“Indeed, numerous black swans are now swimming in the global economic lake,” IMF Managing Director Dominique Strauss-Kahn figuratively described the state of the world economy. What did he mean? Writer and investor Nassim Taleb coined the term “black swan.” That’s how he calls unexpected events that have serious crisis-prone consequences for markets, meaning that investors often forget that the former might occur. According to Strauss-Kahn, the crisis has swung the pendulum from a free market to greater state control and a more complex structure of the world economy. But he thinks it is insufficient – the financial sector needs some major regulatory surgery. “The crisis originated in a culture of reckless risk-taking, a culture that is unfortunately still alive and kicking,” the IMF head said in a speech at George Washington University.
The IMF head’s phrase prompted analysts to redouble their efforts and brainstorm global economic problems. Ukrainian economic and financial experts do not stay clear of this process. Later last week they held a debate, “Stagflation or Deflation. War or Peace?”, at Kyiv’s business club Belgravia.
In their view, the crisis is one of overproduction and is not yet over. One of its causes is a lack of opportunities for the extensive development of the global economy, while intensive opportunities are unthinkable without the Sixth Technological Revolution. Evolution is helpless here. Thus, the independent expert Dmytro Moshalko forecasts “there will be some kind of a revolutionary transition.”
The well-known expert Erik Naiman, currently a Capital Times managing partner and moderator of the business club debate, believes that what has happened lately in the world economy is no coincidence. He quotes Russia’s Finance Minister Alexei Kudrin as saying that the world is marching in small steps towards the establishing of a global government and is forming all the necessary institutions that use crises for impetus. “There is a herd of sheep and the shepherd dogs that lead it,” says Naiman, describing what is going on in the world, “so inflation and deflation occur with the help of these crisis-time shepherd dogs. But, in reality, all these fluctuations are a nice opportunity to cash in and survive.”
“Give me a printing machine and I won’t care about who writes laws,” one of the debaters joked at this moment, as if it were a foreword to the speech of Andrii Onistrat, chairman of the Supervisory Board of the National Credit bank. He focused on the situation in the Ukrainian banking system. In his words, the market is expecting discount rates to go down. This in turn promotes the formation of new businesses and fields of their activity. The banker believes this process “is very active on the post-Soviet space.” “It is a plus,” Onistrat says.
But what he believes is a minus is the lack of cheap money in this country. Although banks are settling refunding accounts with regulators quite actively, corporations and, to a lesser extent, individuals remain big money holders, while it has been the other way round before. Moreover, big capital holders are striving for and, finally, reaping a profit at an interest rate of 15-16 percent per annum. But the liabilities flow over from bigger to smaller banks. Besides, the banker says, non-resident banks have appealed to the IMF “to begin to massacre the innocents.” Fortunately, the IMF’s demands are of an advisory nature, but still, in his opinion, there has been sort of watershed (50 by 50) between the residents and non-residents.
In this situation non-residents decided to launch consumer crediting and make use of their low-rate (about 10 percent) liabilities. This allows for setting a 15-percent p.a. margin in hryvnias. But these rates only work when car purchases are credited. Onistrat notes that non-residents have not yet healed their mortgage-inflicted wounds. As the gravest “wounds” can be found in the three leaders, the building sector is not being credited so far. Everybody is waiting for somebody to bring this process into motion. Yet, as before, nobody likes the mortgage because bankers can see that it does and perhaps will continue to fall – there are no operations except for some in the most expensive segment. In the other segments, growth (about five percent of the pre-crisis figures) has been achieved owing to the sales of one- and two-room apartments on the outskirts. “I am firmly convinced,” the banker says, “that this segment will not begin to develop until non-residents again dislike us, Ukraine. Until then, the mortgage will remain dead.” “For the mortgage to revive, this market should have too much money,” Onistrat concludes and adds: “The maternal companies of non-resident banks regard us as a suitcase without a handle, which you hate to drop but find it hard to carry.”
This prompted the moderator to ask the following question: “But, maybe, people are being deliberately pushed to consume in this way.” But Onistrat notes that there is “in fact no work” in the regions of Ukraine, people live very poorly, and, since a major part of incomes is spent on gas, they switch to subsistence farming. In this connection, the banker favors a free market of land, which may change the situation in agriculture. He also fears that, while previously the peasants used to get at least something for a lease, now he will buy a Daewoo-Lanos for the sold land, but will lack money to finish the roof in the garage. For this reason, Onistrat even predicts a social explosion and a new repartition of land. And is thoroughly convinced that “you shouldn’t go in for consumer loans now because the grassroots’ incomes are showing a downward trend.” The banker believes it is better to credit small and medium businesses, especially agriculture – if farmers are furnished with machinery, they will get a powerful impulse for growth.
