In the summer of 2016, Russia increased investments in US government bonds and brought them to $91 billion, although just two years ago, in August 2014, with the first introduction of sectoral sanctions against Russia by the West, investments decreased to $66 billion. Why does Russia need US government bonds? We will try to understand this issue.
The first reason: maintaining the ruble exchange rate
No matter how much the various "trolls" on the Internet and the patriots on the streets, who do not understand what the economy is, shout about supporting the "enemy", US government bonds are urgently needed.
First, you need to dispel the main myth: money for such purposes does not come from the state budget. US debt securities come from the reserves of the Central Bank of the Russian Federation (Central Bank of the Russian Federation), which are spent on maintaining the ruble exchange rate, providing foreign currency to importers, debtors, etc.
If someone thinks that some grandmother does not receive a pension due to the fact that the Government lends to "enemies", then he is greatly mistaken. TSB RF -an independent financial institution, one of the functions of which is the issue of rubles. It, in turn, depends on the state of the economy as a whole, or rather on the trade balance.
The more economically developed a country is, the more domestic currency needs to be printed. If the balance is not maintained and the Central Bank of the Russian Federation prints a lot of money, then they will turn into ordinary confetti, candy wrappers.
Let's imagine that each citizen was given a million dollars, what will happen then? The answer is obvious: prices will simply skyrocket, since no one will sell scarce goods for paper. In economics, this is called hyperinflation.
Reason two: maintaining the liquidity of the national currency
Depending on the state of the economy, the Central Bank releases rubles into the reserve. But the main trading operations are carried out in euros, American dollars, Japanese yens, British pounds sterling. Also today, Chinese yuan has been added to them.
In order for rubles to have liquidity (weight), they must be monetized, otherwise they will remain ordinary confetti. Previously, gold was used as a security measure. It was the dollar, backed by this precious metal, that won dominance in the world, until French President Charles de Gaulle, one fine day, brought to the United States a whole ship with American currency, for which he demanded gold. After such a blatant action, it was decided to refuse to provide "bucks" with precious metal. Instead, the currency began to be backed by US guarantees that “everything will be fine”, and this, in fact, is US government bonds.
In other words, the ruble must be backed by something, so as not to be ordinary pieces of paper that any child can cut from a notebook. This role is played by US government bonds, which are literally backed by the word of honor of the American government.
US debt securities are a guarantee that rubles can be exchanged for dollars at any time and vice versa. Considering that all trade operations are carried out in the foreign currency of several countries, including the United States, this is a guarantee of the stability of trade operations.
To make it clearer why buying US government bonds, let's simulate the situation: three children are playing in the room. Two of them print their own money, and the third buys. The first cuts out his own currency from the sheets of the notebook, and does not provide anything, the second is more cunning, he changes his paper "bucks" for real rubles at a certain rate, for which you can buy something real in the store. Thus, the second child will not just give them away, unlike the first, who can print "money" in any amount.
As for the issue of funds, the situation is approximately similar to the second child in our situation: the Central Bank issues rubles backed by securities called US government bonds. The dollars themselves are also purchased from the Federal Reserve System by the US Government for the same bonds, which together form the external debt.
Reason Three: Profits
In addition to the two reasons already mentioned, do not forget that investing in US government bondsbring real income.
Central banks, national governments, commercial institutions, private investors can act as investors. The yield on them fluctuates around 2-3% per year. At first glance, the figure is very small, but there is one advantage here - the low interest is offset by the confidence in the return of both your capital and profits. Not a single financial instrument, unlike government bonds of the most developed countries, gives absolutely no guarantees, that is, you can not only not receive a percentage of the expected high profit, but also lose all your capital.
In the world of such investment instruments that provide guarantees for profit, in fact, very few. As such, US government bonds act, with the most authoritative government in the world.
Reason four: maintaining reserves
Everyone in our country knows that keeping money in a glass jar is the same as burning it at the stake.
Inflation in a few years will reduce them significantly, despite the fact that the number of zeros on banknotes will not change.
But an ordinary citizen is easier: if he has funds that he wants to save for several years, then it is enough to come to any bank and open a deposit account where you can put the accumulated money at interest. Of course, you won’t earn much on this, but the main goal is to save funds in real terms, and not in nominal terms. In other words, no matter how muchyou zeros on a banknote, it is important - how many products can be bought with them in the store.
Naturally, banks go bankrupt, close, their license can be revoked, but today, after the 2008 crisis, the state reliably insures all deposits within a reasonable amount.
All banks depend, in turn, on the Central Bank, which issues a license, sets the refinancing rate, etc. But what should the Central Bank of the Russian Federation do? No one canceled inflation directly for him, which means that reserves in rubles are tantamount to keeping savings in a glass jar of some citizen - stupid and pointless. A similar instrument for maintaining reserves is government bonds of "enemies".
Why USA?
Of course, you can talk about the greatness and power of Russia as much as you like, but today it is US Government debt securities that meet three key requirements:
- reliability;
- liquidity;
- yield.
USA is one of the few countries in the world where the economic policy of the state does not depend on the "owner" of the White House.
Whoever comes to power in this country, the situation does not change. In addition, the state is not feverish from various riots, revolutions, regime changes, financial reforms, wars, etc. In this country, they know the main rule in the economy - money loves silence.
When will the "dollar era" end?
Today you can see various films, TV shows, performancespoliticians about the imminent collapse of the "American financial pyramid".
Many "gurus" in the economy say that this is about to happen, we have to wait another couple of years. But real economists do not see such chances even in the medium term (the next half century).
Amount of US government debt
Of course, the amount of US government debt is impressive - more than 19 trillion dollars, which is 109.9% of GDP.
For example, the debt of Greece, Ireland and Iceland as a percentage of GDP is greater than the US, and the debt of Ukraine in the coming years may also overtake these figures. Here it is necessary to take into account not the volume of nominal debt, but the percentage of GDP and its maintenance, which costs the US Government only $250 billion. If we compare it with the budget yield of almost $3.5 trillion, then the amount will be miserable. Therefore, it is too early to trumpet publicly about the imminent US default in the next 50-100 years.
Russia: US government bonds are the most profitable
As for the third key factor - yield, here US government bonds are in first place. Now many will be surprised, but the top five in three-year government bonds are those for which the income is negative. This is not a joke at all: Japanese securities lose about 0.2% per year, France - 0.5%, but American ones can earn up to 1% per year.
Why invest then? The answer is simple - so as not to lose even more from inflation.
Fourth reason: politicalinfluence
In fact, those countries that hold a significant percentage of another country's government bonds can influence it politically. Throwing away all her holdings of securities can cause the price of them to collapse, thereby preventing her from selling other bonds, which is tantamount to a financial collapse.
But we have nothing to be particularly proud of - Russia's share is only 5% of the US national debt.
In 2014, the Central Bank of the Russian Federation, during the period of imposing sanctions against certain sectors of the Russian economy, threw almost 2/3 of US government bonds onto the market. One of the versions of such actions is an attempt to bring down the financial system of the Americans. But Russia is not China, which has half of all overseas debt. It is enough for the PRC to hint that they are going to think about dumping all American assets, as the latter starts to panic on the currency markets.
Conclusion
You can sum up, saying that by investing in US government bonds, Russia derives various dividends from this:
- Supports the exchange rate of the national currency.
- Gives the ruble liquidity on trading floors.
- Makes profit.
- Trying to acquire political leverage.
