Entering text into the input field will update the search result below

Trump's Impact On Russia Is A Non-Event

Alan Longbon profile picture
Alan Longbon


  • President Trump's sanctions on Russia have little or no impact on GDP growth. The price of oil has the largest influence over the Russian economy.
  • Sanctions have most likely made the Russian economy stronger and more self-reliant and cut out the impact of foreign loans that sank Russia in the 1990s.
  • The private sector balance is positive and it looks like the current account, and thus the economy is likely to get a big boost from rising oil prices.
  • One blot on the landscape is selling of assets by world global banks that will make for heavy weather even for the most robust economies.

Russian relations have dogged the new Presidency. Any rapprochement with Russia would have been a plus given its nuclear arsenal and the threat it has to organized human life on this planet. Despite a promising beginning, relations have become frosty and a threat to the President's time in office due to the Mueller investigation and what it might unearth whether true or false.

To be seen not to be too friendly to Russia, it is likely that Russia will be treated more harshly than otherwise might have been the case

The purpose of this article is to look at the macro sectoral flows and assess whether Russia is a good place for investment.

President Putin met with President Erdogan of Turkey in late 2016. At the meeting, President Erdogan passed onto President Putin his theory that he suspected that Turkey's "independent" central bank was responsible for the inflation in his country through rate hikes. Cost-push inflation. A higher cost of credit inflates prices throughout the economy.

President Putin took this lesson home and began lowering the interest rate in Russia and lo and behold, inflation fell with it.

Russian inflation is moving with central bank rate movements, downwards. There is a lesson there for other countries to learn from.

Ruble fluctuations influence GDP as measured in USD in the chart below:

Russia's GDP, expressed in USD, appears to fall. However, in reality, GDP has been growing, as the above chart shows. Apart from the dip in 2015 and into 2016, when the war in Donbass was in full swing, and international sanctions from the 2014 Crimea operation were also taking effect. The biggest hit though came from the decline in oil price. Oil accounts for roughly half of Russia's export income.

Expressed in Rubles, Russia's GDP has grown steadily.


This article was written by

Alan Longbon profile picture
My investment approach is very simple. I find countries with the highest and strongest macro-fiscal flows and low levels of private debt and invest in them using country ETFs and contract for difference (CFDs)I use functional finance and sectoral flow analysis of the national accounts of the nations I invest in. This is after the work of Professors Wynne Godley, Micheal Hudson, Steve Keen, and William Mitchell. Roger Malcolm Mitchell, Warren Mosler, Robert P Balan, and many others.One can analyze a country in seconds with four numbers as a % of GDP and these are G P X C where[G] Federal spending.[P] Non-Federal Spending.[X] Net Exports[C] CreditOne can then derive a set of accounting identities that are correct by definition.GDP = G + P + XAggregate Demand = G + P + X + C or GDP + Credit.GDP = GDIG and X are regularly reported in official national account statistics and one can work out P as follows:P = G + XAsset prices rise best where the macro-fiscal flows are strongest and where the private sector balance is highest.The 20-year land/credit cycle identified by Fred Harrison and Phillip Anderson is also a key investment framework that I take into account.

Analyst’s Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

Seeking Alpha's Disclosure: Past performance is no guarantee of future results. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. Any views or opinions expressed above may not reflect those of Seeking Alpha as a whole. Seeking Alpha is not a licensed securities dealer, broker or US investment adviser or investment bank. Our analysts are third party authors that include both professional investors and individual investors who may not be licensed or certified by any institute or regulatory body.

Recommended For You

Comments (31)

Alan Longbon profile picture

Here is a great article on Trump and Russia from Rodger Malcolm Mitchell.

The real reason Putin elected Trump
by Rodger Malcolm Mitchell
There are many reasons why Putin might have put so much energy into electing Donald Trump as President.

Oh sure, Putin knew Trump is a vainglorious fool who would be no match for Putin in the competition between nations.

