by “Diogenes”
First of all, let me say that with all my respect to Dr.Glaziev in person, and his economical and political views, I have to make some reservations and comments.
He never worked in real sector of economy, industry or the bank. His academic education and background is so called Economic Cybernetics. His postgraduate studies and Doctoral thesis were done in Central Economic-Mathematical Institute of the Russian Academy of Science – http://www.cemi.rssi.ru . Now its a time for me to make a full disclosure:
I did my postgraduate studies of economics and finance in the very same Institute, which I did out of curiosity less then 10 years ago at my own expense, while working in financial industry. However, this study lead me to a conclusion that contemporary financial theory and economics is a fraud (understatement). As one wise man said ” it is a manifestation of a disease of collective consciousness. It is the suppression of Logos and the embrace of Thanatos. It is, in a purest sense, evil.”
This Institute was created in Soviet Union in 1963 in view to help managing Central Planned Economy of USSR by introducing computers in the system of planning and managing economy and developing of so-called “theories of optimum control of a national economy”. In a plain language it means that if you know resources available in national economy and demand for final goods (industrial and consumer) using supercomputers and mathematical models you can calculate most efficient utilization of resources to produce this goods, calculate prices for those goods, distribute them to industries and finally to people. Another words, this is a Top-Down management. It was Harvard-style top-down management and GOSPLAN top-down management. It was a nuclear and space competition of two systems . Top-down management worked well when huge resources, both intellectual and material has to be brought together to design and built a long-range missile or A-bomb in a short period of time.This was a period of time when US and SU were actively competing and copying ideas from each other. It was a period of time when idea of convergence of two system, invented by Pitirim Sorokin (Russian-American sociologist) in 1960 at his “Mutual Convergence of the United States and the U.S.S.R. to the Mixed Sociocultural type ” became popular among intellectuals in Europe. Main ideologist and propagator (not inventor) of this theory in Soviet Union in 1960-70 was Academic A.D. Sakharov, father of Soviet H-Bomb with his “Thoughts on progress, peaceful coexistence and intellectual freedom” published in 1968. This idea became very popular in academic circles (mostly physicists, working for defense industry, eventually they had more freedom of thought and speech then any social scientists in SU then) and “advanced” political circles. One of the supporters (silent) of this convergence theory in Politburo was Y. Andropov himself and later on his hand-picked successor M.Gorbachev. He released Sakharov from domestic exile, was supportive to Sakharov, but always was opposing A. Solzhenitsyn’ s ideas. Actually, both systems US and SU were branches of the same tree, seeded at age of European enlightenment and strong believe in a science, as modern substitute of God. Practically speaking, it has a meaning that modern people using computers can plan and calculate everything and make life better for everybody. But there are 2 problems facing this idea: first, human being is not perfect, biased and egoistic. Second, mathematical – modern science perfected itself in linear domain, but mother nature is non-linear, while algorithms are linear and computer models can’t capture complexity of the subject ( known unknown and unknown unknown variables issue). This huge implied problem in financial modeling was one of the major factors that lead to recent financial crisis (from 2007- onward). More about this problem can be found in the brilliant books of Dr. Nassim Taleb, trader and professor: “The Black swan”, “Fooled by randomness”, “Antifragility”.
Dr. Glaziev’ s research papers are focused on macro problems: economics of scientifically-technical progress and Kondratiev Wave Theory (long waves of 40-50 yrs of economical growth and decline), associated with changing technological cycles.
Alas, his practical suggestions to fix currency or economy are too academic to be directly implemented on practice. Problems with Ruble exchange rate can fixed instrumentally and provide .
He understands THE BIG PICTURE and its a BIG plus. If he would be appointed to a position of Governor of Russian Central Bank he might quickly go through “on-job-learning” with some help and advice of bank experts ( most of them are retired now, like former Central Bank Chairman V. Geraschenko ), of course. Or outsourcing from Customs Union country, like Kazakhstan may be a professional experienced banker, such like Mr. Grigory Marchenko (ex-Chairman of Kazakh National Bank).
He is a designer of Kazakh financial Regulator, National banking system and Eurasian integrationist enthusiast. He is retired now, by the way, at his 55.
But enough criticism of academics, this is too long a preamble.
Let me get to a quiz:
What are the problems with the Russian economy: lack of credit, high interest rate, printing-press based Ruble emission, reduction in the volume of money inside Russia, lack of government investment, etc.?
Lastly, maybe you could explain why so many incompetent/anti-Russian people are working in Russia banking and the government?
First of all, let say , that reforms of Russian economy since 1990s were merely based on introduction of Williamson’s ten points or so-called “Washington consensus”.
1. Fiscal discipline (avoidance of large deficits relative to GDP)
2. Redirection of public spending from subsidies to education, health care, infrastructure
3. Tax reform (broadening tax base), moderate tax rate
4. Interest rates – determined by market, moderate, but positive
5. Competitive exchange rates
6. Trade liberalization
7. Liberalization of foreign direct investments
8. Privatization of state enterprises
9. Deregulation: abolition of regulations that impede market entry or restrict competition
10. Legal security for property rights
All sounds great and logical, isn’t it? Government has to implement it one by one and their job was to translate these rules and practically implement. Simple!
This is were the mantras of ministers are coming from ( fiscal discipline- “no extra budget spending!”, interest rates hikes – it must be “positive” , “privatization at all cost!”, etc). For last 20 years same people were repeating the very same mantras, losing ability of critical thinking and becoming a quasi-religious sect. They had an easy job, not requiring from them any creativity nor intellectual efforts, just discipline!
Note: Key point here is p.5: competitive exchange rate.
De facto monetary policy in Russia is so called “currency board”: when national money supply is always equal to the size of foreign currency reserves. This is a very much rigid design, which forces national money supply fluctuate on line with currency reserves and reserves to fluctuate in accordance with trade conditions. If the latter link between trade conditions and currency reserves is justified, former does not and make sense only for very small countries fully relying on foreign trade (like some African countries). Another words, national money supply growth can come from only 2 sources: export and foreign investments.
When there is lack of domestic money where enterprises and banks can get liquidity? They can borrow abroad, in Dollars, of course! This is why offshore economy was booming. To reduce borrowing rate corporation register HQ in offshore zone and direct its export revenue toward this HQ.
Monetization of Russian economy (Money volume to GDP, %) is way too low: in 2013 it was 47%, less then any other BRICS economy, next to Paraguay only with 46% monetization. For example, monetization in Brazil in 2012 was 81%, India – 76%, China -195% . Average monetization rate worldwide is 125%. Lets put it simple. Money is a blood of economy. In Russian economy there is not enough blood. That is why its too weak. It is prime source of high interest rates- high demand for rare commodity (money) makes it expensive. This is also source of monetary inflation. Yes, not exuberance of cash, but its deficit. Manufacturers transfer high interest borrowing costs to the prices. This subject is well researched by economists, and explain direct relationship between low monetization and inflation in Russia. Ruble free float exchange policy is even worse to Russian economy then previous policy of so called “dirty” exchange rate when Central Bank was intervening and sold foreign currency every time when ruble brake out of the artificial corridor set up by Central Bank itself. It was a channel to provide ruble liquidity by buying currency from market and supplying ruble to economy, increasing its monetization.
Author was participating in a close door event 2009 in Moscow – a financial conference of late Egor Gaidar and Nouriel Rubini (Dr. Doom) were even notorious Gaidar was making case for dirty-float of ruble, suggesting to “his friends and colleagues in the Government and Central Bank who determine the monetary policy” to let ruble depreciate while crude oil prices are falling – main source of foreign currency revenue! (oil prices then were in a free fall from $135 to $40). Central Bank then was trying hard to keep peg of ruble to currency basket (Euro+Dollar) i.e. fixed nominal exchange rate to basket. So, Gaidar made a conclusion, that for Russian economy, export oriented and commodity driven neither exchange policy is good : not free float nor fixed rate, only “dirty” or “manageable” rate (by whom? illuminated Central Bankers who know better?). Dr, Roubini tend to agree with him. Unfortunately, none of current bosses of Central Bank nor Ministery of Finance were not present at that function and Gaidar’s advice was not delivered to them. Nobody at the conference even mention another policy tool: capital control (more on this below). Indeed, they were liberals and it was a total blasphemy, contradicting p.5 & 9 of Washington consensus !
