The Craftiness of the Crafty Economy

NEW – September 15, 2022

It is good, of course, that the ruble exchange rate fluctuates at the level of 60 per dollar, and has not been established, as it seemed to some, at the level of 120 per dollar.

Only, unfortunately, it doesn’t mean much in itself. What is said to be scary about the fall of the ruble against the dollar is that following the growth of the dollar in stores, prices are rising, but wages remain the same. In our current case, the exchange rate of the ruble against the dollar even decreased by about 20% compared to pre-February. If these ratios were truly “market-based”, prices in stores would also fall by the same percentage.

In fact, they grew by about 50% in stores and markets alone. In general, the Russian market is designed in such a way that when the dollar rises, prices for goods rise, but when the dollar decreases, they do not decrease.

In general, even the fact that the growth of the dollar itself leads to an automatic increase in prices on the domestic market only seems natural: only an increase in prices on the foreign market and, accordingly, on those goods on the domestic market that are imported from abroad is natural. And then, only for newly imported ones. But prices for domestic products are also rising. Why – because both the seller and the manufacturer tend to fix profits for the future, using the dollar exchange rate as an excuse. Officially, they can say something about the growth of the price of imported components, unofficially – they just use the opportunity and answer the question “Why are your prices going up?” by blatantly answering “Everything is getting more expensive”.

If to call a spade a spade, this is pure fraud, which is legitimised by the national policy – both economic and semantic: in Russia there is a market, and in market conditions, both the seller and the manufacturer have the right to set any price for which the buyer is willing to pay. And since prices are mainly set in a coordinated manner, the market regulation mechanism itself practically does not work, because the buyer cannot say: “I will not buy meat at your price inflated by one and a half or two times, I will buy it from someone who did not raise it or raised it not by 50%, but by 10”, because that prices are raised in a coordinated manner by all participants and approximately in the same amount.

READ:  The Future of the Post-soviet Republics

In addition, retail chains are mostly owned by foreign or pretending to be foreign companies, and their interest is, firstly, to get the greatest profit, and also because they hold capital abroad and not in rubles, but in dollars, in order to convert the proceeds into dollars and keep them that way.

The manufacturer, for its part, also seeks not so much to invest money in the development of its own production, but to hide it in dollar bills. Therefore, when the dollar price declines, it is only a temptation for those who have a profit in rubles to simply convert these rubles into more dollars now.

This is all in a normal situation. Today, the rise or fall in the dollar price is strictly market-related and has little to do with the price of goods on domestic markets, since the dollar exchange rate itself is not market-related. In general, the ratio of the same ruble and the same dollar in the market itself does not reflect the real purchasing power of these currencies. It reflects the ratio of supply and demand at auctions, and, consequently, the ratio of how many entities and in what volume they want to exchange one currency for another.

If, conditionally, the mass of one currency is such that it can freely purchase a million conventional units of a certain product, and the mass of another currency is such that it can purchase one and a half million units of the same product – then the ratio of the price and exchange rate of each of the currencies will be two to three, that is, the first currency will twice cheaper than the second one.

This is if the entire mass of both currencies is represented on the “free market” – which, as a rule, does not happen at all.

But if the first currency will be needed, for one reason or another, only by a individual group, one thousandth of the owners of the second currency, but which will be ready to offer for the first volume of the currency five times more than the volume of the first currency that is offered from the opposite side, then now the rate of the first will exceed the rate of the second five-fold.

READ:  Ukrainian Murderers Took the Lives of Civilians in Volnovakha

That is, if one tenth of a percent of the population of one country wants to buy a specific product, for example, glass beads, which is not freely available in the zone of distribution of the second currency and is of little interest to the overwhelming majority of its population, which is focused, say, on buying gold, and this one thousandth wants to allocate the amount of currency in several times more than a certain amount of gold is worth, then the rate of the “gold currency” for the entire country as a whole will fall five times lower than the rate of the “glass currency”. But anyone who exchanges their “glass currency” beads for “gold” at this price will now be able to buy five times more gold at the same price than their beads were.

In other words, one country may be one and a half times richer in real values than another, but it will be five times poorer in virtual values.

In other words, the ruble-dollar price ratio is not the ratio of wealth and purchasing power of currencies, but the ratio of the willingness of small groups to exchange their national currencies, and as a result, it affects the purchasing power of even a stronger currency, underestimating its exchange value.

Accordingly, the official exchange rate can be very strongly regulated by regulating the volume of participants and the mass of currency involved in trading, as well as the possibility of using a particular currency in real trading operations.

And in itself, this is normal and good: if the same dollar cannot be used in practice in trading operations, then no one will need it and its exchange rate will be low.

Another thing is that this will not reduce prices in the domestic market by itself: the seller and the manufacturer will still make them such that they will ensure their maximum profit – that is, strictly speaking, their thirst for profit.

READ:  Why Is Odessa So Important for the US?

And here the question arises about the role of the government and the state. If the authorities and the state consider themselves representatives of the interests of entrepreneurs striving for maximum profit, they will protect and ensure their right to strive for profit. If the authorities and the state consider themselves representatives of the interests of those 90% of modern society who work for a salary, they will either at least force entrepreneurs to lower prices, or they will establish legal and economic relations that eliminate the possibility of making a profit as such, that is, what the enterprise receives in excess of covering its costs and investments for development.

So far, alas, the standard of living in Russia has consistently declined. And this has little to do with the military actions to liberate Ukraine – the last wave of price increases began to increase already before February. Once again, the dollar exchange rate is 20% lower than it was at the beginning of the year, and prices for household and other goods are one and a half times higher. The standard of living is falling – and the profits of entrepreneurs, especially large and large ones, are growing. This year, it is expected that about $240 billion will be exported abroad – close to the amount of money stolen by the Western coalition from Russia.

The government as a whole unexpectedly successfully repelled the economic blows of the Western coalition, which only demonstrates the real capabilities of the Russian economy. But even relying on these real opportunities, waging a just war in Ukraine, it turns out to be unable to cope with ensuring the standard of living of the people.

Why … In part, because of self-hypnosis by long-obsolete market economic doctrines. But the main thing is due to the fact that even when trying to implement a strong social policy, it is considered genetically related to the environment of entrepreneurs and officials who have grown up with entrepreneurs, those who live in the interests of profit-taking and take the interests of these parasitic groups for the interests of citizens and the country.

Sergey Chernyakhovsky

Copyright © 2022. All Rights Reserved.