And sure, Putin was afraid of Hillary Clinton's toughness, brains, and experience, a far more worthy opponent than the ignorant, inexperienced, feckless Trump.

But the real reason, the big one, is money, the same reason Trump why is so obsequious when in the company of Putin. It is why Trump, after promising to reveal his tax returns, as previous Presidents had done, he invented excuses ("I'm under audit." "The people don't care." ) and finally refused altogether.

Trump and his family have borrowed billions, of dollars from Putin's Russian oligarch pals.

Following Trump's Money Trail: Why Collusion Is Just An Illusion

The Trump Organization borrowed billions of dollars to finance its real estate operations but subsequently defaulted on many of its loans.

Nevertheless, the Trumps were inexplicably able to continue borrowing millions more from the very banks still owed money.

Around the same time, Russian entities linked to the Kremlin quietly moved $10 billion dollars from global locations into the United States using the same banks.

Government inspectors independently uncovered the suspicious Russian transactions, known as “mirror trades” (stock purchases in overseas branches and identical immediate sales in the United States).

Democratic legislators have demanded banking information for identifying links; Republicans controlling Congressional committees refuse to cooperate.

If Putin's pals demand their money back, Trump could be in serious financial trouble -- maybe broke.


In 2008, Donald Jr. told investors in Moscow that “Russians make up a pretty disproportionate cross-section of a lot of our assets,” while Eric reportedly said in 2014 that the Trump Organization was able to expand during the financial crisis because “We don’t rely on American banks. We have all the funding we need out of Russia.”

Trump has the slimy reputation of declaring bankruptcy every time the creditors close in, and that is the last thing Putin and his cronies want.

Trump can't "rely" on American banks because they won't lend to him.

Here is the gist of all conversations that may have happened, over time:

Putin: "Here's the deal, Donald. We'll help you to become President of the United States. You not only will become rich using the U.S. Treasury as your personal piggy bank, but we'll let you build Trump Tower Moscow and get in on a bunch of other lucrative real estate deals here in Russia. We also will treat you to some beautiful hookers."

Trump: "Money plus women. Sounds good to me."

Putin: "In return, you will use the billions you'll make to repay my friends for those loans, and never go bankrupt on us. And of course, you'll see to it that those sanctions against Russia kind of fade away."

Trump: "I'm in. But this has to be kept secret. I've done lots of sh*t in business, but being revealed as a traitor . . . on second thought hey, if the money is good and the women are beautiful . . . "

Putin: "We'll open back channels for communication, and you and I can have meetings that no one else but interpreters attends. I'll tell you just what to do. You can toss in a couple of stern comments and act, so it's not too obvious that I own your butt. Just don't release your tax returns. That would scatter the grain."

Trump: "Huh?"

Putin: "Spill the beans."

Trump: "I promise I won't go bankrupt on you. Have I ever lied?"

Putin: "You better not. Remember what happened to Alexander Litvinenko, Yuri Shchekochikhin, Viktor Yushchenko, and Anna Politkovskaya. And of course, there's Sergei Skripal and his daughter. You do like your daughter, don't you, Donald?"

Trump: "Of course, as I've said, in public and on many occasions, 'My daughter is hot. She's voluptuous. It's O.K. to call her a piece of ass. If she wasn't my daughter, perhaps I'd be dating her.' Don't hurt my daughter. Just tell me what you want me to do."

Putin: "And if necessary, you will send me your former ambassador to Russia, Michael McFaul, so I can grill him the Russian way."

Trump: "I'll try."

Putin: "And accept our annexation of Crimea."

Trump: "Sure, why not?

Putin: "And finally, I don't like NATO. It keeps me from getting back all those Soviet nations we used to own.

Trump: "I'll break up NATO. It might take some time, but I'll do it."

Putin: "Or you will find yourself to be the innermost of a Russian matryoshka nesting doll set."

Trump: "Yes, Vlad. May I get up, now? My knees hurt."