Sufficient money supply is vital for low interest rates and boom in manufacturing and agriculture. Alas, Central Bank of Russia monetary policy is opposite to common sense and policy of other Central Banks.
Strange, isn’t it? Are these people intentionally making harm to domestic economy or they are simply ignorant and incompetent? It seems there is a combination of both factors.
Last 20 years SysLibs (system liberals) had a comfortable life: they perfectly knew the agenda: what to say (see Williamson’s ten points above) and what to do (same 10 points). Now they have an acute cognitive dissonance crisis. What their Boss (Putin) is saying them to do contradict to their credo.
When countries around the globe were facing currency crisis IMF has a standard prescription, sorry, common loan conditionality:
• Floating of the currency.
• The capital account should remain open, and in fact financial liberalization should be deepened. Capital controls were not allowed. Foreigners and locals were allowed to take out and bring in funds with no or little restriction.
• Sharp increase in the interest rate (to counter inflation and to maintain investor confidence in the local currency).
• Contractionary monetary policies.
• Austere fiscal policies.
• There should be no or minimal government financial assistance to local banks and companies facing difficulties. In Indonesia and Thailand, the governments were asked to take measures to close down several financial institutions.
• Liberalization of foreign ownership in local assets and companies, e.g. after 1998 crisis Thailand raised its limit on foreign ownership of local banks from 10 to 100 per cent; South Korea raised the foreign ownership limit in local companies listed on the stock exchange from 10 per cent eventually to 100 per cent, and Indonesia’s Letter of Intent specified allowing foreign ownership of plantations and wholesale trade.
• Privatization of state enterprises and agencies and state economic activities.
• Reduction or elimination of state subsidies
That is exactly what Central Bank/ FinMin of Russia are doing now.
Since May 2014 Central Bank of Russia (CBR) has a “hands-off” policy on forex market, hence CBR play important role of market-maker on MICEX USDRUB turnover – historical average is 10% of turnover, sometimes could be up to 60%. It was NOT participating in the market and made NO interventions from May to October 2014 (source: CBR, MICEX,research). Basically, Ruble was de facto in a free float since May till October 2014. Exchange rate was in a free fall accordingly due to open capital account, reduced foreign direct investments, capital outflow and speculative attack on Ruble.
Last week currency market in Russia was in “St. Vitus’ dance mode”. Intraday USD-Rub rate was easily in 10% swing and bid-offer spreads were between 1,5-5 Kopecks (to illustrate magnitude of change – in normal times this spread is 0,25 Kopecks- up to 20 times !!! ) spreads for retail bank client between offered rate and bid rate were 3 rubles !!! – unheard of since 1998 default. What is really going on with the Central Bank? Overall I had pretty good idea on theoretical side- what teaching Central bankers are using, since one of my tutors – professor of macroeconomics is lecturing central bankers on same absurd staff he taught us. When I was asking him “out of the box” questions or pointed fact of life that contradicts those theories he refused to answer or provide reasoning. It is a sect-like teaching,disconnected with real world, treating any doubt as blasphemy and considering alternative schools as heresy. This professor of macroeconomics now works at High School of Economics (HSE) in Moscow where Central Bank Governor’s husband is Rector. It was not good enough. Last few days I spent talking to my friends in the banking to gain insight into the real-life story.
Central Bank’s two ladies, who are in charge now, never worked at any commercial bank or real economy- they are theorists (perfected in absurd American “Economics” -like theories) and since appointment to the main Bank were getting advice from people from HSE and internal Central bank analytics.They tried all classical prescriptions (IMF-orthodox, of course) to keep currency in check at the time of high capital outflow. They raised interest rates twice. They provided Dollar (sic!) liquidity (expensive) to the market, etc,etc. None of their advices from the book-shelf were helpful. These tricks simply did not work in the real world, especially in extraordinary situation. Then those geniuses has to turn (sic!) to commercial banking professionals: real-world experts and are getting advises from them.
However, in regulating the market the most important thing is confidence. Regulator has to be committed to the things he (she) is doing, his line has to be known to the market participants and market should learn in a hard way that this line will be enforced by “whatever it takes”. It can begin with verbal intervention and then followed by using the set of instruments from usual market arsenal to administrative measures, even to restrictions of capital movement. Funny enough its there ready available. Like Central Bank Normative of obligatory sale of export revenue by exporters which was set to zero since 01.01. 2007.
Some of the experts are saying, that it looks like situation on the market is “beyond the repair”. At list with those two charming ladies in charge. Nobody trust them. Market doesn’t understand their policy , strategy nor tactics. Its total chaos.
May be weakness of local currency is good for economy, one could ask?
Currency depreciation has some sever negative effects.
First, an increase costs of external debt servicing for both banks and corporations, which borrowed in foreign currency (mostly USD), but making revenue in local currency (RUB). Total external debt of banks and corporations is higher than CBR currency reserves now (over $600 Bln. vs. $400Bln. However, intra-group loans and FX liquidity reserves not accounted in CBR statistics makes this picture not so gloomy. This is where so-called “offshorization” plays its positive role- some Russian group of companies maintain their head offices or branches or financial companies in tax havens or in Switzerland or UK or elsewhere, making them profit centers for the Group and building currency reserves overseas, then lending money to their Russian industrial divisions. In fact, nobody know how much of the foreign debt is due to genuine foreign creditors and how much for Russian business itself.) Second, permanent unpredictable and volatile change of currency rates are destabilizing for merchants and enterprises who are unable to do business in a predictable way as price for imported goods are changing. Third, persistent decline of currency contributed to sharp fall in value of shares on a stock market (MICEX) and lead to outflow of foreign portfolio funds from stock market. One positive effect was for exporters , who obtained higher revenue.
Another concern of even larger capital outflow, as a confidence of foreign and domestic business in economy.
Due to serious adverse effects of currency depreciation issue of stabilizing Ruble should be MAJOR concern of monetary and financial authorities.
Those negative effects “financial” in nature, not originating in economy itself.
First of all, let me explain how the speculation against a currency works.
Its pretty simple. Speculator sell Ruble “short” and buy US Dollar or Euro. There at least two ways of short-selling: a) sell it on a forward market at the current rate in view to deliver Ruble at future date; b) speculator borrow Ruble in order to sell it on spot market and keep the Dollar. Spot market for USDRUB exist on MICEX (exchange) which is transparent online or interbank market (also transparent via banks daily FX reporting) for CBR, while forward market is not and business conducted between banks and their clients or between the bank (onshore or offshore). Obviously, Bank in London can sell on offshore forward market Ruble and buy Dollar for future delivery and utilize only 5-10% of capital for such trade, i.e. deal with notional $100 mln. purchase would require $5 mln. Dollars of their capital allocation (don’t mixed with outright payment). Weaker local currency is – better-off “short” -seller became, market value (mark-to-market) of their trade is increasing when RUB depreciating. This is self-fueling forest fire.
When the ruble depreciated, the speculators could reap the profit. In case a), the speculator delivers the agreed ruble amount at the previous rate and obtains the agreed Dollar amount, which in turn can now be exchanged for greater amounts of ruble (since the ruble has since depreciated). In case b), when the time comes for the speculator to repay his ruble denominated loan at the previous exchange rate, he needs to use only a part of the Dollars he has accumulated (as the ruble has now depreciated) and the balance of the Dollars is his profit. Speculation on the ruble is carried out not only in the local markets but also abroad (mostly in London).
Now, we came to a question:
Is there a plausible alternative to orthodox IMF-style policy in financial-economic crisis management?
Answer: Yes, indeed. There is an alternative, successful one. We can turn to the success story: Malaysian experience in financial-economic crisis management and make case study in a next Chapter.
Malaysian Alternative Strategy
During the crisis in 1998 as financial and economic situation deteriorated
Malaysian government decided to adopt a different strategy then IMF advised. Development of this strategy is usually attributed to The Prime Minister of Malaysia at that time, Dr. Mahathir Mohamad (by the way he is a doctor, not of nonsense “Economics”, but doctor of medicine).
