Here comes the generation of Bankrut II.

It's been precisely a period since the erstwhile entry. On economical issues, it seems that this has not happened much. fresh data and fresh events appear, which complement the erstwhile entry.

For those of you who request a reminder of what we wrote about, I send a link to the entry just a period ago. https://economicsarosia.pl/2023/07/12/generation-bankrupt/

It's time to grow the threads. The first is inflation. This has accelerated rapidly over the past period and they no longer hide it from the Russian ministries. Although the Rosstat data inactive show 3-4%, there are quite a few articles with a sharp acceleration of price increases. The ministers are speaking. Meetings and panels of government and food producers are being created to analyse the situation of the introduction of rigid prices to the most crucial products. Let me paste prof. Steve Hanke's chart, who has been watching prices in Russia for a long time. According to him, the current inflation rate is around 60%. The weakening of the ruble definitely affects the price of all goods imported from abroad, and this in turn translates into prices on shelves. We are not as optimistic as John Hopkins University lecturer again, but we are changing our estimates from 25-30% to closer 30-35%.

We wrote earlier about people surviving on the brink of debt sustainability in banks. (referring to the article at the top of the page). The data that were taken for entry came from the first half of the year. Since then, 2 fresh factors have emerged. As you can see, the situation has changed dramatically since May erstwhile it comes to price increases (there is no real increase in wages), and a strong stamp on the ruble, which in turn forced the first increase in interest rates in a long time. Currently, the main interest rate in Russia is 8.5%. Last fewer months, we had 7.5%. Since September, rates are already announced close to 10%. Anyone who is presently paying off credit in our country knows how shocking it can be to rise interest rates by just a fewer percent. presently we have 6.75% in Poland, there 8.5% in the vicinity of 10%. For all those taking loans in 2019 – 2021, the rate will be very high, as interest rates in those years were respectively:

• 2019: About 6.25%
• 2020: About 4.25%
• 2021: About 4.25%

I took the liberty of a small simulation and conversion for you. You can buy an flat in Russia for the equivalent of PLN 200,000. A mortgage debt for 30 years for this amount with an interest rate of about 6% (4.25% plus a margin of 1.75%) is equivalent to PLN 1200. In a moment, 10% feet will be nothing different in Russia. The debt will be with a margin of almost 12%. Let's see what this debt looks like. In terms of gold, this gives us PLN 2057. Do you know what the national average is, in terms of gold? PLN 2882 gross. However, the average Russian will be able to barely repay a debt of this amount.

But these are the problems that will come up and they will come up in the coming months. However, we already have a very large problem on the marketplace of alleged moments. In Russia, microlending companies have a top-down interest rate limit of 365%. In June 2023, the share of late loans over 90 days reached 46.4% of the full number of loans granted, according to Score Bureau data. Almost half the people who take microloans are incapable to pay them back. Do you realize the gravity of the situation?

This rate was 39.2% in April. Thus, the most noticeable increase in the share of outstanding loans has occurred in the period May-June since early 2020. (For the record, this data is inactive pre-explosion and interest rate increases)

At the moment, the level of bad debts in the section is comparable to the highest indicators of October-November 2022, erstwhile the behaviour of borrowers was affected by mobilisation. People just took credit, packed and ran from Russia no substance what happened to that debt. Now we don't have a situation like this. People simply face a very hard situation.

For microlending companies, working with outstanding debts is the same basic activity as lending, so many companies do not compose them back or sale them, but do their own collection. We wrote about the changes in the debt collection regulations any time ago. 1 of the most interesting changes is the anticipation of assigning a nickname to the collector. He doesn't gotta present himself with his real data.

According to the Central Bank at 1 January 2023, 7.6 million Russians had active loans in microcredit companies. At the same time, 28% of specified companies had more than 2 credits at the same time. According to BCI for June 49% The Russians have 1 active credit, 14.4% two, 10.6% three, 7.5% four, 18.5% 5 or more. The problem so concerns more than 3 million people who are incapable to repay their liabilities in microcredits. Here is another remark, people who are so indebted are frequently household members, so possible financial problems besides affect their spouse and children. A fewer more million as described in the erstwhile article is trapped in a mortgage loan. Here, too, people affected twice should be multiplied, as credit is very frequently taken by 1 individual and they live in respective people. Another 100 1000 in the coming months will gotta declare consumer bankruptcy. And all this before the collapse of the Russian economy, which is coming. An army spending up to 37%, declining gross from the sale of natural materials. Stimulating the economy with public money, not private investment. The withdrawal of capital from Russia by a wide stream. And a raging inflation with a weakened ruble. All these macroeconomic factors only worsen the credit situation of the average Russian over a longer period of time. Rates of 10% will not choke real inflation. Investments in arms are not investments in e.g. infrastructure improving life.

“The generation of bankrupts is coming”, it has a further part, and I think it is not the last, as more dead will fall out of the closets shortly enough. Weakening the ruble is shifting the burden of war from Kremlin to citizens. Fighting the weakening of the ruble is simply a blow to the borrowers. The only logical solution is to end the illogical war as shortly as possible. But the logic of this power is hard for me to think. An ulcer of expanding insolvency will deepen with each consecutive month, and interest rates will most likely not halt around 10%. Similarly, interest rates can be raised to 15% or 20% in a fewer months. What will the payment I've already calculated look like? Around PLN 3000 in terms of gold. So about 50% above the financial capacity of a Russian citizen earning a national average. Where's the rent, fees, food (still expensive), fuel, kid support? The script is highly dark, but numbers and results indicate that it is rather real if Russia follows this path. Each period is tens of thousands of people who will suffer. And not just on the Ukrainian side.