Bet no more than life

In recent days, many economists and economic observers in serious publications have paid attention to the fact that the US Federal Reserve has raised its key interest rate. This event was interpreted as a crisis of the system.

In my opinion, the most noteworthy article is Vladimir Tregubov, Candidate of Economic Sciences. Large, with excursions into history. If only about today, then – concisely:

“The American economy has been falling for six months now and there is no reason why this process will be stopped …

An industrial and debt crisis was added to the energy crisis …

The Federal Reserve raised interest rates three times, the last two times very aggressively – by as much as 0.75% …

The Federal Reserve has lost control of inflation and the price of regaining control could be a recession.”

What is remarkable about Tregubov’s article? In my opinion, the main thing is that in a very large space of analytical notes, he did not name the size of this terrible rate of the FRS – the US Federal Reserve System, an analogue of our Central Bank.

Either he forgot, or, as a professional, he considered that everyone already knew, or he deliberately hid it?

In other publications – the same catastrophic motives.

“It could also end in default, but the US has more room to delay the problem…”

“The American economy is falling. This process is accompanied by inflation unprecedented in recent years.

And so on. But the publications call this “terrible” Fed key interest rate: “The US Federal Reserve raised the rate from 2.25-2.5% to 3-3.25% per annum.”

Now you can get down to business.

For the development of production, free money is needed. Banks give them.

The banking system everywhere is two-tier. State banks (central banks, the Federal Reserve) give loans at a certain percentage (key rate) to commercial banks (second-tier banks), and those already give loans to enterprises, companies, at a higher percentage.

On that both the state, and commercial banks have profit.

If you tell our commercial bankers and entrepreneurs that the key rate of the Central Bank is 3%, they will consider you crazy.

And if you say that the Central Bank gives loans at 0.09 – 0.4% per annum, they themselves will go crazy. Because everything is relative…

Somehow, back in 2007, the then Prime Minister Viktor Zubkov found out that a Russian bank was giving a loan to one enterprise at 16%, and was indignant: “Shame! Ugliness! Our banks do not pay attention to the needs of Russian industry. Complete indifference!”

And ordered to stop this disgrace. But nothing has stopped. Domestic banks continued to stifle domestic producers.

In 2007, the Central Bank rate was 10.25%. In 2015 – 11%. Commercial banks, in turn, gave money to enterprises, companies – at 20%.

What business can handle it? Is that due to higher prices for their products. That is, at the expense of the population. But the people’s wallets are not dimensionless.

And the Fed’s key rate from 2009 to 2017 was from 0.09 to 0.4% per annum. The next 5 years – from 1 to 2.16%. Nine months of 2022 – from 0.25 to 2.5%.

Commercial banks took loans from the state (the FRS) and gave them to companies and enterprises at 5-6% per annum. For long periods.

And now the Fed’s key rate is rising to a “terrifying” 3 – 3.25% per annum.

I must say that large companies and commercial banks of the Russian Federation used the low interest rates of the US Federal Reserve with might and main. But in 2014, sanctions began. Loans closed. Russian business has become completely dependent on the Central Bank and commercial banks.

On the fifth day since the start of the special military operation of Russian troops in Ukraine, February 28, the Central Bank raised the key rate to a record 20%. Consequently, enterprises, companies will receive money from commercial banks already at about 30-35%? What business can handle it? Even taking into account the fact that he will try to shift most of the costs onto us.

Then the key rate was gradually reduced to 8%.

In May 2022, the government of the Russian Federation announced preferential loans as part of the national project “Small and Medium Enterprises”.

Loan rates for microenterprises and small businesses – 15%; for medium-sized businesses – 13.5%, for the development of entrepreneurial activity – 16% per annum.

Then, apparently, someone there, at the top, saw, guessed or even understood – and was horrified. In mid-August, three months later, a new program of concessional lending came out – at 3 and 4.5% per annum.

Very well. Let so far only for small and medium-sized businesses, including individual entrepreneurs and the self-employed. But will there be a sequel?

Sergei Baimukhametov.

Photo by Olga Davydova