Bankruptcy scarier lost profits

the recently published statistics registers decline in production in industry and a sharp deterioration in other indicators (reduced volume of construction, transportation, investment in fixed assets, etc.), experts say. First, the company began experiencing cash shortages, not only for investment but also maintenance of the current manufacturing process. On the one hand, declined sharply sources to replenish the working capital as a result of the crisis of confidence in the banking sector and widespread liquidity problems. Companies do not have time to react to a sharp change in the situation that has led to problems with liquidity balances, longer turnover working capital, accounts receivable, etc. The lack of access to credit to cover cash shortages led to the inability to buy raw materials, components, etc., and pay for the obligations of the counterparty. As a result, the company started downtime. These problems arise in all sectors of the economy, but are most common for companies with a long production cycle. On the other hand, for the same reasons, began to delay payments to consumers of goods and services, which only led to an increase in accounts payable and receivable. Despite the conservation potential of demand response Business on the growth of non-payment was stopping shipment of the goods and the partial suspension of production. This situation is typical for many companies. For example, some of the food industry because of nonpayment by the retailers and the inability to get a bank loan had problems with the payment of supply of agricultural products. As a result, enterprises are forced to idle temporarily freeze the production or work in the warehouse. Secondly, the problems involving loans amid falling consumer demand for real estate led to the freezing of construction projects development and construction companies. As a result of the technological chain reduction in demand from the construction has affected the building materials industry. Third, many companies has been an increase in production costs, which is based on the one hand, rising interest rates on borrowed funds, on the other - increasing costs of imported raw materials, equipment and components against devaluation of the ruble and rising import duties. All of this leads to higher prices for products and services and, accordingly, the correction in demand down. retaliation is to reduce the supply manufacturers, the change range in the direction of cheaper and less "on import." Fourth, one of the causes of the decline of funds from enterprises which are designed to support current production was increasing pressure on debt service. This is due to a sharp reduction in the possibility of debt refinancing, as well as the growth of ruble debt servicing costs in foreign currency due to devaluation of the ruble. On the part of contractors on a background of negative expectations become active presentation processes offers , the recovery of debts, etc. This is detrimental to financial stability, leading to the suspension of deliveries and, consequently, growth delays and defaults. As a result of the company, faced with debt problems, are forced to save money and put them to meet debt obligations, even to the detriment of production. Bankruptcy scarier lost profits. The highest debt load from construction companies, companies in the food sector and agriculture, with retail chains, financial institutions and airlines. Fifthly, the decline of both external and domestic demand is a signal to reduce production goods and services in export-oriented industries. The result of lower external demand, by a recession in the world's leading economies, has been the decline of exports. For example, in November, the production of mineral fertilizers decreased by 51.6% on an annualized basis. This decline was partly due to production and lack of flexible pricing policy of domestic companies. Domestic demand has also been reduced. investment demand dropped significantly since financial difficulties have led to a substantial reduction or freezing of the investment programs of companies. At the same time the population until there is a slight decrease in consumer demand. Faced with reduced revenues and the suspension of the program of consumer lending, the population begins to conduct rationalization of consumption, switch to cheaper price segments, but consumption remains high. The response of industry to the changing demand of enterprises and population is the decline in production of capital goods, changes in product mix, etc. Sixthly, important influence on economic processes have negative expectations of enterprises and people, one of the main causes of which is the negative news background. These expectations also lead to an adjustment of production program in the direction of contraction. Thus, in the Russian economy is showing signs of recession. The main problem of the current situation is that the reduction production of certain goods and services associated largely with the violation of the payment discipline of economic actors, not only with a reduction in demand for goods and services. Most companies do not roll production and suspend its work or to the warehouse, which may in the future will shake their financial situation . Why the Bank of Russia refinancing rate increases, and anywhere in the world of its lower? increase in the Bank of Russia refinancing rate to 13%, which led to an increase in interest rates in the economy was due to a desire to increase the attractiveness of ruble-denominated assets due to higher yields on them as compared to currency instruments. Ultimately, the measure was aimed at reducing the outflow of capital from the country and banks, as well as reduced demand for the currency and prevent mass "valyutizatsii" country. But the actions of the regulator can not afford to fail to influence the situation. Members of the monetary and foreign exchange market (banks, companies, population), going into a foreign currency, are guided primarily by other factors. First, the outflow of foreign capital from emerging markets, these actions of the Bank of Russia is impossible to stop. This process, on the one hand, due to the repatriation of capital to solve their own problems with liquidity. On the other hand, in the context of a weakening ruble decreases the attractiveness of investment in ruble-denominated assets (the presence of exchange rate losses in the reverse conversion of ruble incomes). Secondly, domestic