The stagnation is different from the recession
The recession is the first steps of possible problems, which may not happen if the government of the country conducts a sound economic policy. This is a minor decline, which is inevitably present in the modern cyclical economy. The recession is replacing the period of growth and prosperity. If the government fails, then the recession, with its lower business activity, is followed by stagnation.
Stagnation is a prolonged stagnation. If the recession can be compared to fatigue, then stagnation is already a disease. This requires a special soft tax regime and financial injections to recover.
Inflation and devaluation: is one possible without the other?
Inflation is the rise in prices or the depreciation of money. Due to inflation per unit of currency, say the ruble, you can buy less goods.
Devaluation is the depreciation of the national currency relative to other currencies.
Devaluation has two main reasons:
- High level of inflation.
- Deteriorating trade balance.
A small devaluation has a positive effect on the economy. It stimulates domestic production and increases the competitiveness of domestic goods in the domestic and foreign markets. As the devaluation leads to an increase in the prices of imported goods. And inflation is characterized by rising prices for all goods.
Devaluation in developed economies may not cause inflation, although in Russia it is not yet possible, although it should be noted that dependence on imports over the past 15 years of the oil boom has declined significantly.
Default
Default is bankruptcy. The default of the state is the inability to repay the current amounts for debts. Thus, in 1998, the default in Russia was caused by the inability to service bonds - T-bills. The issuer was the Ministry of Finance. After the default is declared, the debts are restructured, in much the same way that the bank does for the borrower who has overdue payments.
Signs of approaching default:
- Sharp reduction of gold and foreign exchange reserves.
- Active issuance of new debt obligations, indicating the need to refinance. The yield of liabilities in this case increases, as the risk of losing money increases.
For Russians, the default is the devaluation of the ruble, inflation, the outflow of investment, a reduction in production and an increase in unemployment.
Today Russia still has enough gold and foreign currency reserves, which, incidentally, are being rapidly spent. The country's debt is small, but budget revenues are falling. Today, Russia's rating is BBB, which is called a pre-maritime rating. True, it should be noted that Bulgaria and Romania have the same rating, and these countries are quite attractive for life.
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