.
For comparison it may be noted that, according to the Finance Ministry, the volume of the national welfare Fund on 1 April 2020 amounted to a similar amount of money – 12.8 trillion rubles.
However, in our proposed concept, no expenditure of funds of the NWF generally does not occur.
Before you argue about the impossibility of using such a scenario, it is necessary to pay attention to the Bank of Russia on the continuing growth of monetary aggregate M2 in Russia: on 1 January 2011 – 20 trillion rubles as of 01.01.2012 – 24 trillion rubles 01.01.2013 – 27 trillion rubles, 01.01.2014 to 31 trillion 01.01.2015 – to 31.6 trillion rubles, 01.01.2016 – 35 trillion rubles, 01.01.2017 – 38.5 trillion rubles, 01.01.2018 – 42.5 trillion, with 01.01.2019 – 47 trillion.rubles, 01.01.2020 – 51.6 per trillion.rubles.
That is, with 2011 the increase in money in circulation RF occurs regularly regardless of the economic crisis on the level plus 3.5 trillion rubles a year.
In the present situation, using the mechanism of controlled emissions is the simplest way to revive economic activity in Russia.