This new strategy was not adopted all at once, but stage by stage and part by part as developments unfolded.
Firstly, on the institutional side, a National Economic Action Council (NEAC) was formed in January 1998 to take overall charge of economic crisis management. Previously the Finance Ministry took the lead in managing the crisis, and now the decision-making centre shifted to the Prime Minister’s Department which hosted the NEAC. The Council was chaired by the Prime Minister and comprised several Federal Ministers, the Chief Ministers of the state governments, several government agencies, and representatives of industry. It had an executive committee led by the Prime Minister and included the Deputy Prime Minister, Finance Minister, Executive Director of the NEAC Secretariat and some key economics-related officials (including the Central Bank Governor, the Director General of the Economic Planning Unit and the Secretary General of the Treasury) and a few individuals. A new NEAC Secretariat was established in the Prime Minister’s Department, with an Executive Director and full-time staff drawn initially from the Economic Planning Unit (the country’s main planning agency), and it was also serviced by a Working Group of five individuals drawn from business and academia.
The establishment of this high-powered Council with almost over-riding authority to deal with the economic crisis on an emergency basis, was a central and structural aspect of the Malaysian model of crisis management. Eventually it was the NEAC that drew up an alternative medium-term strategy to deal with the crisis. But it also intensely monitored all aspects of the economy and made decisions on a day-to-day basis. The NEAC executive committee chaired by the Prime Minister met every day for several hours to receive feedback on the implementation and effects of policy decisions and to make decisions on new measures. The NEAC was also able to cut through the usual territorial compartmentalisation of the various Ministries and agencies, and take decisions in a coordinated way.
A National Economic Recovery Plan was then formulated and launched on 23 July 1998. Its objectives were to stabilize the currency, restore market confidence, maintain financial market stability, strengthen economic fundamentals, continue the equity and socio-economic agenda, and revitalize affected sectors.
On 1 September 1998, measures were announced by the then Prime Minister Dr Mahathir Mohamad relating to the currency and to mobility of capital flows. They were aimed at stabilizing the level of the local currency (through fixing of the exchange rate to the US Dollar); preventing overseas speculation on the value of the local currency and local shares (by banning the overseas trade in these); and reducing capital outflows (through selective capital controls). This set of measures was a watershed as until then it had been almost taboo for economists let alone governments to even discuss capital controls. By coincidence, a week earlier the American economist Paul Krugman had broken the intellectual taboo by advocating that Asian countries should adopt exchange controls, in an article in Fortune magazine.
The Malaysian move involved measures to regulate the international trade in its local currency and regulate movements of foreign exchange, aimed at reducing the country’s exposure to financial speculators and the growing global financial turmoil. The policy package included officially fixing the Ringgit to the US Dollar, deinternationalising the trade in the Ringgit, a one-year moratorium on the outward transfer of foreign-owned funds invested in the local stock market, and strict limitations on the transfer of funds abroad by local residents.
The rationale for the move was explained by Dr Mahathir in a television interview on the day the measures were announced. Asked whether the exchange control measures were regressive, he said they were not so, but instead it was the present situation, where currency instability and manipulation was prevalent, which was regressive. He said that when the world moved away from the Bretton Woods fixed‑exchange system, it thought the floating rate system was a better way to evaluate currencies. “But the market is now abused by currency traders who regard currencies as commodities which they trade in. They buy and sell currencies according to their own system and make profits from it but they cause poverty and damage to whole nations. That is very regressive and the world is not moving ahead but backwards.” He added the Malaysian measures were a last resort. “We had asked the international agencies to regulate currency trading but they did not care, so we ourselves have to regulate our own currency. If the international community agrees to regulate currency trading and limit the range of currency fluctuations and enables countries to grow again, then we can return to the floating exchange rate system. But now we can see the damage this system has done throughout the world. It has destroyed the hard work of countries to cater to the interests of speculators as if their interests are so important that millions of people must suffer. This is regressive.”
Dr. Mahathir added the Malaysian measures were aimed at putting a spanner in the works of speculators, and taking speculators out of currency trade. He said: “The period of highest economic growth was during the Bretton Woods fixed exchange system. But the free market system that followed the Bretton Woods system has failed because of abuses. There are signs that people are now losing faith in this free market system, but some countries benefit from the abuses, their people make more money, so they don’t see why the abuses should be curbed.”
The elements of the Malaysian strategy included:
* Selective Capital Controls
It should also be noted that the ruling, in existence before the outbreak of the crisis, prohibiting local companies from obtaining foreign-currency-denominated loans from abroad unless these were for activities that earned foreign exchange, remained in force.
The capital controls were selective in that they covered movements of funds in the capital account. In the case of foreigners, they covered mainly some aspects of portfolio investment. In general, the Ringgit was still to be freely (or at least easily) convertible to foreign currencies for trade (export receipts and import payments), inward foreign direct investment (FDI), and repatriation of FDI-related capital and dividends by non-residents. In the case of local residents, the capital controls covered a wider range of activities, and in fact the aim of preventing the flight of local-owned capital was to be just as important (if not more) than the controls imposed on foreign-owned funds. However, there was no control on currency convertibility by local residents for purposes of trade. Convertibility up to a certain limit was also allowed for certain other purposes, such as the financing of children’s education abroad. But convertibility for autonomous capital movements for several purposes not directly related to trade was to be prohibited or limited.
* Stabilizing the Currency and fixing the exchange rate.
Stabilizing the exchange rate became about the most important objective. The NEAC studied the experiences of many countries. It was decided to adopt a fixed exchange rate system, i.e., fixing the Ringgit to the US Dollar. This would NOT be done through a Currency Board system (as adopted by some other countries) because in this system the country’s money supply would be linked to the level of the country’s foreign reserves. In the Malaysian system, this linkage is not made. The exchange rate chosen was RM3.80 to US$1, which was about the rate at the time the then Prime Minister announced the adoption of a fixed exchange rate system in September 1998. The Central Bank uses this rate to exchange Dollars with Ringgit in its dealings with the commercial banks and other authorized financial institutions, and they in turn are required to use this rate in their currency dealings with the public. The Ringgit-Dollar rate has remained the same ever since. The government has announced several times its intention to stick to the same rate for as long as possible (i.e., if this does not cause the Ringgit to be too over-valued or too under-valued, especially in relation to concerns for export competitiveness) so that there will be a high degree of predictability. Up to now, there has not been any “black market” or parallel trade with a different rate. The predictions especially by international analysts (voiced when the Malaysian system was introduced) that a fixed exchange rate system would result in misalignment and a black market have not been borne out, at least till now.
The fixing of the exchange rate has been important for stabilizing the financial situation. Perhaps its most important role, however, is that it allows the government to take monetary and fiscal policies on the basis of their own merit without being constrained by fears of a fall in the value of the currency if the funds analysts do not approve of the measures. The exchange rate fixing also reduces the opportunity for speculation.
As stated by the then Prime Minister when introducing the measures in September 1998: “With the introduction of exchange controls, it would be possible to cut the link between interest rate and the exchange rate. We can reduce interest rates without speculators devaluing our currency. Our companies can revive.” He added the country would not be affected so much by external developments such as the crisis in Russia.” (Sic! – Malaysian PM said this in 1998. Now Russia is repeating same monetary policy mistakes in 2014 as in 1998. Why? Because, it was and it is a man-made crisis and people in the Government who were responsible for crisis and Government debt default then and still in charge now! )
Let me summarize the above mentioned measures in simple words :
If someone would like to have a comfortable temperature say between 20 and 22C in his home while winter is coming and its getting cold outside, what usually one does? One switch on heating system inside the house, once there is no inflow of warm air from outside and no sun light anymore penetrating through the windows and gently warming the rooms, while closing previously opened widows and insulating them from leaking valuable warm air. Winter is coming to Russia and no mantras will help to keep the place comfortable for its residents, but heating the house inside and insulating from the cold will.
Malaysia was able to manage the “climate control” very successfully since 1998. Can Russia navigate crisis now better then 1998? Who knows? Only time will tell us.
Diogenes a Russian technocrat with post-graduate education in economics and finance, with 20 years of experience of work in international and domestic banks and financial institutions.
