lending and consumer lending that started to become a major factor even to such a degree that it became a concern for the central bank for the monetary authorities because it was actually too fast so too much you were playing bad astern habit and because of the great snow i totally agree i mean this i think peaked last summer it's now coming down a little bit but if you look at the level of debt that the average russian consumer has consumer debt it's really at a level that is very comparable with eastern european countries it can't go much higher right now and beyond that it's not secure debt it's not mortgages it's not cars it's basically cash loans that have been used for consumption so this worries me a little bit even though the consumer is still the major driver of the economy i am not confident that this can continue for a long time and we see we've seen and paleness across all banks and rising significantly and if you go outside of russia i believe it's about forty percent of net disposable income is spent on interest and capital repayments which is it's

a major status relates to be considering i would say even before two thousand and eight personal debt was something that was hardly talked about at all right as a country yeah i mean one of the things that the banks obviously the c.v.r. as as i stepped in and with the new leader is increasing provision of course a large number of russian banks and we're seeing the proliferation of nine hundred russian banks being shrunk shrinking down which is a good thing we want strong sustainable banking sector that isn't pushing at my own growth you know twenty thirty forty percent that's that's unsustainable you know you know we're all talking about you know since the middle of last year but this is when the government shifted gears ok because there was an expansionary policy and then what i call russian austerity came in but there was a plan behind that is that it would slow down the economy though in the second quarter third quarter of this year we would see the for wish in the fruits of that plan is it still on track. i think the understanding is that. quality matters

probably even more in the near term explain to our viewers what that means because of the road but all of that we want this to productivity we want. through greater efficiency rather than just through high oil prices and partly because of that i think there is a certain we think in terms of the economic strategy whereby there are looking to the government is looking into budget spending looking into the possibility of cutting back some of the things there that proved to be in the fish and there's there seems to be you know a measure on the part of the government to try and evaluate the efficiency of various parts of government as something new for this economy because i haven't heard this kind of talk before we've all talked about diversification and we've been document that for a decade but this kind of quality growth the issue productivity this is something that's new on the internet no i think this is the diversification of economic growth this is what you're talking about the question is how do you actually get it

to happen it's not a simple question and in my view the key is for private sector entrepreneur rules to unlock the regulations to unlock the bureaucracy that holds them up from starting businesses and there's many things like that so if russia can do that i think the seeds for. better distribution of growth among the economy is there and that would make the country so much less file teil going down the road no depends on the commodity cycle or much less than we see today. is this it we were looking at kind of a threshold here a turning point here and i think you know what tim just said is very very interesting because it's now moving away from state companies because you know the state takes the state companies and there's been so much focus on that so much money thrown out it does well here but it hasn't addressed the productivity issues and from what tim just said here now we have to look at the private sector more i completely agree that the the problem he's would know. getting the growth in

entrepreneurial young russian businesses where there were there were fewer startups now than there were a few years ago whether it's because of bureaucracy whether it's because of the collapse in the ruble there are many factors but e.t.s. it is something that needs to be addressed and not just from the from above it needs to be if you have groundswell of russians wanting to push forward where they see where they've stopped touring because of structural reform or because of many other fears that they may have it's something that for the future of russia the dam needs to break and they need to be. a mass of young twenty's and thirty's pushing forward and start in the room business is very the number of s s m e's is significantly lower than it needs to be does the government get it from yes it seems like the government to starting to look into the possibility of compiling a new reform program precisely along the lines of structural directed at boosting

productivity finally the focus is more short term previous programs reform programs for ten fifteen twenty years now the focus is on the next several years so hopefully that kind of effort will lead to something akin to what we saw in two thousand and two thousand and one during putin's first term the most successful form program that we've had in decades the graph program if something like that is rolled out later this year i think this is one of the potential drivers for the economy and for the markets this you can they don't have much choice do they i mean this is you know this is we have a. government that has been able to garner support because the economy has been relatively successful and we've all remember the one nine hundred ninety s. and remember their early to thousands now again this kind of turning point where they it's not the if they want to do it they have to do these things well i hope they see it that way peter but i'm i'm not sure yet let's. c there are

