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​The Russian Ponzi laid bear, er, bare

9/1/2016

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Russian Pensioners Have Never Lived So Large Before

​
More below.
"The Russian Government is taking good care of its retirees. Prime Minister Dmitry Medvedev was brutally honest with pensioners in Crimea last May: “There is no money, but cheer up!” he said to an angry elderly woman asking that her pension be indexed to inflation (as the authorities had vowed to do after annexation). Clearly unable to make good on their promises, the authorities instead decided to make a one-time payment next year.

In another memorable statement, Medvedev explained the government’s reasoning:
Under current economic conditions, a one-time payment would be better; one can buy something for a holiday celebration, do something else with it, rather than have it be spread thinly and not be felt at all.

Russian pensioners will be able to live large in January of 2017, when every retiree, employed and unemployed, receives 5,000 rubles ($80), rather than having it be spread out all year, amounting to $6.06 per month."

Whoo hoo! Vodka all around.

​"The good news for Russian pensioners, however, was tempered with some bad news for current workers. The Russian Government announced it would again freeze saving contributions to the pension funds in 2017, the fourth time the Government has done so since Crimea’s annexation. (The pension system in Russia consist of two parts: insurance and savings. The insurance part is used by the government to pay current pensions, while the savings part stays in every citizen’s account and may be invested. Each employer is required to set aside 22 percent of each employee’s salary for pensions, with 16 percent going to insurance, and 6 percent to savings. If a person doesn’t chose a private pension fund to invest his retirement savings, those funds automatically go to the State Pension Fund of Russia. The saving contributions freeze means all the 22 percent go to the insurance part—people are directly being deprived of their retirement savings.)"


Russia is out of money, it has little economy outside of its oil exports, its economy is in serious recession, the Rubble is dropping like a tank liberated from an aircraft at 40,000 feet, and the Treasury is running dry. It does not have the money to pay the pensioners what they need to survive, but it must, so it takes some from the workers to pay to the retirees. Exactly the same way a bankrupt might take rent money to eat. 

There is no reason to believe that the current low price for oil will lift any time in the next year, so Russia will find no immediate reprieve. Instead it should expect the price of oil to remain low for at least a few years, meaning that the self drive car, and its efficiencies will likely erode the demand side of the equation before the supply side can be reduced. 

This could not happen to a better Putz, er, Putin.
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