REFERENCES:
Mahathir Mohamad, 2003. Globalisation and the New Realities. Pelanduk Publications, Kuala Lumpur.
Ministry of Finance Malaysia, 2001. Economic Report 2001/2002.
UNCTAD, 2000. Trade and Development Report 2000, and various other years. United Nations, Geneva.
Khor, Martin, 1998b. The Economic Crisis in East Asia: Causes, Effects, Lessons.
Economic Planning Unit, 1998. National Economic Recovery Plan: Agenda for Action. Prime Minister’s Department, Kuala Lumpur.
Kaplan, Than and Dani Rodrik, 2000. Did the Malaysian Capital Controls Work?
The demands of the US and NATO against Russia over Ukraine appear to be a modified version of the demands of the US and NATO against Yugoslavia and Milosevic over Kosovo in 1998-99. The US and NATO not only demand a change of Russia’s policies, they demand dictating what policies Russia can have … as a defeated nation. http://novorossia.su/ru/node/10688
It is too late,Putin is lost.They are sending the price of oil to a target of 50 usd now.
They will go down to 30 if necessary(like in 2008).
Well,let me be Devils advocate as they say.
Considering that USCompanies are swimming in debt what would happen if oil went bellow $30.everybodies wealth is based on debt.Well,Saudis service your debt at $30.what about Exonn.Shell.BP.
If I was in charge in Russia I would take oil down to almost free.Now I will let all you educated intelligent people stew on that for a bit.I bet you will get a brain freeze.lol.You want oil I give you oil.Choke on it.
I am really looking forward for comments from these experts or academics.Please,enlighten me,or your selfs in the process.
This is excellent,but the main problem is that Malaysia… is not Russia.
The West want war at any cost.They want regime change.They want to put a fith column puppet in charge and then control all ressources.Maybe destroy the country in 10 or 12 entities.Their final target is China.
Putin and RF are a ‘must’if they want to finish the job(China).
Their decision is taken,they will not change it even if they have to put the world in economic depression for a while.
Merkel is asking for more sanctions today(I just see a Swift exclusion remaining).
They only respect force because they act in the very same way.
RF made too many concessions,they know they are weak.
Why would they stop?
They are all flying to Turkey(Cameron,the EU etc)to threat Erdogan after the Turkish stream deal.
US House Votes 98% to Donate Weapons to Ukraine But US Public 67% Against, Is It Democracy?
http://www.4thmedia.org/2014/12/us-house-votes-98-to-donate-u-s-weapons-to-ukraine-u-s-public-67-against-is-it-democracy/
Hey there!
Look babe, let us start where civilised volk should:
Mike here. Greetings! Micha if Ya like.
Me and You are very similar anymals, with certain significant: thogh, methinx, reconcilable twists.
Born in Moscow in 65.Parents Hun/Rus.Male.Hetero.Grew up in Hungary.Effed up to Can/US in the eighties fuelled by the novelles of Kerouac and the beats…
LOVE-to this day the ‘idea’ of the US…hate it has become …yet…that is.
@ the time of 9/11, and WAAAY before, I was VERY active part of a flight simulation community, which, with the simultanious awareneness and the processing/data accumumulation powers multiplied by Moore’s law and some of our own processes, at out little forum have discussed the possibility of a 911 type attack, and others, on numerous occasions.
We were acctually evaluating different type of aircraft for the purpose…
…one the net.
…openly…
I got SOME of this back from google history recorded. If You care, I can provide You with them. Go drones…man…
Nevertheless…let us jump to the present problem of ours.
Let us assume we are brother Russians(me half Rus, Half Hungarian)…and You have brotherly interests in mind…
By spending almost half of my life(reminding you, the one most aware) in the States, I realise the major crash of racial lines except the “can’t we just get along” doode(Rodney King). I arrived fresh to Cali the day the his verdict was annnounced. Fuckin’ streets empty – me and police wondering why I am NOT hiding…:-)
I am sorry, bro, I cannot deny the inevitable signs of an earthquaqe spilling over that threshold. Look at recent events, shit is much on the edge.
Just Take away the foodstamps…
Now, of course here comes the ususal lines about the education levels, number of teeth to chew with the and the available smorgasbord of the racist innuando…yet…
I AM a Racist. I AM a Nationalist. I also like beer and pretty ladies in my presence, I do declare, that I DO want to live within my folk and prepare for their prosperity with all my might, which is what I foresee as foundation for my children, and the only future of this planet.
All that said:
Q:What makes me different from anyone living in Mombassah or Memphis, Taiwan or Tokyo…besides of having white skin?
A: I am a White Nationalist.
And that is the MOST bothersome perspective of this genocide, that We don’t even realise it is going on today in the ukraine 20 times a day…again again and again. Every fucking day. 20 times.
Saker, how many kids have You? Saker, can You count? Add and multilpy? And that is why I am upset with ya babe.
Saker, how many people do You think You can have this conversation with in a few years if trends continue? ….Ya gonna talk to a messicans? Niggers? ABout what ? an exctinct race of human beings of whome You are obliged to bend a kneee and ….nonononono, let US NOT PUT OURSELVES IN THAT SITUATION BY KILLING OUR BEST. We are only capable of it – that is why the jews do this.
Saker!
Trust me, v’been there!
Think about this man, You ‘re a gringo left out in the woods, what is it You gots do? Sell out? Come in? ok….made my point. You think it through…
Jacenuk—–jew
Peteoshenko—–jew
Should I go on????????
Man, You know. DO NOT SIDESTEP THIS ISSSUE!!!!
fuck!!!
Look.
Back in the day, the German folk desparately tried to get rid of the jews controlling the nature, culture, future and the finance of the German Nation. They managed some, not the most. Turns out they couldn’t avoid it to become a War of worlds.
Today, the situation is eearily similar, just most of the world is aware of and in stranglehold of Weimar(jewish) machinations.
One addendum is the profilerations of nukes…not good when you wrestle with the pigs in the mud…
Awesome article! I have a zero knowledge of economy (in every possible sense of it) yet, somehow, I read this whole piece from a to z. I so hope that somebody in Russia can actually sort all this mess out.
Strong, real economy that is based on things of real value is the only way forward.
Thank you!
Oil is a scarce resource and we are facing peak oil in near future, if not already at the plateau. The price will go up in long run..
Putin, Needs to do just one thing at this point. Change the Game.
Buhari of Nigeria did it before when and the same U.S sponsored his enemy to take him off the throne..
To change the GAME. Putin needs to start selling in Rubbles. Fuck all the stock sh*t.. Go back to trade by barter between his Allies and even EU countries. This is dictating to them how much he wants to sell oil.. Change the system. Or may even sell in exchange for Gold. This is the right time and the right card to play.
Off the gas supply for 2 weeks. They will start dancing to his drums..
For example.
This is pretty scary. France’s Hollande flew to Moscow to warn Putin of a USA false flag.
http://www.4thmedia.org/2014/12/terrified-france-warns-russia-of-obama-terror-spectacular/
The French intelligence services are generally pretty capable.
Putin needs to do just one thing at this point. Change the Game.
Buhari of Nigeria did it before and the same U.S sponsored his enemy(Babagida) to take him off the throne..
To change the GAME. Putin needs to start selling in Rubbles. Fuck all the stock sh*t.. Go back to trade by barter between his Allies and even EU countries. This is dictating to them how much he wants to sell oil.. Change the system. Or may even sell in exchange for Gold. This is the right time and the right card to play.
Off the gas supply for 2 weeks. They will start dancing to his drum/music.(It is winter)
Saker, I can’t believe how brilliant this sounds. Send it to Khazin and maybe he can show it to Putin.
I wonder if this is why Malaysian airlines was targeted. I certainly heard it was targeted…that it is actually an impeccable airlines.
Hi Saker, please don’t take this wrong…I’m just wondering why you let that weird comment through ? Poor Saker.
Does anyone have ever heard about the following case?
If there is world war(the big one),some city banksters say that a lot of the junk derivatives and debts must not be repaid anymore because this is a ‘cas de force majeure’ exception??Cds are involved.
I’m not a legal expert at all,but if it is true that would explain a lot of things happening now..
