Should we expect trouble in the economy this month.
In any company, there is a person at the mention of whom everyone begins to nod understandingly and look at each other enigmatically. Egor, yes, of course, ah, I see, Egor (the name has been changed — in your company such a person may not be called Egor). You can expect anything from him. No matter what he did, you shouldn’t be surprised, it’s Egor.
August acts as a kind of Egor to Russians. They expect trouble from him, and when August passes and nothing happens, they forget about him. If something bad happens, well, it’s August.
It is the phenomenon of August that explains another social anomaly: the love for the song about the third of September. No, the song is good, but how many good songs are there? In fact, it’s about the fact that August is over, and you can “turn the calendar upside down”. Exhale, so to speak. Dacha dwellers who have been lingering on their farms gather on their verandas and, wrapped in their bathrobes, pour what they have left after the sultry summer, and quietly sing a song about another August we have survived, and now we can go into winter with a clean heart.
I decided to find out: where the myth about August came from, whether it’s a myth, and whether we should expect anything like that in the economy this year.
Thanks to the “GKCHP”
Analyzing mythology is difficult but interesting. I definitely did a lot of work, and it turned out that two events formed the bad reputation of August: the GKCHP putsch and the 1998 crisis. Other incidents reinforced the reputation.
Both events were, so to speak, worldview and civilizational in nature.
The putsch warped the fabric of reality — the world was no longer the same. At that time, a generation (and more than one) had grown up in the country, which piously believed that everything that happens, happens THERE. They are the ones who have strikes, fights with batons and tear gas in the streets, coups, putshes — and we have the eternal “Summer Evening” from the repertoire of the group “Flowers”. We are too big for such trifles as coups. It takes us three months to get to the nearest sea.
This naive faith was strangely coexisting with a domestic cynicism characteristic of the late USSR, which, where successfully or not, was reflected by the creators of the so-called “Chernukha” (“Little Vera” and others).
Of course, the putsch turned brains and, of course, the Soviet Union mentally ended then, in August. An epoch ended, and for that reason alone, August deserves to be in history.
But in 1998, August came, and with it another era ended. The one that began in August 1991. The economic crisis ended the Nineties, a strange time that seemed to have come forever. Never say “forever,” thought the stunned Russians.
It was in 1998, as far as I was able to trace, that the “fear of August” was born. Civilizational breakdown happened twice before the eyes of one generation. And both times — in August. Of course, after such a thing, one can hardly fail to suspect that the month is special.
Myth or not
The web is full of studies that prove that August does not statistically stand out from its 11 calendar cycle brethren. “Disaster month” — I don’t think so. A month of political instability — no, not really. Neither on the scale of Russia, nor on the global scale, the statistics does not see anything like that.
But if we take only the economy, it is immediately noticeable that the month is still special. In fact, here is just a list of crises of varying degrees of severity that shook the world (and Russia with it) in August: the crisis of 1989 (Russia was cut off from the world economy at that time, and it is not remembered), 1998, 2007, 2011, 2015.
And in fact, the crisis of 2008 also became known in August. I remember very well, I was on a business trip somewhere abroad, I had to go to the airport, I turned on the TV and couldn’t believe my eyes. It was the last days of August. Moscow was welcomed with pouring rain, the people on the streets were moving as usual, but in the offices ( it happened to visit a ministry on the same day) they were already panicking.
Exactly one year before that was the banking crisis of 2007: today it is completely forgotten, but at that time, in the moment, it was shocking and disturbing. And it was forgotten because the incident affected only the professional sphere. Be to be, if you know what I mean.
This phenomenon would indeed need to be explained, and there are explanations in fact.
In the world (and modern Russian) corporate practice, it has developed so that officials and businessmen work in June and July, and go on vacation in August. The tradition is old and has existed since at least the 1950s.
How it was expressed in the USSR is a separate question, and I won’t give you a quick answer, but the fact is that the putsch happened in August precisely because Soviet President Mikhail Gorbachev went on vacation to Pharos, and Moscow was empty, Gorbachev was vulnerable, and it was time to act.
Similarly in economics, as follows:
- company directors and owners retreat to paradise islands, and middle managers start making a mess of things. This, as far as I can remember, is what caused the crisis of 2007 and probably several other crises;
- knowing that big companies have been temporarily decapitated, independent players and speculators are getting active, realizing that big firms will not react quickly. Not until they notice. Until they contact the owner. While a kind of collegial body is assembled. The video conference literally appeared right before our eyes, by the way. It’s a great time to speculate and do other bad things. That’s exactly how the 1998 crisis was organized;
- officials are also on vacation. In theory, the regulator could stop the negative trend in the economy by organizing all sorts of actions like currency interventions, or even just verbal ones. But there is no chief, and department directors have little understanding of what is going on outside their competence;
Cheap is bad
In Russia one circumstance is added to this, which has nothing to do with vacations, is purely Russian and seems to be positive — but there is little good from it. August deflation.
Russia is still a rather pronounced agrarian country (who says that’s a bad thing — the world doesn’t have enough food). The fall harvest (and Russian food grows mainly in places where crops are sown in April and harvested in August — the Kuban, Stavropol and Transcaucasia) is reversing the financial situation. Vegetables and fruits are getting cheaper so fast that inflation is turning into deflation.
It seems that inflation is bad, and then deflation is good. In fact, inflation is a natural state of the modern economy. As Alexei Kudrin once said, inflation is a temperature; if you don’t have it, your business is bad. The regulator knows how to deal with inflation. The whole economic mechanism is sharpened to the fact that there is constant inflation in life. Banks (deposits, loans) are fueled by a single fuel, the name of which is inflation.
Everyone realizes that the August deflation is small, was predicted in advance and will soon pass. Nevertheless, deflation weakens the immunity of the economy. The economy becomes unstable to external influences. If such an impact happens, the consequences are worse than usual. This is why Russia fears the August crises and remembers them.
What’s going to happen this year
We see a significant depreciation of the ruble. We are also pleased to see that this is of little concern to anyone. The large economy may still be tied to the dollar. The consumer economy is no longer. People are not rushing to the exchange offices. And there are no money exchangers as such. People may be doing some actions on banking apps, but they are not creating crowds and thus panic. It is important for the economy that the snowball effect does not come into play. People standing in line at the exchange office produce such an effect, disturbing the passers-by by their appearance. The weakening of the ruble deserves a separate conversation (and we have had such a conversation, and maybe there will be more), but I do not see any prospects of this situation turning into a crisis.
Despite the fact that many officials, as usual, decided to take a vacation, most remain in their posts this year. People are working without vacations and often without days off. This is bad for them, but good for the country.
Revival is also observed in industry. Plants are increasing production. New programs are being launched. China has become Russia’s main partner, and there is a different type of movement there, and there is no tradition of August vacations.
All that said, this August is an unusual one, and we can be calm for Russian economy.
But what is there in the West? Not very pleasant processes are unfolding in the West, which could lead to a serious crisis. To what extent will this affect Russia? Do you remember, we said that there are no traces of the 1989 crisis left in our memory. The degree of Russia’s integration into the Western world is roughly the same now. It is worse if something happens in the West, shakes China, and then affects Russia. But such a hypothetical wave will reach Russia by late fall. It is unpleasant, but this crisis is no longer the one of August.
So don’t be afraid of anything and relax. The weather’s not bad.