‘When it rains it pours’ may be a good way to describe shopping today (never mind it is sunny spring) at my neighborhood farmers market. Why? Again (and it is rare), I ran into that old Znakharka (witch/healer/seer) of whom I wrote about last week. Twice in eight days! Coincidence, spooky? You tell me.
As usual, she made sure to ‘bump’ into me. “We go outside for a smoke, yes”? Why not? After all, the great outdoors and fresh air are now the smokers’ new habitat. Cadging a cigarette from me… and a light… I was fully expecting her to launch into one of her commentaries on the state of the world through the eye of the ruble. No such luck! She recalled when I broke off her last week’s “prophesizing”. She was beginning to sound like the Slavic version of Mohamed El-Erian, or some wonk from Goldman Sachs or JP Morgan.
“Inflation has started, but few believe it. I told you that when used car prices rise and when the prices of properties keep rising, it is not so good if you have no gold.”
I thought to myself – not bad for a Russian pensioner as this week in America data came out showing a 12% surge for the 20-city composite of housing prices for the three months ending February. I guesstimate then that the annualized increase over the last eight months for the national index was 15+% – stronger than any period dating back to the mid-1980s.
“It is the basics you must pay attention to. The wood to build with, the pipes, cables, and even the water.”
There she was getting really warm, as back in the US the lead lumber contract is up 60+% so far this year, and 340+% over these past 12 months.
“Many people everywhere are still with no real jobs, so the effect of every kopek increase in the price of things is painful. Even our president Putin understands this, he yesterday announced that the government will return to parents half the price of sending their children to summer camp this year, a very nice thing as so many have been isolated inside their homes this year. I think the same in America where your Mr. Biden is printing so many dollars and giving them away to American people, all people, even those who come not legally – maybe he is too generous with American money?”
“I have started to also put some of my money to work on the Russian Stock Exchange (MOEX) last year. I already told you about gold and cryptocurrencies. Some of our stocks are good and will always have ruble value, so far I am happy and it is a very interesting game.”
She has a point, especially if all you care about is rubles, the MOEX has performed remarkably well, even when compared to the world markets in their local currencies. Despite all the headwinds, sanctions, and the like, the ruble-based MOEX index for the past 20 years has done extremely well.
So where is this inflation the Znakharka assures is already upon us? If you dig into this, worldwide, the collective money printing and stimulus programs spent $15 TRILLION in 2020 alone. These were not funds for infrastructure or the real economy, it was stimulus payments and other ‘economically’ non-productive directions.
This year inflation can be seen in wheat prices which are up 30%, soybean prices up 80%, corn prices up 100%, and so forth. These, and the lumber, housing, cars mentioned earlier are at the foundations of the diversified products flow to the eventual consumer. They don’t get cheaper with add-on processing, storage, and transport (which, by the way, is at 10-year highs).
“So, inostranets (foreigner), remember that anything placed on a pedestal always falls. It can be reputation, love, respect, values, or more practically the dollar. Remember also, if I have helped you, you can always repay the favor with a gold St. George, some nice pickled herring, or some Ethereum one day!”
Analyst Paul Goncharoff, Moscow