[OPE] Russian crisis psychology

Russians 'Better Off' Than Brits Mentally
10 April 2009
By Alexandra Odynova / The Moscow Times

The country's top psychiatrist said Thursday that many more people are seeking psychological help amid the economic crisis but Russians are better prepared than Westerners for hard times because they survived the chaotic 1990s.

Tatyana Dmitriyeva, who heads the prestigious Serbsky Institute, said the number of people seeking psychological help, mainly for depression, has soared by 20 percent since the months before the crisis struck last fall.

"The main cause for depression among Russians is the loss of a job, even though many of them haven't lost their jobs yet," Dmitriyeva said at a news conference.

In contrast, Americans are mainly depressed about losing money, and Britons are depressed about losing their homes, Dmitriyeva said.

The Serbsky Institute's hot line is receiving 130 to 150 calls a day, while in noncrisis times the average was 30, she said.

Dmitriyeva said Russians are better suited to ride out the crisis than Americans and Western Europeans because the current problems are not as bad as they were in the 1990s.

"The Russian crisis in the '90s was economic, political, social and ideological," she said.

The current crisis, however, is much simpler, she said.

A new poll indicates that Russians feel more optimistic about the crisis than people in the West. The poll, released by state-run VTsIOM this week, found that 63 percent of Russians fear that the crisis will last a long time, while 76 percent of Americans and 81 percent of Britons share the same fear.

"Russia is being rescued by the fact that it hasn't risen from its knees to fall down again in the current circumstances," VTsIOM head Valery Fyodorov told Nezavisimaya Gazeta.

Still, the Serbsky Institute predicts that alcohol consumption will increase among Russians this year. Between 1990 and 1995, the period around the Soviet collapse, alcohol consumption shot up by 40 percent and resulted in many deaths as people drank low-quality drinks and home-brewed alcohol, the institute said.

Dmitriyeva cautioned that the suicide rate might also increase. Russia has the world's second-highest suicide rate, after Lithuania, according to figures from the World Health Organization.

She recommended that people fight depression by occupying themselves with physical activity and unpaid public service work. "These are the best antidepressants," she said. http://www.themoscowtimes.com/article/600/42/376101.htm

Professor Gilman, who doesn't really mention unemployment, also says:

(...) Before despairing, we should recall a few truths:

*When things get cheap enough, people will start buying again. This will be true of oil prices, the ruble exchange rate and share prices of Russian companies. We may have already hit bottom -- or maybe not. In a globalized, interdependent economy, it is premature to say that Russia is now a bargain. There are too many other factors at play. We will only know for sure well after the fact.

*All countries are in this together, even if the timing and extent of their respective recessions may differ by national characteristics. This is not a replay of Russia's 1998 financial crisis. Prudent countries like Germany and Japan have been hit even worse than new debtors like the United States and Britain. Russia was somewhat immune until late in the game, but plunging oil prices and the evaporation of global credit caused an inevitable collapse. Only time, savings and reduction of debt levels will restore personal and corporate balance sheets in the United States, much of Europe and other heavily indebted countries.

*There are no magic bullets. It doesn't matter if you are a neo-Keynesian, a monetarist or from the Austrian school, there are no easy fixes to the wrenching, inevitable adjustment. The Group of 20, G8 or IMF cannot assert some form of divine intervention. Governments are taking steps to cushion the pain, but no matter how effective these measures are, it will take time to cure the crisis. And Russia is certainly no exception. Like all governments, it faces only hard options. In the meantime, a Keynesian fiscal stimulus program that will turn last year's 4 percent budget surplus into a projected budget deficit of 7.4 percent of GDP this year will have to carry us through to the other side of this vicious business cycle.

*Russia can live -- and even thrive -- with cheaper oil. Just five years ago, an oil price of $37 per barrel seemed not only reasonable but was considered consistent with high economic growth, like the 7.3 percent increase in GDP that we saw in 2004. What has changed since then is that high inflation in Russia, 60 percent cumulatively, has implied that the real exchange rate (adjusted for inflation) had appreciated by more than 40 percent before the Central Bank embarked on its seemingly successful managed currency depreciation between November and January.

*In Russia, there is no balance of payments crisis. On Friday, the Central Bank announced that the current account surplus shrank to $11.1 billion from $38 billion in the same period a year earlier, but at least it is still running a surplus. Capital outflows have slowed significantly over the quarter, and by March, Central Bank First Deputy Chairman Alexei Ulyukayev said the bank had bought up about $10 billion to avoid a precipitous strengthening of the ruble. A positive current balance and restrained capital outflow even after debt repayments should lead to a net increase in foreign exchange reserves in 2009.

*Russia does not face major debt problems. Fears about the country's debt are exaggerated, and they do not approach the levels seen in Eastern Europe. Household debt at 9 percent of GDP is extremely low, and even corporate debt of 50 percent of GDP is not high in the global context or relative to profits and assets. Therefore, Russia does not face the huge solvency problem that Western countries face. Individual oligarchs, banks and companies are exposed, of course, but there is no systemic weakness. Foreign exchange assets are much higher than debt. With the peak of foreign debt repayments already passed, Russia should have no systemic difficulty in repaying the $122 billion due over the next 12 months.

*Russia's foreign exchange reserves are not at risk. The gross international reserves of $388 billion held by the Central Bank at the end of March were about the same level as two months earlier despite net capital outflows of $38 billion. The Central Bank has not intervened to support the ruble rate, and it has even purchased dollars repeatedly in recent weeks. Money supply seems to have stopped falling in March, and since the trend in monetary aggregates is closely correlated with the real economy's performance, this may be a reason for believing that the worst is over. Assuming oil prices do not drop and inflation is reduced soon to single digits, the ruble should continue to be stable.

*Russia's reserves were not wasted. It seems that the $200 billion drop in reserves since summer was mostly a transfer to the private sector that enabled it to reduce indebtedness and build up liquid foreign assets. The reserve decline of $130 billion in the fourth quarter can be almost fully accounted for in this way.

For Russia, the months ahead will be difficult enough without the scaremongering by observers who are playing catch-up. (...) http://www.themoscowtimes.com/article/1028/42/376024.htm

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Received on Fri Apr 10 21:15:52 2009