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Hrant Bagratyan

Hrant Bagratyan. Crisis 2008-2009 and geoeconomics. Introduction: GDP dynamics in 2007-2010, selected countries (for 2009 preliminary data). Introduction: GDP dynamics in 2007-2010, selected countries (for 2009 preliminary data) (cont). Introduction: Summary: main lessons of the crisis.

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Hrant Bagratyan

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  1. Hrant Bagratyan Crisis 2008-2009 and geoeconomics

  2. Introduction: GDP dynamics in 2007-2010, selected countries (for 2009 preliminary data)

  3. Introduction: GDP dynamics in 2007-2010, selected countries (for 2009 preliminary data) (cont)

  4. Introduction: Summary: main lessons of the crisis • Countries which use to be considered as source of crisis due mortgage (hypothec) issue (USA, UK, Denmark etc where mortgage loans were 130-300% of GDP) have 2-4 times less decline, than the countries of post soviet area, where the mortgage was insignificant (Russia 3%, Ukraine 0.9%, Armenia 0.8%). • Post soviet area most destroyed part of the world’s economy. • The crisis is week where there is strong and dynamic SME (Brazil, Turkey, Thailand) and stronger in the areas of domination of production monopolistic and oligopolistic structures (Armenia, Ukraine, Russia) – business elite change is important. • The crisis is stronger in the countries with the deficit of labor force and weaker in countries with surplus of labor forces. The most difficult situation is in countries where there is deficit of labor force vs GDP’s potential level but they have negative migration balance (Armenia – world recorder, Latvia, Lithuania, Ukraine for 1991-2005). • The crisis is stronger in the countries with proficit of mineral resources and commodotoes, and getting better in the countries importing resources. 6. When the growth of a country isn’t diversified (Russia – export of oil, Ukraine – export of metals, Armenia – construction) than during recession times the possibilities of the government are limited to provoke the aggregate demand or aggregate supply curves.

  5. Introduction: Three main global reasons of the crisis 1. The world’s inadequacy of distribution of resources and consumption 2. Insufficient innovations (the lack of resources wasn’t compensated by creativity) 3. Omissions in financial institutions

  6. 1. Inadequacy of distribution of resources and consumptionin the global world

  7. 1.2. Population growth exceeds the resourcesgrowth several times Hrant Bagratyan

  8. 1.3. Land distribution. HB 8

  9. 1.4. Geopolitics: distribution of the economies, 2008 HB 9

  10. 1.5. Golden years, world trade volume, World GDP and average tariff applied, 1990=100 Hrant Bagratyan

  11. 1.6. Summary World’s net migration in 2005, thous. people World’s average migration rate in 2000-2005 was 0.495-0.750%. 28-33mln of migrants out of 80 mln growth of world’s population According to 2005 data each 4th born nowadays will became a migrant

  12. 1.7. World’s net migration in 2005, thous. people USA +5676 Spain +2504 Italy +1750 Canada +1089 Russia +964 UK +948 Germany +930 France +761 South Africa +700 Australia +641 UAE +575 Portugal +291 Saudi Arabia +285 Ireland +230 Eritrea +229 Austria +220 Qatar +219 Switzerland +200 Belgium +196 Sweden +186 Greece +154 Singapore +139 Finland +133 Netherland +110 Jordan +104 New Zealand +103 Norway +84 Japan +82 Czech +67 Liberia +62 Denmark +46 Finland +33 Mexico -2702 China -2000 India -1500 Pakistan -1235 Myanmar -1000 Iran -1000 Philippines -900 Bangladesh -700 Zimbabwe -700 Morocco -555 Sudan -532 Peru -525 Sri Lanka -442 Ecuador -400 Uzbekistan -400 Tanzania -345 Tajikistan -345 Ethiopia -340 Moldova -320 Georgia -309 Egypt -291 Romania -270 Congo, dem -230 Brazil -239 Nicaragua -206 Poland -200 Kazakhstan -200 Somalia -200 Ukraine -173 Nigeria -170 Cuba -163 Algeria -140 Colombia -120 Azerbaijan -100 Armenia -100 Argentina -100 Yemen -100 Nepal -100 Senegal -100 Bolivia -100 28-30 mln each year

  13. 1.8. 62% of migrants stream is:the stream of mineral resources in reverse direction Muslim world Far East, Africa West and Russia

