Euro / dollar remains under pressure

A pleasant surprise from the report, Chicago PMI, as well as a slightly higher rate of index of consumer sentiment for October, the University of Michigan failed to inspire the bulls in the euro / dollar for a new assault attempt. Euro is currently continuing pressingovat session lows, and while the bids around $ 1.4780/70 while holding back a couple of further fall, dealers are reminded of feet below, and pay attention to the rebalancing of the positions of market participants at the end of the week and month. They note that investors have left a large amount of long positions in the euro, and see the risks to decline to $ 1.4760/50 and $ 1.4730/20.

Say "Goodbye!" Pre-crisis trend

There is a pleasant myth of the business cycle. All of this - only the fluctuations around the underlying trend. Production during the boom was even higher sustainable level. During a recession, this figure was below the level. The budget deficit in a phase of decline can be and should be offset by surpluses accumulated in the boom years. Regardless of whether optimistic or pessimistic you are tuned in the context of stabilization policies, they exist in their own sphere and economic policies can focus on measures of "supply side".

Unfortunately, this is quite symmetrical image belied by the facts. There is a widespread view that the damage caused during a recession, associated with the financial crisis, tends to be twice as much during the traditional recession. More important is the conclusion that most of the losses in production during the recession is permanent and that the economy will never return to its old trend line. These findings have been demonstrated in some detail by the late Christopher Dow (Christopher Dow) in his study "The primary recession," which was published in 1998. Although some research has been thorough and fundamental, with today's macro-economy has little correlated. Latest world economic outlook the IMF has already appeared, however, have something to accuse him, it concerns the fourth chapter, which, unfortunately, only available on the Internet.

The authors of the report, the IMF estimated that the output from the financial crisis remains at 10% below trend in the medium term, which is defined as seven years. Of course, this average with a tolerance on both sides. In Chile, since 1981 and in Mexico, since 1994, output grew much faster than the previous trend, whereas after 1997 in Japan, growth has stagnated for many years. Average score may exaggerate the impression of sustained loss of production capacities. This may be due to prolonged effects of the recession, which would require more than seven years to completely disappear. UK Treasury provides a permanent loss in the economy of 5% of GDP.

Countries that are currently in the midst of a banking crisis, in the amount accounted for half of real GDP of all developed countries. This is equivalent to the GDP of about $ 40,000 bn (€ 27,050 bn, £ 24,440 bn) for the year. If we apply the 5% underestimation in terms of production, the future hole in the world economy of up to $ 2,000 billion, that is little consolation, because, according to the IMF, the economy, which allow for counter-cyclical fiscal and monetary stimulus in the short term to mitigate the slowdown in the aftermath of the crisis, as tend to experience less decline in the medium term. "

Interestingly enough, these studies show a possible return to pre-crisis growth rate with a lower level. I can not help but notice that it is a very convenient result for the politicians, because they are blamed for the causes of the crisis, and the output of the recovery phase is intended to be the return of new, even lower trend, resulting in them will be difficult to clearly blame insufficient growth .

A detailed analysis of the IMF suggests that the higher structural unemployment, slower accumulation of capital and lower productivity growth played an important role in explaining long-term decline in output since the financial crisis. National Institute of Great Britain primarily emphasizes a high price for risk, which may increase the actual cost of capital, resulting in higher commissions for the purchase of shares on the stock market.

But I'm not quite sure. Based on the vision of Keynes, which is set out in the last few chapters of his general theory, there is a persistent tendency for savings in connection with the natural excess of investment opportunities and, therefore, full employment is achieved, in rare cases, such as wartime or at the peak of the boom. According to this analysis, no need to explain the loss in production during the collapse, but unstable, high levels that preceded it. That is why Keynes advocated the preservation of low interest rates in order to alleviate the stagnant trend. This picture is not possible in the postwar decades, but may come into its own now, with the emergence of chronic surpluses of Asian economies.

If China and other countries are chronic "savers" who can be "sverhzaemschikami? Over the years they have been consumers of "Anglo-Saxon" model of the economy. But even if there was no banking crisis, sooner or later they would have to face the prudential limits of their debt levels as a result, only the public authorities will take out loans. The proposals enunciated kinds of money can cause dissatisfaction of the authorities that they do so on their own. But the right approach may be at St. Augustine: "It will make me virtuous, but not now" - where "not now", which is still a very long time.

The Financial Times
October 29

U.S. GDP grew by 3.5% in third quarter

Growth of the U.S. economy in the third quarter amounted to 3,5%. Volume incentive program of the U.S. government allowed the country's economy out of the very long and deep recession, with 30 years of the last century.
GDP growth in the third quarter was the first in the current year and the most significant in the past two years. Before reporting period, U.S. GDP has been declining steadily for four consecutive quarters. This was the first time since the Great Depression.
Compared with the same period last year, U.S. GDP fell by 2.3%.

Number of applications for unemployment benefits in the United States dropped to 531 thousand

According to the U.S. Department of Labor, the number of initial claims for unemployment benefits declined for the past week.
Index fell for the week to Oct. 24 at 1 thousand to 531 thousand average value of the index over the past four weeks dropped to 6 tons to 526.25 thousand.
In the same time, the number of Americans continuing to receive unemployment benefits decreased by one week October 17 at 148 thousand to 5,8 million people. This indicator is at its lowest level since March this year.

CBR should inflation

Financial Analyst FxPro Alexander Kuptsikevich: On Thursday, the board of directors of Bank of Russia decided to lower the refinancing rate by half a percentage point to 9,5%. As stated in the declaration, such a decision in the first place "stimulates the activity of the credit of the banking sector. This means that the Bank intends to continue to struggle with the strengthening of the ruble, using not only the purchase of currency on the market.

One reason for the deepest recession in Russia served as a huge amount of foreign loans. If the situation gets out of control the central bank may apply the effective action only in respect of its own currency. During the fall, economic activity is an objective measure of the depreciation of the currency, but in our circumstances (and an even greater extent in the countries of Central and Eastern Europe), this policy simply increases the volume of bad debts.

One solution to the Central Bank has been a significant limitation on the issuance of new loans in foreign currency. But in the long term, not long-term use of protective barriers. Another option is to bring monetary policy in conformity with what is observed in the creditor countries, of course, subject to Russian realities. As is evident from the statement of the Central Bank, this is the ultimate goal of policy. The stakes for business in the 14-18%% APR prohibitively large, they consume a significant portion of the profit only to debt servicing. And in this case slowing of inflation favors the monetary authorities. Following its decline in the Bank can cut rates, making them more acceptable to companies originating loans in rubles.

Inflation may slow down for two reasons: a weak activity in the country and the strengthening of the ruble against other currencies for external reasons. But strengthening of the ruble has many other negative effects (pressure on Russia's companies and the growth of speculative interest rate). With great probability it can be said that the chosen course for further narrowing the interest rate differential between Russia and other countries with a gradual weakening of the screws on lending in foreign currency. While these restrictions still look reasonable.

On hand in this case will deter the growth of energy prices. Such a trivial move for oil-exporting countries suddenly began to move and some representatives OPEK.Pri such developments in the coming years we will not talk about the windfall from oil and curbing the growth rate of the ruble and inflation.

In the short term, the ruble may still continue to rise for this week to 28.80 on news of the strengthening of economic activity in the world and the development antidollarovyh sentiment. New highs for oil can also strengthen the value of the ruble to a basket, today it has updated at least since the beginning of the year, referring to 35,33 p. As a result, increases the likelihood of further reductions in rates and falling inflation, but it is unlikely to create jobs and stimulate business activity.