Ruble denomination will help fight the shadow economy, but will lead to higher inflation, believes the head of the Department of Corporate Finance and Corporate Governance of the Financial University under the Government of the Russian Federation Konstantin Ordov.
In Russia, they proposed to denominate the ruble
The head of the information and analytical center "Alpari" Alexander Razuvaev considers, that since the last denomination in 1998 the Russian ruble has depreciated enough, which allows for a new denomination in 100 time.
The reason for this decision is the critical increase in cash in Russia, since the Central Bank of the Russian Federation announced the volume of cash in 11,6 trillion rubles. This is a record figure, as a result of which for every Russian, including children, accounts for the amount of cash in 80 thousand. It negatively affects the economy, and Russians are switching to enveloped salaries.
Denomination will allow you to control such transactions and identify undeclared income. Especially, according to Razuvaev, the denomination will be inexpensive and will not become a serious burden on the Russian budget.
Razuvaev also said, that denomination will bring a penny back, and this will increase the authority of the Russian currency. it, At first, controversial claim, and secondly, it repeats the statement of Boris Yeltsin at the end 1997 of the year.
AT 1998 year, Russia has carried out the denomination of the ruble in the ratio 1:1000, and Yeltsin in his New Year message said, that the ruble became "one of the most stable currencies in Europe" and called the return of the penny a huge achievement. Alexander Lifshits, one of the finance ministers of the Yeltsin era, welcoming denomination, characterized her, as the completion of financial stabilization in Russia.
Only this rhetoric was quickly discredited by the events of August. 1998 of the year, collapse of the ruble, default and collapse of the government of Sergei Kiriyenko. A few days before the default, Yeltsin spoke publicly, that there will be no such development of events in Russia.
Denomination will help fight the shadow economy
“This story smacks of PR and hype., but denomination causes bad associations among Russians. Not only with 1998 year, but also with 1991 year - with the Pavlovian reforms, when we exchanged large banknotes ", – concludes the Hordes.
AT 1991 year, the goal of the reform was to get rid of apartments, clogged with money - because of this, the amount of old money, which can be exchanged for new, was limited - the same was the case in 1993 year, when Russia got rid of the Soviet ruble.
“Then, when exchanging large amounts of cash, it was necessary to explain the origin of these funds. Today, we see, that apartments are systematically identified in Russia, crammed with cash, therefore, during the implementation of the denominational reform, such people in a short time will not be able to exchange their savings for new money ", – summarizes the hordes.
If you remove the brackets from the media position of the sentence, Razuvaev hints at huge amounts of cash, accumulated in Russia, which are not the result of trade and economic relations, as seen in the case of Colonel Zakharchenko.
"A huge amount of cash confirms shadow earnings and a large share of the shadow economy in Russia", – states Ordov.
There are different assessments on this issue., but experts mostly agree on, that the share of the shadow economy in Russia is 30% from its volume. The fight against this problem should turn into the general line of the Government of the Russian Federation, It was with this task that the experts associated the appointment of the former head of the Federal Tax Service Mikhail Mishustin as the Russian Prime Minister.
Now, in connection with the coronavirus, this has been forgotten a little., but in Russia they will definitely return to this, for what, perhaps, and hints Razuvaev.
“As a way to get rid of illegal savings, denomination is good, because with her it will be necessary to prove the origin of income. The aesthetic aspect is also positive.. Dollar over 70 kopecks will allow you to remember the times of the USSR ", – concludes the Hordes.
This is where the pros end, since the change in ruble noughts will affect prices and the financial situation in Russia.
Denomination leads to a surge in inflation
“The real impact of the denomination on the economy is unlikely to be positive. The scale of the currency will change, but not its share in the economy. We can also recall the denominations in European countries before the introduction of the euro, and also about our experience with the Pavlovian reform, when we switched to a new order of prices. It always leads to a surge in inflation.. Stamping and Printing Money Easily, but the denomination was always and everywhere accompanied by a rise in prices ", – summarizes the hordes.
Nobody will round prices down, and the return of a penny means the need to make a huge mass of new metallic money. According to the expert, there are big doubts, that we are ready to rattle coppers again, and Russia has long adapted to the modern ratio of paper and non-cash money.
“In large cities it is easy to pay by bank transfer, and large cash confirms the volume of the shadow economy ", – states Ordov.
Denomination will further stimulate the demand for cash, which is growing due to lower interest rates. We're heading towards negative rates today, like developed countries. Deposit income is no longer an incentive to keep money in the bank, and the citizens carry them home. Denomination will only strengthen such aspirations in society..
“A broader question arises, and how will the Russian Federation react to a further decrease in interest rates ", – concludes the Hordes.
Dmitry Sikorski