You are wrong. Ruble has to be fully convertible so that capital=savings could feel secure that it could get out to save its’ purchasing power.
In order for the exchange rate to stabilize there has to be a deflationary bias while simultaneously incentives for capital to enter and bid up the purchasing power within the country while bidding down interest rates. No banker understands this precisely because it implies that the velocity of money does not churn the interest rates for capital to accrue in the long-run, what happens is prices fall in both real and nominal terms and the cost of doing business becomes easier so transaction velocity goes up while value added goes through the roof. *Sigh* Why is it so hard to understand that you need maximized liquidity with no interventions except those by private participants that aren’t subsidized by the gov’t to skew the distribution of investment and create malinvestment.
Not all Western economists sell the Harvard or IMF nonsense. I think Diogenes would get along quite well with Joe Stiglitz, for example, who as former Chief Economist of the World Bank (1997-2000) did battle with the IMF during the Asian financial crisis of the late 1990’s, and prescribed something more akin to the Malaysian solution. See, for example, his narrative of that crisis in his book “Globalization and Its Discontents” (2002).
Unfortunately, as Chairman of the Council of Economic Advisors in the Clinton Administration, (1995-1997) he was marginalized by Robert Rubin, Larry Summers and Alan Greenspan . Had he (and later Brooksley Born) been listened to at the time, we might have avoided the financial meltdown years later in 2008.
Not all Western economists sell the Harvard or IMF nonsense. I think Diogenes would get along quite well with Joe Stiglitz, for example, who as former Chief Economist of the World Bank (1997-2000) did battle with the IMF during the Asian financial crisis of the late 1990’s, and prescribed something more akin to the Malaysian solution. See, for example, his narrative of that crisis in his book “Globalization and Its Discontents” (2002).
Unfortunately, as Chairman of the Council of Economic Advisors in the Clinton Administration, (1995-1997) he was marginalized by Robert Rubin, Larry Summers and Alan Greenspan . Had he (and later Brooksley Born) been listened to at the time, we might have avoided the financial meltdown years later in 2008.
Diogenes
Thank you for the education about the problem and the possible solution.
Very, very useful article.
Malware warning.
OT, but definitely related to the 5th element. I picked up a trojan here that redirected the page to one addressed at x.vindicosuite. How do I know I got it here? Because this was the only site I was looking at today before it appeared and it only redirected the Vineyard Saker site. I checked a few other google “blogger” sites, but they operated as normal, as did every place else I checked afterwards. Apparently the sod who managed to place it at Vineyard Saker specifically was targeting this site. Kaspersky called it this:
HEUR:Trojan.Win32.Generic
Which doesn’t say much. It is something brand new, apparently. The infection happened right after I last posted here, which was at 10 December, 2014 00:45.
вот так
Saker ! I hope you’re going to wtite something on this tomorrow or whenever…like to hear what you think about it.
A basic question on whether “Putin is betraying or betrayed Novorossiya” asked to Colonel Cassad’s readers produced the following result (over 3,800 respondents):
1. 39% believe that Putin has not betrayed Novorosssiya.
2. 28% believe that he did.
3. 33% are confused and at a loss for answer.
Verdict: Putin is on a slippery road, sliding into a zone of troubles.
In his speech made on December 4, Putin claimed that only recently Russia assisted Ukraine with some $33 billion, which or most of which Ukraine or its anti-Russian oligarchs would hardly ever return and even thank for. Today, Lavrov boasted of this great support as well–on top of the previous figure of some $200 billion which the Russian government passed unto Ukrainian oligarchs in the form of discounts, credits, etc.
This support for Ukrainian oligarchs, who are sworn enemies of Russia, who say that they are at war with Russia, who are a willing NATO proxy against Russia, who are working hard to Nazify and de-Russify Ukraine, is most likely the most counter-productive investment or waste of resources in recent history.
Instead of bragging about this “support” and “assistance,” a significant portion of the Russian government ought to resign or, better yet, be put on trial either for sheer incompetence or for sabotage.
I am not at all an economist, so forgive me for not understanding most of this long analytical article on the subject, but I did appreciate the last analogy of the way one stays comfortable in winter, and I think it is very appropriate.
I don’t really comprehend the Malaysia example, but have been thinking that one we shouldn’t forget is that of Iceland. As I understand it, when pressure was put upon that country to enter into such austerity measures as would really cause hardship to the population, the Icelandic government simply opted out of casino capitalism entirely.
They still did have hardships, but they were the kind that lowered expectations all the way around, with everyone sharing in the difficulties and pulling together.
It seems to me that a huge country such as Russia can do this as well, and maybe even better.
[from Blue]
A few quick points on the preamble.
1963 — 50 years ago. Comparing todays computers and computer science to then is like comparing a spaceship to Snoopy’s and the Red Barron’s biplanes.
Economic theory? Yes, still primitive, as Steve Keen says — and goes to show how to do it better, using his Minsky program, with some advanced math — and math now can indeed handle non-linear, chaotic system, and other advanced topics.
Top down planning? It doesn’t have to be that way. And, as Rick Wolff has pointed out, we DO have economic planning, but it’s by the oligarchs and wealthy CEOs, not the people — until it degenerates into the ‘invisible hand’ of the market and chaotic forces.
We can use modern economic theory and computers to inform our decisions, and avoid the disasters of lack of, or wrong-headed planning, assuming we can wrest control from the elite. In fact, a typical housewife who regularly plans out meals, budgets, and allocation of resources, could do better than what we have because she looks at the whole household and not just feeding herself at the expense of everyone else — and does not rely just on the academics who work for the universities paid for and dedicated to perpetuating the hegemony and control by the elite, despite the rest of the knowledge being developed and available there.
–Blue
Anonymous @10 December, 04:50
I got same maleware too. I ran Spybot Search and Destroy and it’s gone now.
I posted a comment on the article about the “prominent” Germans which I denounce as propaganda because of their comment on the “illegal” annexing of Crimea.
Right after that I got the malware vindicosuite.
Cheers
Christine
Not a bad idea at all to bring examples of other countries challenging IMF supremacy successfully. Using Malaysia however, is bound to be a double-edged sword!
Mahathir Mohamad bucked anglo-zionist economic hegemony via the presence of a religio-cultural background which stands firmly against usury, debt/interest finance. That tradition is what gave him the moral leverage to withstand pressure without losing public support.
Something that anyone else hoping to repeat his success needs well ponder! In the case of Russia, the Church might have the same potential to backstop a political effort to buck the imperialists, but it’s stand on the same issue of usury would first need be clarified.
Without a broad-based social consensus that underscores the moral authority of their resistance, the ever-present 5th column will exploit all weakness in the situation, so as to collapse people’s will to escape the hegemon’s clutches.
Secularists will be challenged to find common ground with their religious adversaries, in pursuit of a higher purpose – and bottom line loyalties will be revealed at last!
There’s always that same old troll whose funtion while breathing is to suck the reath from others:
Malaysian Prime Minister Mahathir Mohamad accused George Soros of ruining Malaysia’s economy with “massive currency speculation”. Soros claims to have been a buyer of the ringgit during its fall, having sold it short in 1997.
http://en.wikipedia.org/wiki/1997_Asian_financial_crisis
I seem to recall Malaysia being in the news lately, ……
@вот так
re: Malware warning…
Not a security “expert” but did a ‘lil sleuthing and it seems as if “x.vindicosuite” has something to do with the “sitemeter” script/gadget/addon. Hope that this info may be useful for @Saker or others for follow up to decipher a solution and/or remedy.