a couple other tools i think that are out there that could really help this economy the first is more investment in infrastructure which is something that mr putin talked about a year ago it's easier said than done but it's terribly needed in this country and it would really that's that's a disappointment which it as i was saying you know the short term get there is in many ways they have to start thinking more short term and infrastructure that's a big big one but but we shouldn't forget some of the medium long term ones the other thing is building institutions that will support private businesses like financial markets i think the work that's been done in you know rebuilding the stock exchange here improving the registry system all of these sort of technical things which most of us don't spend time thinking about that's how you get to have institutional investors start to bring money into russia and that's how you get russian companies that start to be able to raise money in russia so these things shouldn't be forgotten either i think there has to be i mean they're very doable yeah i mean absolutely i mean the cost of the thing is a significant office in europe there will security it makes

a big difference there's more at local shows and g.d.r. as well as we had previously and this is something that you know we do want institutional money we don't want traditionally the russian stock markets be very flighty offer an awful lot of money flowing in and out whenever whenever you wanted a high beta for russia to be have long sustainable long term growth needs the institutional substantial institutional money from overseas to be flowing in sight and there's little changes make to make a big difference or some people are going to break you and yes i think this is precisely the issue for us the stock market has been underperforming throughout the past several years on the issue there is quality we need quality investors we need long term investors saw there were forms that were conducted they certainly were very important we need more ok gentlemen we're going to go to a short break and after that show for it we'll continue our discussion on russia's economy stay with me.

i. put it on your cultural marginalise commune hall of fame good old bone. pleasure to have you with us here on our team today i'm sure. we'll go to the future one show we go into tons of stuff on where we meet some of

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play play. clue . i think. we're going to go that you know the premise is the only industry specifically mention of the constitution and. that's because a free and open press is critical to our democracy albus. in fact the single biggest threat facing our nation today is the corporate takeover of our government and across several we've been hijacked lying handful of trans national corporations that will profit by destroying what our founding fathers once built my job market and on this show we reveal the big picture of what's actually

going on in the world we go beyond identifying the problem. rational debate and real discussion critical issues facing america to find ready to join the movement then walk the big. welcome back to on the money where the business of russia is business i'm peter lavelle to remind you we're talking about russia's economy you know everybody coming into this program my staff my friends my landlord my cleaning lady we all

want to know one thing what's going on with the ruble well the thing with the ruble is that it's very interesting that starting from last year it started to track emerging market currencies such as the troika the brazilian currency the south african currency so it's essentially now within this one. cortex of the currency crisis and you know to some degree you look at it from within russia you think why is russia within that world war two x. because really you look at russia sovereign balance sheet it's much stronger than a lot of these emerging markets russia has a current account surplus the level of oil prices is relatively comfortable so to some degree this is certainly i think to a large extent an external factor that is impacting russia again and something that again underscores the significant dependency of russia on external factors. so i would just add two things i think one we can't forget what's going on in the

united states with tapering which is really been the catalyst for almost all of the problems in the emerging market currencies and russia has not been as affected as much as some countries like turkey argentina in three days in their sixteen percent down i mean it was an absolute disaster i think russia like you said because of its reserves and its approach to the currencies a little more isolated and insulated then these other countries so i think the other factor here is that the central bank is no longer targeting the value of the currency per se they're looking at inflation they're looking at domestic interest rates and so you can't have both and so right now the tradeoff seems to be will tolerate a little more weakness in the ruble as long as we can continue to stimulate growth domestically that's a trade off is that a good mixture there yeah i mean i would also have an obviously to push it in rubles not great for inflation and with central bank targeting inflation you know

that maybe there may be you know we've talked about potential growth prospects prospects in russia. rising inflation is not great and it's a perennial problem that this country has had in over the last it was just really i mean it was fundamentally i think that will weaken this is not great for us not just near term but longer term as well because the ultimate issue for russia is the need for trust trust on the part of the population on the part of the economic agents banks and the will and russians assets and that sizable depreciation is of course a bit of a blow to the will and that regard and i think short term of course and terms of consumption this weakness in the world will is a negative factor so i think certainly this is a key risk factor for us this year and a lot again depends on this u.s. tapering issue how it will progress on how emerging markets will react let's talk about. capital outflows continues to increase i mean it was