firms and banks, in anticipation of payments on foreign debt (mostly in dollars), seek to hedge exchange rate risks, and advance to form foreign currency reserves. Data available reserves overseas due to including the crisis of confidence in the banking sector. Third, the new interest rates are still inferior to the potential devaluation of the ruble. Therefore, for speculation and income from operations currency of good opportunities (such as banks, rather than assume the risks of lending to businesses, you can safely earn on foreign currency transactions). The objectives of rate hikes by the Bank of Russia and the motives of market participants are different. As a result of rising interest rates hurt the company: the value of money increased , the availability of loans has declined even more, which led to an increase in defaults. In contrast to Russia, the developed countries maintain exchange rate is not the task of central banks and the problems with capital flight no. Consequently, the increase in rates in the economy for present purposes is not relevant. monetary authorities of developed countries in terms of financial and economic crisis, seeking to maintain economic activity and increase the availability of money, lowering interest rates. The reason of defaults in the Russian economy? "One of the main reasons for the growth of non-payment in the Russian economy is a significant contraction in the money supply, which is observed from late August 2008. The reasons for reducing the amount of money in the economy are as follows: Termination of the channel the money supply through the purchase of currency by the Bank of Russia. Moreover, the channel began to act in the opposite direction: Bank of Russia is forced to sell the currency and to withdraw rubles from circulation. The government's actions in the form of accommodation cost funds and loans to banks and companies were not enough to offset the cash withdrawal of Bank of Russia - a net balance of the money supply was negative. outflow of people and companies with bank deposits, as well as curtailing lending to commercial banks, companies and people that led to a reduction in credit issue. As a result of these factors, money supply (M2) rose in January - August 2008, only 9.5%, and over the next two months, fell sharply by 7%. If there is insufficient money for the economic turnover is a problem of non-payment. Enterprises are experiencing shortage of working capital, which is insufficient to cover cash shortages that are available in any production process. Over time, cash transactions are replaced by various non-monetary forms of payment: barter, offsets, calculations using a variety of money substitutes (notes and various commitments, etc.) which have already been used in 90 years. What determines the dynamics of the ruble? Bank of Russia continues a policy of devaluation of the ruble against the currency basket. The recent weakening of the ruble against the euro and a slight strengthening of the dollar is the direct result of the formation technology of the ruble. This technology determined by the situation in the world currency market Forex, where in December there is the strengthening of the euro against the dollar, as well as the bi-currency basket, which is determined by the demand for foreign currency on the domestic market. The situation on the Forex is extremely unstable. The fall of U.S. dollar in December, is under the influence of several factors : Adoption of a common European plan to stimulate the economy, the convergence of EU and UK, as well as the weakening of control over budget deficits of eurozone countries at a time of crisis, support the euro, and the number of currencies of European countries. The demand for dollar assets has reached its ceiling. For example, the yield of Treasury U.S. bonds because of the excessive demand in December, has already become negative (demand was caused by the desire to sit in a safe asset in the context of high risks in the financial market). The next steps in support of various sectors of the U.S. economy require more financial resources, which increases the budget deficit to record levels. The answer to the question, thereby weakening economy will be able to close the deficit and pay off your debts, do not. In addition, some politicians in the United States questioned the effectiveness of government measures. The growth of bi-currency basket, which is observed in December, is associated with virtually support the Bank of Russia the U.S. dollar, which fall on the world market was to repeat itself in the domestic market. Not letting the dollar fall through an increase in bi-currency basket, the Bank of Russia was forced to significantly increase the rate of the euro against the ruble. The reason for the Bank of Russia - the presence of potentially high demand for dollars to pay for corporate debt in 2009, and also to prevent buying depreciating currency speculators. In December, the result of policies pursued by the Bank of Russia, already suffering from reduced demand for foreign currency by the public and banks, which is natural in terms of compression ruble money supply . Probably, the peak outflow of capital had already passed - as a result of pressure on the ruble weakened somewhat. It is possible that some companies have already stocked up the American currency, or agreed with VEB to grant them loans. The demand for currency by the population began to decline due to problems with employment and a reduction in income and wages. The high demand for euros in the first week of December is stored as part of the population, and importers. But the sharp rise of the euro in recent days will reduce the demand for this currency. It is worth noting that there is a "ceiling" of the devaluation of the ruble . First of all, this is due to the high import dependence of domestic economy, like producers, working on imported raw materials and the consumer market, where the share of imports is high. As a result of the strong devaluation of the rise in imports may lead to commodity shortages and the next bout of inflation . In addition, the excessive growth of the ruble value of foreign debts threaten growth in the number of defaults on foreign currency debt of many companies and people. Compressing the money supply on the background of high demand for rubles for the current account (as opposed to 1998 is now the ruble is the only means of payment in countries) also limits the demand for foreign currency.