Here are a few cached results via g**gle:
https://webcache.googleusercontent.com/search?q=cache:THUDPUDuEfwJ:http://productforums.google.com/d/topic/blogger/2gUl_F6t2TY
https://webcache.googleusercontent.com/search?q=cache:wWH_2Bs4DLkJ:https://answers.yahoo.com/question/index?qid%3D20141209191312AAUIMzs
https://webcache.googleusercontent.com/search?q=cache:fDQZLx4wadMJ:http://www.gamefaqs.com/boards/916373-pc/70775094
https://webcache.googleusercontent.com/search?q=cache:3mbspYh5ayQJ:http://theincidentaleconomist.com/wordpress/little-tech-help-a-bleg/
https://webcache.googleusercontent.com/search?q=cache:-Mb7mKOriPwJ:http://mostlyexchange.blogspot.com/2014/06/goodbye-sitemeter.html
https://webcache.googleusercontent.com/search?q=cache:S1_Jfm6FlQsJ:https://www.virustotal.com/en/domain/x.vindicosuite.com/information/
https://webcache.googleusercontent.com/search?q=cache:nKtzsT0T-jwJ:http://forum.saxontheweb.net/showthread.php?220494-Ugh!!-Constantly-being-redirected-to-an-advert-site
Here is the WHOIS info:
https://webcache.googleusercontent.com/search?q=cache:y6j-qVoi5eoJ:http://www.whois.com/whois/vindicosuite.com
I now see that although I did get the malware vindicosuite right after I commented on the “prominent” Germans article, my comment never went thru….
Glad to see that other commenters also rejected that insiduous comment “illegal annexing of Crimea”
The text to prove you are not a robot is more challenging than usual for a 70 yr old with failing vision.
Cheers to all
Christine
@anon
Anonymous said…
This is pretty scary. France’s Hollande flew to Moscow to warn Putin of a USA false flag.
http://www.4thmedia.org/2014/12/terrified-france-warns-russia-of-obama-terror-spectacular/
So how would Hollande find out about this while he’s flying around, and PUTIN’s spy agencies not know about it? or Hollande assume they don’t?
and how does the site’s informant know, when they held their talk the TWO OF THEM in a spy-proof room?
can you say fear-mongering?
“Malaysian measures were aimed at putting a spanner in the works of speculators, and taking speculators out of currency trade”
Coincidence, possibly? But then again maybe there is something to those conspiracy theories for MH17 and MH317.
Revenge of the Money Bags?
Saker, thanks, but can we have a link to the original Russian version so it is easier to read? The translation into English is just plain painful.
Hmmm…
Eventually Russia must decide what it wants the Ruble to be worth. I’m guessing that this also has to happen in conjunction with deciding what it feels is the “right” price for oil and gas in this world.
And somewhere in there, these two values will also have to match the “right” value of gold – something that I don’t want to dig too deeply into in this particular comment, except to say that I accept the notion that gold and oil maintained a parity during the 20th century as a standard of value.
And I don’t think anything has changed with these two commodities, oil and gold, at the level of national economies and power balances, except for the gross rigging of markets that disguise the value of gold – and now as we see, oil also, for a while. Honestly by the way, I don’t see that the values of oil and gold and any currency can drift too far apart from each other without something having to snap back into balance.
I like this article, and its descriptions of the disadvantages of a floating national currency. I accept as completely true the author’s point that currencies must have long-term, stable parity with accepted measures of value for an economy to work well. I’d suggest that principle as a pretty rock-solid foundation moving forward.
So stabilizing the Ruble becomes necessary at some point. The question is, where and when? What are the costs of the disadvantages right now in letting the Ruble fall in sync with oil against the Dollar, compared with the costs of stabilizing the Ruble through Dollar purchases (or Dollar reserve expenditures) at ruinous rates of exchange?
Where does Russia want to end up? And what’s required internally in Russia for the necessary power to be secured in the hands of the right actors, in order to act successfully?
And what about China, sitting with all those Dollars? I’m on shaky ground with this one, but in a pinch could some of those Dollars be used to float the Ruble’s parity with the Dollar up a few notches, if outside help were necessary? In exchange for a gold swap, as between friendly nations? Ignore this paragraph if it doesn’t make sense, I’m just musing. But it IS worth asking, what does China want? I’m sure the two countries talk about this, often.
The point is that there is no one answer without all the other answers, all acting in concert or appropriate sequence, and over the optimum time period, be that months or years or decades.
There’s a whole set of things to be established and then acted upon, not the least of which is getting the power to act. And let’s not forget Russia’s military preparedness, which it would prefer another couple of years to perfect, and its desire to prevent a hot war with the crazies in the US. Surely all of these factors must be on the board together at the same time in terms of planning and action in all the different spheres of its global and national conduct.
I think Putin in his speech addressed capital repatriation and constraining currency speculation. That’s quite a chunk, something that can begin to be addressed without adopting capital and currency controls, which may not in the end be necessary. See what the next speech addresses.
I agree with the author that economics is largely voodoo, and often in the hands of people who have things exactly backwards. But the fundamentals of Russia are phenomenally strong. She has vast resources, an unbeatable people, enormous natural genius and creativity, and best of all, freedom.
We are all part of this voyage of discovery and deliberation that Russia is making. It’s exciting, rather than frightening, I think.
[from Blue]
I scanned my windows computer with malwarebytes and it found a nasty — recyler/s-1-5-21-1487359258-708484429-3616897
Had to restart to eliminate it said. Previously I was getting the vindico page instead of the blog page (no, I don’t want to buy a watch or whatever).
From “Account Settled”,book by Hjalmar Schacht 1949:
“. . . By the autumn of 1923 the unrestricted depreciation of the currency had reached such a pitch that it threatened to break up the whole structure of Germany’s national life. Wage-earners’ wives were in despair. Whenever they went out to buy food they were involved in a hopeless struggle against the depreciation of the mark. The wages of their menfolk ran through their fingers like water even when, as was finally the case, they were paid daily, In this extraordinarily difficult situation the authorities called upon me to put a stop to the depreciation of the mark and stabilize the currency. . . .”
Regarding financial speculation that was attacking the Reichsmark, here is one of Schact’s actions:
“… My second measure was directed against speculation in foreign exchange. On November 20th, 1923, the Reichsbank had let the exchange rate of the United States dollar climb to 4.2 billion marks with the firm intention of maintaining it at that level. However, private speculators continued to buy dollars at an even higher rate. The groups who indulged in this speculation did not believe that I would succeed in keeping the exchange rate at its official level, and so they merrily went on buying foreign exchange on a rising market, paying up to 12 billion dollars [sic; marks] ‘per Termin’, which meant that at the end of the month the dollars had to be paid for with legal tender, that is to say, with Reichsbank notes. When settlement day came round at the end of the month the dollar purchasers needed marks from the Reichsbank to meet their commitments, but the Reichsbank refused to give them Reichsbank notes and handed out Rentenbank notes instead. This Rentenbank had been established as an auxiliary institution to assist in the stabilization of the mark, and the notes it issued did not have the character of official bank-notes. In short, they were not normal legal tender. But naturally, the foreign groups who had sold the dollars demanded payment in money which was legal tender, and the German dollar purchasers were now unable to comply. Nothing remained for them but to sell their stores of foreign currency to the Reichsbank which now secured dollars, which had been bought speculatively for as much as 12 billion marks, at the official rate of 4.2 billion marks. Speculators lost many millions on this unprofitable transaction. Naturally, my unpopularity was greatly increased, but the well-being of the great mass of the German people meant more to me than the troubles of individual speculators. The dollar rate of exchange, officially fixed by the Reichsbank at 4.2 billion marks, had to be maintained at all costs. I was not prepared to allow private speculation to drive it up again. It was, in fact, held.” …
My understanding of Schacht is that each situation must be diagnosed anew and with skilled observation based on long experience, then artfully corrected that the general population should benefit, and not be victim of financial cleverness.
I read “Account Settled” in English translation. Highly recommended as the author Schacht writes as first-hand witness and key participant in stopping the
financial abuse of that period. He imparts economic know-how based on demonstrated competence.
From Rick on his 78th trip around the sun.
“The only function of economic forecasting is to make astrology look respectable.” – John Kenneth Galbraith
Anonymous at 3.33
Anonymous said…
This is pretty scary. France’s Hollande flew to Moscow to warn Putin of a USA false flag.
I wouldn’t trust that author, at all:She/He is known for much disinfo;
Sorcha Faal, otherwise known as David Booth of the CIA.
I have to disagree with some of the conclusions although the author does defend his assertions about economic policy with some impressive qualifications and a measure of experience.
My contention is that what he describes is keynsian economic philosophy which has been demonstrated from the end of ww2 with bretton woods, imf, currency reformation and international conversion by 1958 in europe, the closure of the london gold pool in 1968 and finally the release of the usd from its gold value to become the petro dollar in 1971 and so on.
