The Duran Podcast - Russian economy not in tatters. German economy in tatters

Episode Date: October 5, 2023

Russian economy not in tatters. German economy in tatters

All right, Alexander, let's talk about the Russian economy, which is not in Tatters. It's actually projected for even better growth than what they were saying. Last time, the economic ministry gave their projections. They had it, I believe, like 1.8% or 2% growth. Now they're putting it at, what is it, 2.8 or 3% growth. growth, and they're saying that 2024 could also be a very strong year for growth.

Very different. The outlook for the Russian economy is very different than what you're getting from the UK, what you're getting from Germany, which is now being called the sick man of Europe. I mean, it's, that's the German economy now,

the sick man of Europe. How do you explain what's going on? Well, I think it's not actually difficult. I mean, this is largely a product of two things. Firstly, there is the highest spending that the Russian government has engaged in on the wall. And there's no doubt that there has been an increase in spending, that arms industries are producing more, and that is undoubtedly strengthening economic,

or increasing economic activity altogether. But that's only a part of the picture. And in my opinion, far and away, smallest part of the picture. The main reason the economy is taking off in the way that it has is because of sanctions. The whole way the sanctions thing has played out. Firstly, last year we had the sanctions imposed. That caused Western companies to pull out en masse from Russia. That caused huge numbers of niches in the Russian economy that needed to be filled, which of course provided a huge number of business opportunities to all sorts of people.

There was also a worry at that time on the part of many, many people about what would happen to the economy in the face of the sanctions. So people started saving. So there's already savings left over from the time of the pandemic because people have been saving during that time, because they couldn't go out and shop and do the kind of things that people normally do. So savings were probably already quite high. And then last year they saved even more. demand fell and that was a real problem and the government was very worried about the fact as I remember the demand in the economy was so weak and so the government did two things they started spending more on the wall they increased arms production at the end of last year and in a big way at the beginning of this year and they also took various steps to try and support demands to try

to get demanded the economy, you know, active and coming out again. And it all suddenly kicked in in the second quarter of this year. So demand came surging back. That meant people started to spend. That meant that there was suddenly very high demand for goods and services right across the economy. and that has led to a big economic surge. And manufacturing is now growing fast. In Moscow, which is the biggest manufacturing hub in the country.

Manufacturing is increasing by, I think it was 14% growth over last year and much higher than 2021. So the economy is surging. And business investment is rising, and the government is now rolling out various plans for further business investment in strategic industries. I was reading, by the way, a long paper about the government's plans to rebuild and enlarge and develop Russia's semiconductor industry, for example. So all of that is happening all at the same time, and the economy is now serving. And the effect is that, as you correctly said, we had a prediction, if you remember, from the World Bank, the start of the year that the economy would grow by 0.7% this year and then it was upgraded to, I think it was 1.5%. Then it was 2%. Then a short time ago Putin was saying it might be 2.5%. Now the economics ministry is saying 2.8% by year end, perhaps even 3%.

So this is a very, very big surge. And bear in mind that most of this growth is coming. The month where growth really began to kick in was July. So that's where the surge really began to take off. Now, this is having some other effects. It's sucking, sucking in imports. That has put pressure on the ruble because there's such big demand in the economy and also labour shortages because demand, you know, companies are struggling to keep up with the supply, this huge surge in supply. And of course, a lot of men are now in the army and the war.

There's also been a further push up in wages. So there's wages are growing, demand is growing. The economy is growing, but it is also showing definite signs of overheating. And the result is that inflation is higher than the central bank hoped it would be at the start of the year, which is why they've been trying to raise interest rates. The latest opinion view of the economics industry is that inflation will peak somewhere around 7% by the end of this year, and will remain there until this process finally stabilises, takes a more stable form, which they predict will be in the last quarter or third of next year.

So we're going to have a period of higher inflation and higher interest rates. But note that the higher interest rates at the moment do not seem to be slowing economic growth. economic growth remains very strong and the government by the way because they've got these programmes both to support the war through higher war spending but also to build up various

industrial components of the economy I spoke about the plan for semi-conductors and other such things shipbuilding all kinds of things of that kind they are going to spending in Russia is going to increase but with oil prices rising and the ruble soft

they're expecting that the budget deficit is going to shrink this year and possibly next with tax receipts surging some Russian officials are talking about a budget surplus next year so already the economy is bigger than it was

before the sanctions were imposed and it is going to become bigger still right okay so uh what is happening to to germany the u k i don't know if you want to talk about the u.s i think this is a good point uh a good point in time to talk about the economies of the collective west specifically what's going on in germany and europe and the u.k because we are at the one-year point of the north stream pipeline sabotage which really did change the economic economic fortunes of not only Germany, but of many countries in the collective West and many countries that are part of the European Union.

Because as Germany, as Germany's economy goes, so do the economies of the EU. Well, we've discussed this before, but to reiterate again, what we spoke about right at the beginning back when Schultz first suspended Nord Stream 2, if you remember, what has happened with that and with the subsequent destruction of Nord Stream 1 and the loss of cheap energy flows from Russia what that all means is the Germany is now definitely in a process of deindustrialisation

and this is apparently starting to accelerate it's also the case and this is something we also discussed over many years that the entire period of the Merkel the entire Merkel era was a period of industrial and industrial stagnation in Germany. It was a period of immobilism. The German economy did not adapt to the changes,

the technological changes that were taking place in the world. It was buttressed by the euro and the captive market in Europe, which of course for Germany the euro is a soft currency, even though it's a very hard currency for everyone else. So now all of that is coming together and Germany's economy is starting to look increasingly unhealthy. The sick man of Europe, some people are calling it, and that's affecting Europe altogether.

