Hi to the Gaidar Forum or why we do not need to fight inflation

Published: January 12th, 2017

Today opens Gaidar Forum. I will not be glorified as a great visionary, if I write that they will once again call upon reconciled with stagnation, with the "new normal", and that the burden of the majority of performances will continue the fight against inflation as the basis of all economic policy.

I want to say that the fight against inflation - a false guide, a false problem, which is solved by the same wrong methods. And what if the government will continue to be guided by the existing installations, no development, we really do not see.

Let us look at the government's actions, which "are targeting inflation": the introduction of "Plato", raising excise taxes on fuel, raising other taxes and tariffs, the constant "sterilization", ie concluded by the government of money abroad, unfavorable conditions of WTO membership ... All this leads to more expensive manufactured goods to Russia, ie, spins inflation. The disadvantage of production is unprofitable investments in Russia leads to the fact that the ruble investors are not concerned, they are willing to change the currency, which leads to a cheapening of the ruble, ie again spins inflation.

Expensive credit, inflated interest rates, contraction of the money supply, which the central bank is "fighting inflation" are in the same row. They make goods more expensive, unprofitable investments, ie, even more untwist inflation.

This "fight" continues for a quarter century and can continue until the elimination of all non-oil part of the economy of our country.

How should we act and how we propose to the CCI and will be offering at the Moscow Economic Forum.

Our slogan is: Inflation is nothing, industrialization is everything! We must do everything to improve the competitiveness of production in Russia. It is necessary to attract money into production. For this new fiscal policy, necessary, reasonable and adequate foreign trade policy of the Central Bank policy. And the Central Bank's policy implies a key rate at 1% and to conduct a large-scale issue.

The growing economy that we need, to be engorged with money, and the money should be more and more. Money supply must not be compressed, it must meet the needs of the economy.

Let's look at China's actions, which economy has grown 40 times in 30 years.

Over three decades (1986-2016) of modern economic policy the volume of annual investment in China increased by 55 times, which required 70 or more times to increase the credit of the state of the banking system. The initial source of funding was the state target credit issue. Money supply grew at the same time more than 100 times, increasing annually by 20-40%.
Despite the multiple advance of monetary growth in relation to the increase in production, inflation in China for the entire period of almost thirty years of turbulent monetization of the economy remained in the range of 6%.

It should be noted that moderate inflation, cheap and gradually getting cheaper currency - is good for production. Cheap currency makes goods produced in the country more competitive on the world market, and hence contributes to the growth of the economy. This again tells Chinese experience.

That is why:

no need to fight inflation, it is necessary to work, you need to know how to use it;
issue should not be afraid, when the emission of sound economic policies is needed;
at the Gaidar Forum do not go, Kudrin and Nabiullina not listen, come to the end of March to the correct forum in Moscow economy. They will discuss the right strategy, and a good delegation from China will too.

Source: LiveJournal

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