The end result has been the creation of the EU as we understand it in its current form. That form now appears to be crumbling with much dissatisfaction throughout europe itself, notwithstanding the grandstanding by david cameron in uk.
Economic reform in russia observers similar pattern however the state still maintains the right to intervene which is not keynsian protocol. Keynsian philosophy is not democratic; is not a doctrine of liberation.
In fact there is not true market economy in Europe. To enable entry in the EU there are tariffs and hurdles to navigate and the internal market is strictly regulated with common policies in agriculture 2009, 2014 for example , and common defense policies not including NATO alignment.
Europe is not a democratic institution and very socialist in operation.
We can conclude there are no sovereign nations within the European union, but is an example of another expansionist state seeking domination of its territory and feigning interest in the welfare of its neighbors through obfuscated disguised subversion through the European Neighbourhood Policy 2005, Eastern Partnership Programme 2009.
Diogenes makes the same points WRT currency trading that I made in my Essay…….. Namely, that the currency markets are dominated by speculation.
I lived in Malaysia for a year. Their currency controls extended to prohibiting non residents opening bank accounts, which made my repairs to Pegasus difficult.
I proposed another avenue to controlling speculation in the Rouble, namely issuance of electronic roubles as serialized encrypted notes of specified denomination, recorded on the RCB database in Moscow. I don’t believe that Rouble float is excessive. I believe Rouble demand is artifically kept too low, and demanding payment for Russia’s energy exports in Roubles and only Roubles would go a long way toward increasing demand for the currency. I also believe that pricing for energy products to NATO countries should be increased sharply to 50 Roubles/ cu meter. They want to sanction Russia, let them pay!
INDY
In the 2008 financial meltdown, the Australian Government did some of the usual bailing out banks etc, but they also gave bonuses to pensioners and other welfare recipients in December, the in mid-2009 they gave one-off bonuses to low-income earners.
The 2008 money was $1400, and a later survey showed 85% of it was spent, only 15% invested. Some of the spending was on bills (medical, credit cards, utilities) but 55% was spend on buying things. As the sum was equal to about two months’ pension, it was an amount few would ever be able to save for larger purchases.
Pensioners don’t go on overseas holidays. The money was all spent locally – for instance a good refrigerator in those days was around $600, a couple’s combined bonus was nearly the full price of a good condition small used car.
This injected $8 billion into the economy at the lowest level, and surely kept some businesses from going broke….so many didn’t lose their jobs. We got out of that recession very lightly.
Of course Keynes would say growth comes from saving, not from spending, but I never understood that… if nobody is spending, who the hell are you producing for? This antipathy to spending seems like just an excuse to pay people less as “they’d only just spend it anyway which is bad for the economy”.
Malaysia’s problems are not just from preventing a recession
http://en.wikipedia.org/wiki/Kuala_Lumpur_War_Crimes_Commission
Taken alone, I’d say MH17 was picked out of the available overflights because it had a lot of Europeans (so they’d get angry, if the Russia option was believed), and belongs to a distant country unable to take revenge (in case the Kiev option showed up early). MH370 had shown them to be bumbling and incompetent in response.
But the target to be damaged was Russia; a Malaysian plane being best for other considerations would have just been a bonus.
” strong believe in a science, as modern substitute of God. Practically speaking, it has a meaning that modern people using computers can plan and calculate everything and make life better for everybody”
I realise that English is not your first language.
One of the consequences of “specialist education” is an increasing probability of obfuscation of other branches of knowledge.
Some amelioration of this is sometimes achieved by the use of inter-disciplinary teams as per your example.
Knowledge is social and barriers to this interaction through social constraints such as “intellectual property”, ego, in-bedded beliefs, self-interest etc. tend to re-enforce linear practices.
You talk of a science – presumably meaning a branch of science – as a belief system rather than a lateral interaction with data wherein doubt is always seen as a catalyst. Your representation does reflect the practice of some “scientists” but not all.
Much of cybernetics is based on Boolean logic and as you say posits a linear environment in a lateral world.
Your example of GOSPLAN and cybernetics is well chosen since I remember a conversation I had at GOSPLAN in 1993 where one of the authors of “Optimal functioning system for a Socialist economy” tried to defend his theses and posit the failure of the Soviet economy on GOSPLAN’s lack of computing power, rather than on the design and reliance on linear models of lateral environments.
In addition reliance on linear models precludes perception of interactive lateral change, although attempts to ameliorate these lacunae included uses of arrays and crested iterations still based on Boolean logic, effectively increasing the initial blindness.
In another context NSA and associates are trying to ameliorate this by reliance on “big data” apparently forgetting the GIGO acronym like the STASI.
Amongst the missing lateral factors were probably the greatest facilitators of lateral change – people, their expectations, there hopes, their perceptions and their purposes.
It would appear that your essay also misses some lateral factors including purpose, and nuance as a component of perception.
Your representation of Mr. Andropov and the level/nature of his wedding to notions of convergence, and the possible over-emphasis on the aversion to pain and ensuing consequences perhaps reflect this.
The world is laterally inter-dynamic and your essay an interesting potential catalyst to the mix as were black swans, the perception of which significantly pre-dated the published work of Dr. Taleb.
Since knowledge is social the practice of attribution may not only be hubris but also linear.
Not so ambitious as the cake lady.
The Democracy Award (did you even know such a thing existed?):
From Protest to Politics: Honoring Ukraine’s New Democrats.
The National Democratic Institute (NDI) held its annual Democracy Award Dinner on Tuesday, Dec. 9. The theme of this year’s dinner is “From Protest to Politics: Honoring Ukraine’s New Democrats.” Three young Ukrainian activists — Hanna Hopko, Serhiy Leshchenko and Oleksandr Solontay — will receive the Democracy Award at the dinner.
Each of the honorees had achieved prominence in their respective fields before the political situation in Ukraine prompted them to take part in the demonstrations that led to the fall of the country’s autocratic government earlier this year. They have now transitioned to the political arena. Two of them — Hopko and Leshchenko — were elected to parliament on political party lists on Oct. 26.
http://www.slideshare.net/NDIdemocracy/slide-show-democracy-award-2014-pst-and-jjf-edits-12082014/1
Dear The Saker,
Medvedev has done his tv interview. He is laying full blame on oil price and sanctions and seems to say speculators could be involved and seems to brush this off somewhat in my opinion:
http://itar-tass.com/en/russia/766087
http://itar-tass.com/en/economy/766113
Funnily enough he seems to think Russia should look to what the US are doing to resist current crisis:
http://itar-tass.com/en/economy/766135
Rgds,
Veritas
An ‘Alternative Strategy for Russia’ has been underway for a long time already.
The West has all the information with regards Russia’s moves aligned with China and the BRIC’s to buy gold at the its current deflated price and must realise that the writing is on the wall regarding the US $’s hegemony. Anyone who thinks that Russia is at the mercy of the western capitalists is totally misinformed. It is Russia and China who now have control of the strategic strings and they do not want to be called puppet masters. Maybe egalitarianism rather than individualism?
In his recent speech to the Russian nation Putin gave the atlanticist oligarchs and politicians a once only option to retain the value of their mainly ill got ton fortunes by repatriating it to the Russian economy; if they refuse their fortunes will go down the western drain.
The following two articles clearly set out how Russia is containing the West and remember at the end of the day Russian still wants to cooperate with the west in a multi polar world.
http://www.informationclearinghouse.info/article38112.htm
http://www.marketoracle.co.uk/Article46822.html
With respect to Diogenes, prescribing the Malaysian solution to Russia would be a terrible mistake.
Russia has capital controls already. It is far from clear how much more explicit the controls need to be in order to work, if in fact they can work. Malaysia is also structurally very different than Russia in that it doesn’t have anywhere near the level of international trade – in both directions – that Russia participates in. There’s also the offshoring aspect: Russian companies have long since had massive offshore cash holdings and are expert at moving money in and out mixed in with said trade.
The problem isn’t just structural then, but also tactical.
congratulations to all for attracting such articles to this stie. I hope for many more.
When a country is in a state of war many things are not only possible, but are accepted as necessary.