a bad month in december. january was even a little bit worse here what's driving them may be capital outflows right now. you know i think it is the same phenomena that's been driving it for years which is i think a lack of trust in keeping assets in this country and also a lot of investment inflows and we just don't have as much coming in as we should have i would say so i think it's the combination of those two things unfortunately most russians that i know want to have assets outside of russia so this is a fundamental i think culture that needs to shift that plus attracting institutional investors to come in only then can you have a balance what kind of trigger does russia need to have this the capital and capital flows coming into the country don't just come in on their price before it for i mean we have to remember that one of the hunt for is actually russian companies investing overseas so the headline number he's nightmarishly bad but does include these very positive numbers that should give russia

a major benefit in the future it's true i mean this is the number itself is a is an exaggeration because it is russian money ok it is being parked someplace else exactly and that actually if you look at the scale of these outward investments by russian corporates a lot of them blessed by the kremlin coordinated with the kremlin. abroad and to europe and to the united states i mean the scale is quite significant and is a significant part of the overall outflow the other issue is that a lot of this investment is very inefficient so there is a lot of work that needs to be done by the government in coordination with the corporate sector to try and make sure that going forward state companies are for far more efficient in terms of how they approach these these outward flows and another issue is of course the offshore ization that was very prominent last year and probably will continue to be a significant issue during russia's. presidency and the g eight that's something

that is going to be a major topic there and of course the issue for russia is not just to you know make sure that there are no loopholes with regard to the two off shores but also there are some carrots there are some facts that yeah bring in whatever investment well it's about time isn't it i think offshore financial centers is now become a global issue and i think that last year really escalated i can tell you within the world bank right now we look at this very very carefully and anybody that doesn't pass the global alliance test in terms of an offshore financial center we will not invest there and they're going to be more and more investors that do this so i agree i think that this problem absolutely needs to be resolved and i think it we're making good progress i mean i'm going to join a consensus we go well three of us now complete agreement the offshore center is a good idea it's just slowly dying right so it's something that will slowly would go away ok let's talk about you know the border moving forward what kind of

externally into the russian economy because if i remember correctly about a year ago it was we were both on the emerging markets and developed a market so that it would cloud a lot of its effects revert yeah i think on the issue is certainly the u.s. tapering that's going to be problematic for the result for emerging markets overall the other concern is that not only are there signs of weakness in the martial markets but we know the weakness in the developed world so the question is is it really proper for the world to start thinking so aggressively tapering. and then of course within the emerging markets world that there is the issue of ukraine there's the issue of. polls thing that we figure so there is a still a significant of risk six for the global economy this year so i would just be focused on europe for a little bit because it was never in the last five years really an engine of growth for russia now we're starting to see a softer form. i don't know how much. sort of energy that is behind it i don't know

if it's going to last but it's very important to russia in terms of trade i mean it's just fundamental and it's also the largest investor as well exactly so i think if we if we see continued improvements in the overall economic situation in europe this is the biggest potential plus for russia the second thing which i think is more of a risk in the medium term is china because it's really the elephant in the room i would say and china i think is going to have a pause in terms of growth in the next sort of six to nine months simply because i think at the municipal level and somewhat at the national lover the country is overextended and so it needs to be leveraged itself a little bit and i think that this is going to have not such a positive effect on the prices of commodities and oil and gas which is of course key to russians economy something we had a shot at making in china is really the problem in our i mean your fictional banking sector is enormous the shadow banking sector well obviously you know

deposit account to try to get over some of the official to officially yield. is beyond extending we're starting to see a large number of defaults with with companies that are borrowed from that sector it's a it's an issue that needs to be addressed the chinese know they say i mean again if they're fully aware of it but it is a major problem to the world economy i will agree that europe i think is kind of the flat earth as their sort of cotton thing might as a lot of the time being they've benefited from the rest of them were trying and they're getting ready for it naturally but i think what's significant benefit russia probably a negative for russia say the warming iran u.s. relations and what that does to a potential to oil price for me that's a that's a little concern for the because so far the gold price has been quite right it's not as comfortable yeah of course it will act like stable it's one of the amazing things about the past several months that it's not you know how do you know it's a you know worry about iranian oil worried about libya talking. i think there's always going to be wrong about you and i want to just have your little bit tell.