Now, they've had another massive blow, which is this big increase in oil prices. Now, there's been a lot of talk about the increase in oil prices, and a lot of people are blaming open. PEC Plus, and of course they have undertaken production cuts. That's no question at all about that. But there are other factors that are leading to the big increase in oil prices as well. One is that Chinese demand apparently is coming back.

In fact, it's been quite strong. So China takes it up a lot of the oil. It's now one of the big consumers alongside the United States. but the other is that the Biden administration and not just the Biden administration, but European governments in general tried to sustain the economies last year. Do you remember there was all that huge spending programs

that took place last winter to tide the economies through what they assumed would be a temporary blip? That has left massive debt behind, but it's also... meant that reserves of oil especially are not as strong as they ought to be. The United States drew heavily down on its strategic reserve. And the result is that there's not enough oil.

There is now an oil shortage. And that is why the oil price has been creeping upwards. And most project that it will continue to do so. Now that is very, very hard, very bad news for the German economy, which is not able to import cheap energy. And of course, rising oil prices are going to accelerate in Europe, the downward spiral. And that's what we're going to see. And the European Central Bank has now again raised interest rates, and it's saying that interest rates have to continue to remain very high.

budget deficits are starting to grow in various European countries. Italy is now running a big budget deficit. The stresses, the strains across the eurozone are growing and they're going to get much worse. I can't see upon what possible basis they can get better. And beyond that, we have at best a long period of continuing stagnation and most probably decline

and that's only if we avoid a serious recession. So that's Europe. So that's a simple situation. The United States in some ways is even more interesting because what has happened there is that the Biden administration

did what the Europeans did. The Europeans, as I said, pumped a lot of money into their economy, last winter in order to try to cushion the energy shock that happened last winter with the results, the consequences that we're now seeing. The United States did the same, but of course they're also continuing to give huge funds to their industries through this so-called inflation reduction act. Now, a lot of that is done through providing cheap credits or sometimes extremely cheap credits or handouts and things of that kind. Now, I was reading an article by an economics writer, Matthew Lynn.

He's pointing out that the budget deficit as a result in the United States is soaring this despite the fact that the economy is growing. of course all this money is also the amounts of money are increasing. So the Inflation Reduction Act was supposed to provide $350 billion of extra spending to industry. Now that's already increased to $512 billion, apparently. There's talk that it will increase to $1.2 trillion before very long. So just as happened in the first year of the Biden administration, what we're seeing now is a huge wall of money hitting the economy, coming from the, you know, it's a huge fiscal stimulus taking shape. And that's also creating signs of overheating. And we see that with strikes in the auto industry, demands for people demanding 40% wage increase.

We see the fact that food prices and energy costs are also rising. And from what I'm hearing, very little real sign that this industrial renaissance, that the Inflation Reduction Act is supposed to have been producing. Very little sign that it's actually producing that effect. Because to reiterate again, if you're going to start, you're going to go down the line of trying to build up your industry, in this sort of fashion, you unavoidably need to undertake a high degree of structured and coordinated planning. And there's no sign of this coming out of the administration. They'll come up with all kinds of plans, but when you actually go through them, they're not

realistic and they're not properly costed. It also sounds to me like the European Union and the US, they spent all this money to keep their economies in check during the last year based on the hopes that Ukraine would pull off a victory. Well, that's exactly right. Ukraine would get that money back somehow, right? Yeah, Ukraine would pull off a victory. Russia, there would be a regime change there. the political system would collapse and, you know, all would be well. But it didn't work out like that.

So, I mean, that's the situation they're faced with today. I mean, again, they put all their eggs in one basket. They thought if we get through last year, well, yeah, so it seems. I mean, that's the strange thing about this. They thought, you know, if we provided we get through, you know, the winter, you know, we'll be all right because in the summer, you know, Zelensky's tanks will be outside the Kremlin by the

autumn. And, you know, at the very least, you'll have retaken Crimea. We'll be able to impose some kind of capitulation on the Russians. This terrible man, Putin, will be out of the picture. At last. We'll get our hands on

Russia's energy resources once and forever lock out the Chinese. Perhaps Russia will even break up and all will be well. But of course, it hasn't worked out like that. And anybody who had two brain cells to rub together would know that you never gamble in that kind of way. Yeah, but Schultz, well, Schultz doesn't have two brain cells to rub together, but Schultz subsidized everything over last winter. Yes. To cover up the problem that he maneuvered Germany into. Exactly. And the problem that the North Stream

pipeline sabotage forced upon Germany. Yes, I think here again, this is one of the fundamental problems with today's generation of political leaders in the West. Once upon a time, political leaders in the West

came from industry, from business, in the case of the left, from unions. They had actual background in production, in industry, in the commercial world, they understood how things worked. They had some real understanding of how things work. Today they don't, because they are a class of political apparatchiks

who just float upwards to the extent that they have a background in anything. It's either some types of law or it's journalism, things like that. But they don't really know how things work properly. And it's easy to see how someone like Schultz could have fallen for this kind of trap because he has no real background in this. And of course, Harbeck, who is his economics minister, well, I understand that his previous experience was writing children's books, which isn't going to prepare you.

Yeah, exactly, which isn't going to prepare you for the difficult business of managing an economy as complex as the German. So they all thought, well, we're very rich. Our countries are the richest countries in the world. Of course we can find ways to get around. And they don't understand that their countries are rich in the way that they have been because of the very hard work than all kinds of people

have put into that. And because up to now they've been run in a certain way. Well, I'm not going to get into the background of Annalina, from what I understand, she was a trapeze. Well, that's right. Specialist or something like that in this. I don't know. Absolutely. Absolutely.

Yeah, we will leave it there. The durand.com. We are on Rumble, Odyssey, bitch, shoot, telegram, Rockfin, and X, and go to the Duran shop. 10% off. Use the code. Good day. Take care. Thank you.