The fiction of a democracy quickly disappears,everything is openly controlled,’In the national interest’,stock markets are shut down,currency and capital controls are implemented and rationing is introduced.
All Russians need to understand they are at war..like it or not!, you cannot be on good terms with tyrants.
The entire financial system has been engineered to extract value from the bottom,sending wealth to the top of the pyramid.
The US uses proxies like George Soros aka György Schwartz,to attack enemies and ‘friends’alike
bringing them to heel.
He also does colour revolutions as we know…so do the SVR and FSB.
Twice this year Russia closed it’s stock market,these markets are really just a casino and are the means to destroy companies.
I feel sure that when the people have been woken up sufficiently VVP and friends will nationalize the Central Bank,quit the IMF and issue it’s own currency,debt free.
Debt free currency issued by the State is absolutely essential,the US/UK model deficit spends so the grandchildren pay the interest making them no better than serfs(!)
cheers
anonymous said ” they demand dictating what policies Russia can have … as a defeated nation. http://novorossia.su/ru/node/10688It is too late,Putin is lost”
exactly
putin should have acted within two weeks of crisis-he slept over it,
then he was stupid and treacherous enough to stop novorussia through bogus mink agreement instead of letting novorussia army press the advantage.
now Russia is in mess due to putin and all traitors.
this coming from someone who always loves Russia.
The article makes sense: Malaysia had a good strategy to counter a currency speculation attack.
But fixing a currency will only work when you have a sound trade balance. If you have a trade deficit you will slowly run out of foreign currency reserves and that point you will face a meltdown.
Malaysia had a sound trade balance but Russia is facing a rapidly sinking oil price. There is little it can do about that (Russia is increasing oil exports now but that is also driving prices down further).
As far as I can see Russia didn’t make elaborate forecasts on how it should react when the oil price tanked. Instead it lived in the vain assumption that that would never happen. Now they need to improvise.
Who and what in Russia really needs dollars? Financial institutions for repaying debts, importers of a luxury goods, tourists, maybe importers of a vital high-tech (West is still searching for such Achille heel, probably doesn’t exist), organised crime, NGOs. The others are simply lazy to find alternative contract in a non-dollar country. You know how quickly and easy Russia replaced “indispensable” EU+USA food… Russia is losing billions not owing to sanctions but owing to real EU insolvency and lack of competitive products. It looks like new kind of Putin’s judo – energy of sanctions works against most pro-Western segments of Russia economy and also makes them visible.
Joat said…@
10 December, 2014 13:14
A case of New York is so good they also named it twice?
Pastrami on rye with a little coleslaw on the side.
Miroslav said…@ 10 December, 2014 15:18
Well named but perhaps wearing the wrong brille.
” losing billions”
You cant lose something you never had, but try convincing the opponents.
They thought they “lost” Vietnam.
Kasha
As an economist, I have to say that I agree with the main ideas of the article.
Russia is trapped, but
1) America and EU are totally bankrupt years ago. They need urgently a war to solve all their problems and to waste all the millions of their unemployed youth.
2) I dont know how they will attack Russia, but they will attack. Maybe Poland and Lithuania, Estonia, Ukraine will be the puppets of war against Russia.
3) I dont think that Americans will win this war. I dont really think that they want to win. They really want to destroy Russia. And send Russia to stone age. They will bomb and bomb and bomb till they destroy all russian infrastructure and poison the water, and the soil.
4) Russia should avoid this conflict.
Russia has to stop basing its economy in oil and gas. The government should finance the agricultural factor, the new technology and the automotive industry. It is the only way for Russia to go forward and not to become Saudi Arabia. Oil nations have huge problems due to huge oil reserves. Oil sometimes creates more problems than it solves for a nation. Russia has the scientific base to go forward. It is not Saudi Arabia, Nigeria, Iraq and Bahrain..
Make things usefull for the people. Food, Cars, Motorcycles, Tools, Engines, Electronics.
Fuck the EU. It is a big museum. They are going to die.. Euro is dying. Go for the Asian Markets, go for Latin America..
In the meantime. EVERY RUSSIAN MAN/WOMAN SHOULD HAVE TO SERVE IN THE ARMED FORCES. EVERY RUSSIAN HOUSE SHOULD HAVE AN AK47. I mean really an AK47 7.62mm because the newer Kalashnikov which is 5.45mm is not a real gun, it is bullshit like the american M4/M16.
Russia should follow the Swiss strategy in defense. Every Swiss house is a battle position. Every Swiss Man has a Rifle in his house.
The West will come against you. The power of the patriotic heart of the people, who say MOTHER RUSSIA.. and cries, and who believes in Orthodoxy and the russian tradition is more dangerous than the power of all the rockets with nuclear heads of the US.
A Greek who sees his country in ruins by these Zombies of Wall Street and their EU Puppets. Russia is now the next.. China will follow..
Whatever it takes to break free of the Central Bank/IMF stranglehold on the control of the ruble.
Malcolm David 10 December, 2014 12:14 wrote: “In his recent speech to the Russian nation Putin gave the atlanticist oligarchs and politicians a once only option to retain the value of their mainly ill got ton fortunes by repatriating it to the Russian economy; if they refuse their fortunes will go down the western drain”
One can speculate that there could be a round of RF assets being seized in the West while Western assets are seized and nationalized in the RF sphere. Perhaps this is what Hollande and Merkel fear the most.
Great article.
Regarding computer modeling and economics, it’s a must see to watch Adam Curtis’ documentary All Watched Over by Machines of Loving Grace.
@Anonymous professor 10 December, 2014 12:05
“I realise that English is not your first language.
One of the consequences of “specialist education” is an increasing probability of obfuscation of other branches of knowledge.
Much of cybernetics is based on Boolean logic and as you say posits a linear environment in a lateral world.
Knowledge is social and barriers to this interaction through social constraints such as “intellectual property”, ego, in-bedded beliefs, self-interest etc. tend to re-enforce linear practices.”
Exactly! Since they put me in this asylum, your voice is the first I understand perfectly. You have no idea how I suffer here. The guards are typical Boolean thugs with no understanding of bilateral relations and the doctor, who says I am bipolar, gives me a unipolar treatment, with no clues to the beauties of my non-linear mind. As for multipolarity, that is hard to achieve when you are surrounded by idiots, wouldn’t you agree? The other day one inmate, a frenchman asked for fish and chips for lunch, can you imagine? The guards took him away, of course. I have yet to tell you the worst. Heinz from Hamburg said “Kann Ich ein Beefsteak bekommen, bitte?” Crazy, isn’t it? The doctor, a female, gave him a shot. I have studied her and learned how to avoid the straightjacket. I have stopped calling her Mrs Dora. Dear anonymous professor, you may be the only one who understands what I am saying.
For everybody else:
Never try to eat software and computer chips and never ask to become an englishman. Never call a woman dora, if she understands russian.
“printing-press based Ruble emission, reduction in the volume of money inside Russia”
uh… what?
Also, your knowledge of ЦЭМИ РАН is laughable, considering there were the first to argue for a free market in the USSR, instead of a planned economy.
First order cybernetics is boolean, second order cybernetics and second order economics where contextualization is the case is a completely different issue. The former is hierarchical, like matryoshkas, iterated boolean acting at each level and interlevel. The latter where the controllers are part of the system under control, is alike a klein bottle surface, has no inside nor outside. Then the logic is non boolean, in every level and interlevel. There is where cycles like Kondratiev operate. So my huntch, being unable to read Glazyev, is that he may be conceiving things in those terms. If you want to beat Soros, at least one has to learn his theory of reflexivity, which he uses quite effectively, then look for the integration at each boundary in which the system returns to itself. Of course, Putin who learned dialectics, has a working practice and knowledge of this in a reduced form
Good article, which answered a question I asked before about the feasibility of a system that reduces the use of usury in a country’s finance.
May I add that this Malaysian Financial System is based on the Quran.
Trade is lawful, usury, and its sidekick speculation is not. according to the Quran directives.
A corollary, you cannot sell what you do not own, the speculators thrive on that one.
great points altogether, you simply won a new reader. What might you suggest about your put up that you just made a few days in the past? Any certain?
http://www.Iy1thO1bxL.com/Iy1thO1bxL