talk to our viewers here how does the russian consumer feel right now and what is the russian consumer thinking about well i think the russian consumer is. more in secure than say last year over the past several years because of the ruble dynamic certainly the ruble depreciation is a significant blow. related to that of course is ruble depreciation leading to potentially higher inflation. the other factor is the slowdown in consumer lending that something bad is actually seen by the central bank as a good thing but on the other hand in terms of headline growth figures this is a bit of a negative so it's basically a transition i think for the economy but also for the russian consumer for from quantity to quality and to some degree because of that will see i see. that the dynamic here in this market here is that patterns are changing your people want better quality but maybe fewer goods i was going to say i think that the average

consumer is becoming more sophisticated in many ways in terms of the quality the products that they choose but also looking from the banking side also in the price of the credit they take so this is a process banking is very new in this country and people are just getting used to the idea of understanding gee if i paid this percent and i paid this fee that's a lot i'm not going to do that so i think this is a good thing but you know consumer credit is still growing it will probably grow twenty five percent per year this year and so it's not shrinking so i think what consumers are doing is using their their their roubles and their credit more judiciously they're not bind big things like cars and that and that they're focused on things that make a difference in their day to day life seconds. the consumer is actually slowing down quite significantly retail sales. across russia we're necessarily down year on

year this is a worry looking forward as we've all talked about the consumer being part of the growth ok gentlemen many thanks to my guests and thanks to our viewers for watching us here on on the money see you next time and stay with our. and russia at least being gay is not criminalized there absolutely no punishment for being gay in russia the only thing that. is spreading information family information on nontraditional sexual behavior what are you going to legislate against couples who swing you know who. you know trade partners or is it only a certain type of sex that you're legally able to you know it is so.

propaganda you know it's so unclear. yet when i close my eyes i see people who. you know sometimes i think that you're a model in itself is a face covered by most. people in most on both sides of the barricades. and you know sometimes it feels as if all of ukraine is no. winter is when the sahara comes to life. a waste is palm trees are being harvested

. people are waiting for the biggest event of the year. the desert festival. this is through and that is. leading camel races have spent the last year preparing for the grueling marathon. the day before the race there's a heavy sandstorm overcoming the. power of nature is a never ending challenge. so far on a desert winter an aussie. rules. legal rights. to the. lives. of the young girls can hold for the future harder.

between two and three hundred million guns united states so you can act like they're not here and keep kids away from them. the plaza sound is the law or you know i mean this teaches them a lot of are a responsibility and simply come to pay through the eyes of children if we can do it for our children for our future. is a hundred fold. it. took right from the streets. first street to use a knife gripping pictures. on a reporter's twitter. and instagram. to be a month. on. i

marinate join me. for in-depth impartial and financial reporting commentary contribute and much much. only. on the bus and on. dramas the chance to be ignored to the. stories others refused to notice. the faces change the world writes never. the old picture of today's news. pundits mug from around the globe.

broke to. the. protesters take control of government headquarters in kiev as a crisis deal fails to appease the radicals and spread more violence of president doesn't step down by saturday morning. lows in the hallway and i'm not talking

blitzer sitting out from the door outside the olympic village a pleasure not in this hall what's this guy out of there the u.s. media swallows the bait over a t.v. prank at the sochi olympics say forget check the facts here hons for faults at the games both russia is so scary it's so crazy it's a panda monium do people rather own their heads on fire and so there's food in there and so they love to play it up. and the games have one unofficial gold medal reserved for the fans for raising the roof during the winter olympics.