And the rest is history. In total, there are many reasons why Putin would want Trump to be President, there are none favoring Clinton.

And as for Trump, the big reason is money. The man is notorious for cheating creditors, cheating employees, not giving to charity, using his charitable foundation for private use, keeping conflict-of-interest ownership and control over his properties while President, and encouraging the usage of his properties by foreign dignitaries.

Trump is all about money, money, money. He would do anything for money, including sell out his own country. And that explains everything.

Next, Mueller will explain it even better.

Rodger Malcolm Mitchell
Monetary Sovereignty
VR51 profile picture
23 Jul. 2018
Alan, I’m surprised you haven’t already been roasted by the fires of T’s fans.
This perspective allows one to strip the haze-filled political motivations out of the equation. It becomes very straightforward when we simply follow the money.

Dirty Money, Episode 6, "The Confidence Man," covers some of the knitty gritty in an easy to digest narrative. Well worth the hour of Netflix.

Thanks for posting, Alan
It has always been about the money. This is the most clear cut case of quid pro quo and high level political corruption this country has likely ever seen.

But it speaks to the power of propaganda that Trump and his spin machine have managed to successfully sow the seeds of doubt for so many Americans and change the narrative with endless conspiracy theories. Its straight out of the Kremlin playbook.
alan shapiro profile picture
Nice article Alan. That last portion was, however uncomfortable, quite accurate.
Alan Longbon profile picture
Thanks Alan. Brace for impact
VR51 profile picture
06 Jul. 2018
Why focus this idea on Russia? Why not China, Japan, Europe or world markets?
Alan Longbon profile picture

I do. Have a look at my past articles. I do sectoral balance analysis every half year or so or after a major event like a policy change etc.

Thanks for reading and commenting.
Alan Longbon profile picture

Thanks for your comment.

President Putin must have little concept of monetary sovereignty as he makes no use of this power at all. He even borrows in other country' currency. The is probably why he has been tolerated by the bankers and power elites for so long.

President Putin has demonstrated to me that he has little financial knowledge or skill by his non use of monetary currency sovereignty. Austerity brings nothing and makes a country weaker. It expands the gap between the rich and the poor and if that is its purpose then it has been successful.

The same austerity tactics have and are being employed by most ruling elites in most countries in the world.

By using those sovereign currency creation powers of his country President Putin really could build Russia back up to superpower status.
Not the biggest fan of many Putin's policies but at least he seems to know well that the moment he starts the budgetary profligacy you advocate most of the money he prints will be converted into foreign currency and off the shelf goods, sending inflation through the roof and destroying the national currency in the course of a few months, while the only way to avoid this would be to install severe capital, price and private consumption controls that he already has witnessed in full action for many years in the Soviet Union - that is, until that thing naturally went into bankruptcy which he considers the major tragedy in history and obviously tends to avert the same fate now for Russia.
Alan Longbon profile picture
So corruption is a problem?

The corruption index is 29 where low is bad and high is good.

Switzerland is 85.