  14. 2. Insufficient innovations

  15. 2.1. Insufficient innovations make the big movements of nations are unavoidable, more • More equal distribution of population and resources (land and mineral resources) is requested for the further development of world’s economy: the efficiency of world’s economy requires that MPL/PC = MPC / Cf=MPR/Rex, where, MPL – marginal labor product in the world, PC – world’s private consumption, MPK – marginal product of capital, Cf – efficiency of of capital, MPR – marginal product of resources, Rex – revenues on resources. • As a matter of fact: for our times population movements are easier and economically more efficient than the transfers of capital goods

  16. 2.2. geoeconomics: summary Domination of the East-West link over the Nord-South link (62% of migrants and resources)

  17. 2.3. Geoeconomical positioning for Russia

  18. 2.4. Geoeconomical positioning for Ukraine HB 18

  19. 2.5. Geoeconomical positioning for Turkey

  20. 2.7. Geopolitical positioning Russia: in the center of the economies with 30 trln $ GDP In the center (a Carrefour) of the trade 7 trln $. Goods and people are intensively moving here. In the communication center of Christian, far-east and Muslim worlds Good roads and geopolitical positioning define Russia as a bridge between west and east (in fact the only competitor in Eurasia is Turkey)

  21. 2.9: summary, 3 types of economic policy • In-and-out (сквозняк)policy • Semi-conductor: In Out • Accumulation

  22. 3. Omissions in financial institutions

  23. 3. Omissions in financial institutions • FRS’s decision to allow commercial banks to invest money to purchase shares and stocks, assets of non financial entities • Excessive concentration of the equities market in one country: USA presents 12% of world trade, 22% of world’s GDP and more than 65% of equities market • The absence of the relevant control on the international means of payment (dollar, Euro etc): the issuer countries are free in the choice of budget deficits, in cash emission • Absence of the relevant mechanisms of regulation of the securities (equities) market, a minimal state interference in this sector of the economy

  24. 3.2. Battle for survive: means

  25. 3.3. Battle for survive: USA • USA: Encouragement of the supply by H. Polson plan (October 2008, 700 bln $), changed in to T. Geytner’s new plan under Obama’s administration, 787bln. $, February 2009 where also are strong measures of demand supply. Year end wasn’t to bad for USA: -2.5 in GDP.

  26. 3.4. Battle for survive: China • China: first time sine 1984 China reduces gross capital accumulation (formation) and started to provoke private consumption keeping discriminated approach to the different regions. China consists, in effect, of several economies with different wage levels. In China, as factories in the richer coastal areas switch to more sophisticated goods, the production of textiles and shoes can move inland where costs remain cheaper. This we call a cascade of different economic space within one country (it’s like cascade of hydropowerstations on river). Year end: more than +8%. Chinas CB successfully sterilized the inflow of hard currency (because of positive BOP). As of 01.01.2010 China’s foreign reserves made 2273 bln $.

  27. 3.6. Policy issues in the post soviet area: Russia, Ukraine, Armenia • First stage: end of 2008 and beginning of 2009 – support of supply, large-scale business (week approach) • Second stage: April 2009 end of 2009, gradual increase of demand support, reinforcing of fiscal policy issues, support of supply by crediting (banking) tools (more realistic approach) • Third stage (2010): pension reform, social housing, tax reform (precise approach) • Weak point: rubles revaluation • Ukraine and Armenia: no program, support of big business deepened the crisis, foreign reserves melt on the groundless support of national currency forex.

  28. 3.7. in Russia, Ukraine and Armenia and other post-Soviet countries the crisis was sharpened because of: 1. Growth problems 2. Taxation system (fiscal stabilizators doesn’t work) 3. High grade of market monopolization 4. Social polarization

  29. 3.9. needed international policy measures • A new economics: so called geoeconomics • Removal of the 4th group of investment normatives in the banking regulation and control, prohibition commercial banks do not invest in securities • Control under the emission international currency reserves by the community of users country • All type of promissory notes in the business should be issued by CB’s • Change of the accounting system: aggregate financial and economic product (AFEP) • Control of the equities emission of commercial banks by the Central Banks

  30. 3.10. Tax reform in post soviet area: tax cross The experience shows (Georgia, Armenia, Ukraine) there is cross between income and profit tax curves Russia is planning in 2010 to remove ‘’yediny’’ income tax (26% in total) to separate income taxes with the average rate 34%. As a result there will be a cross in Russia. To the left of Eo the shadow economy is bigger than to right For the decrease of shadow economy IT > PT Tax rates 40 Eo it 30 20 PT 10 0 Revenue Hrant Bagratyan

  31. Thank you

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