Sunday, August 21, 2016

How Bad are Things in Russia Today? Some People There are Now Pawning Their Teeth

Paul Goble

            Staunton, August 21 – The worsening economic situation in Russia is highlighted by many things but none more compelling than the fact that it is forcing ever more people there to pawn whatever items of value they have – including their teeth -- and then not to be in a position to reclaim their property by paying the pawnbrokers back.

            Russia’s Central Bank says that the amount of loans issued by Russian pawnbrokers rose from 36.6 billion rubles (600 million US dollars) in the first quarter of 2015 to 47.6 billion rubles (800 million US dollars) in the first quarter of 2016; and industry leaders say that the share of loans not repaid has doubled since 2012 (

            In general, Sergey Sokovnikov, the head of the Russian Association for the Development of the Pawn Industry, says, most of the loans pawnbrokers make are small and typically are given in exchange for jewelry; but sometimes he says Russians bring other things if they don’t have any jewelry, including their dentures or gold fillings.

            He suggests that “the growth of pawning in Russia is a signal of the market that the economic situation is in difficulty [and that] ‘other mechanisms for extending credit” such as banks, credit cards, and micro-finance organizations “have become less accessible,” forcing people back to this old form of raising cash quickly.

            Vasily Sokolov of the Higher School of Economics’ Banking Institute agrees. He told Rosbalt that “people have no money, real wages are falling and people simply need to find some way to live. They are going to pawnbrokers now because this is the shortest path to getting ready cash.”

            Banks are not lending as freely as they did, he says, because they are seeing more bad loans; and with pawnbrokers, people know that if things get even tougher, they won’t have to pay them back, although that means they will have lost their property and in some cases the only reserve they had.

            And despite the expectations of some, Russians are not opening more credit card accounts, either because they do not have any credit history or it is a negative one. As a result, Sokolov says, people are “step by step falling into debt slavery.”

            Russia’s financial ombudsman Pavel Medvedev agrees. He points out that when times were better, people took out loans in the expectation that their incomes would never go down. Now that they have many are taking out loans to pay the original loans lest they land in default of one kind or another.

            Some kind of debt relief is needed, he suggests.  Some seven to eight million people are over their heads in debt, and they need legislation that will address their problem. But up to now, the government has shown no interest in helping them out, and so both their numbers and the amount they owe are growing.

            “Millions of people have been driven into a corner,” the ombudsman says.  What they will do next is far from clear, although as Vladimir Putin has said, anyone driven into a corner is likely at some point to attack those who have put him there.

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