I hear what you are saying, it is like running a leaky ship.
Corruption is a symptom of a larger problem which is that the state is not functioning well which increases inflationary expectations. However inflationary expectations are everywhere not just in corrupt countries. They cannot be completely eliminated and moreover that should not be eliminated unless in the intent of causing depressive erosion of discretionary consumption. The existence of inflationary expectations means that the moment the populace believe the state will not be able to reasonably control inflation they run to stores or banks to buy stuff (harder assets first, and whatever is left on the shelves when these are gone) or convert their money to harder, more dependable currencies before it's too late. Perhaps for some hubristic neocommunist academics in well-off Western countries this is hard to understand but everyone who lived through hyper-inflation spirals going out of control in poorer countries this is a hard fact, and easily replicated. National currencies get destroyed very easily with budgetary or monetary profligacy and barter relations and/or foreign-currency substitution ensue, naturally destroying a country's sovereignty and growth - not due to corruption but simply to natural behavior of simple people. Naive rhetorical profligacy with offers of communism, return to superpower status, eternal prosperity and other such high bombastic concepts do not work well with real people who know better and do not take stability and civilization for granted.
These shallow economic conjectures and extravagant delusions about Putin's monetary competences obviously go exactly in the opposite direction to what E.Nabiullina, the head of Russian Central bank, preaches and does. She hiked the rate to 17% in december 2014 to stop the prospect of hyperinflation due to rapidly falling exchange rate in the imports-dependent Russian economy and has since openly and fervently opposed any calls from socialists and fringe economists to lower the rate too much despite significantly overshooting her own disinflation target. As for Putin, he has defended her stance publicly as well as resisting calls for increased deficit spending through public borrowing drawing criticism now even from some well known independent fiscal conservatives. Simply put, Putin's government are well known austerity advocates (even with some awkwardly funny quotes from his Prime minister Medvedev to that effect) and his Central Bank are well known monetary hawks.
Civilization Type 1 profile picture
"Trump's Impact On Russia Is A Non-Event."

Ah yes, but Russia's impact on Trump definitely IS an event. :-\
Alan Longbon profile picture

Yes, it is certainly dogging his Presidency.

Thank you for your comment.
panzer profile picture
hard to invest in a russian company since America can simply bar any company it pleases from international financial transactions, as it did with Rusal...
Alan Longbon profile picture

The micex index is on most CFD offerings.

Thanks for reading and commenting.
I'm not so convinced about the ultimate doom-and-gloom situation given so many uncertainties and the admitted antiquity of current models but I appreciate the value of this post and the research therein. Good work!
Alan Longbon profile picture
You are welcome, thanks for reading and commenting.
I stopped reading at "Russian relations have dogged the new Presidency." These have all been allegations from the left when they lost the election. No proof to back up the claims has been shown.
If there is proof please show it.
Alan Longbon profile picture

The article goes on to say no impact and nothing behind the allegations either.

There is a bit at the end that everyone should read.

Your loss.

So far everything in the Steele dossier has been proven to be true. Everyone in the Trump campaign had ties to Russia and multiple people have been charged already. Some have already been sentenced.

Trump will lift Russian sanctions soon because that is part of the quid pro quo deal he made with Putin. But don’t worry, the right wing propaganda masters will put a nice spin on it when it happens and you will eat it right up.
Alan Longbon profile picture
There are business dealing links because Trump had done and still does do business with Russian nationals long before he was President.

None though are linked to influencing the election or controlling the presidency, all are linked to Trump development projects.

Trump probably knows a few Australians for the same reason but that is not a problem. Both countries has a similar GDP and the same economic potential.

Russia is only a self created problem to justify over expenditure on military items . A bogeyman to fuel fear and stoke profits for the military industrial complex.

I hope you are right about sanctions going away and friendlier relations as both sides have a lot of nukes that could end organised human life on earth as we know it.

It would be nice to see the doomsday clock wound back.
hmmm, Trump did something that impacted the Russian economy in a way that was a huge positive... oil up, Russian economy up... ? is what Russian stocks will get the biggest lift
Alan Longbon profile picture
Yes, a high oil price is a big uplift for Russia.

Thanks for reading and commenting.
Hello McFly, Russia has a smaller GDP then Canada. The Russia this Russia that is fake news.
Robert P. Balan profile picture
Once again, thanks a lot Alan for referencing my work and Predictive Asset Models.

Articles like this one should be important eye-openers. There is a lot of materials here to digest. But it is worth the effort. Thanks again.
Alan Longbon profile picture
You are welcome Robert.
Disagree with this article? Submit your own. To report a factual error in this article, . Your feedback matters to us!
To ensure this doesn’t happen in the future, please enable Javascript and cookies in your browser.
Is this happening to you frequently? Please report it on our feedback forum.
If you have an ad-blocker enabled you may be blocked from proceeding. Please disable your ad-blocker and refresh.