Dear friends,
Today is my my privilege to submit to you the full text of the recent article by Sergei Glaziev “Stupidity Is Worse Then Theft” originally published on the World Crisis website:
http://worldcrisis.ru/crisis/1716266. I want to thank all those who participated in this difficult and long translation: Alice, S, Gideon, Marina (translation) and D.M. Pennington, Michael, Peter, Heather, Bernie, Patricia, Tom, Kristin (editing). This is a crucial text which is made available to the English-speaking world only thanks to the fantastic job of these volunteers. Thank you guys!
Also, a reader of the French Saker Blog named “DePassage” (merci!) has called our community’s attention to a most interesting analysis made by Jon Hellevig the Awara Group entitled “Putin 2000 – 2014, Midterm Interim Results: Diversfication, Modernization and the Role of the State in Russia’s economy” which you can find on this page http://www.awarablogs.com/putin-midterm-interim-results/ and which I strongly urge you to read. It might give you a better sense of where the Russian economy is, along with a few surprises.
Clearly, until the combat operations resume (which the most probably will), the “economic front” is the most important one in the war against Russia and I will try to continue to bring to you alternative top-quality information and analyses to try to debunk the imperial media’s narrative.
Cheers and kind regards,
The Saker
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Sergei Glaziev: stupidity is worse than theft
Translation: Alice, S, Gideon, Marina
Editing: D.M. Pennington, Michael, Peter, Heather, Bernie, Patricia, Tom, Kristin
STUPIDITY IS WORSE THAN THEFT
http://worldcrisis.ru/crisis/1716266
Why did the Central Bank raise the interest rate and let the ruble flow? Author: Sergei Glazyev, academic RAS (Russian Academy of Sciences)
Another increase in key interest rates on loans issued by the Bank of Russia, for the purpose of refinancing commercial banks, made loans completely inaccessible for the majority of enterprises of the real sector of the economy. When the average profitability of the manufacturing industry is 7.5-8%, credit issued at rates of 10% or higher cannot be used by most businesses, either for investment or for replenishing working capital. Such decisions cut off the real economy, with the exception of some sectors of the oil, gas, and chemical-metallurgical sector, from credit issued by the State.
Prior to that, the consumer lending boom drove millions of citizens into a 10-trillion ruble debt and the real economy lost the savings of the population, becoming a net debtor. Also, the Government withdrew pension savings from the economy. Sanctions imposed by NATO countries deprive the economy of the bulk of external credit. Most businesses have only their own funds to finance working capital and investments, which is clearly not enough to provide even simple reproduction, never mind an expanded one. The amount of profit of enterprises this year (taking into account the fall in the prices of export goods) will be no more than 10% of the required rate of investment of 25-30% of GDP. It’s no surprise that as a result of such decisions amidst the economic recovery in almost all countries of the world this year, Russia is experiencing an unexpected decline in investment and production.
According to the Central Bank’s report, On the key rate of the Bank of Russia, October 31, 2014, its decision to raise interest rates was made because of external circumstances: “In September-October the external environment has changed significantly: oil prices dropped significantly while there has been a tightening of sanctions imposed by individual countries to a number of large Russian companies. The ruble has been weakening in this environment, which, against the backdrop of August’s restrictions on import of certain food products, led to a further acceleration of growth of consumer prices”. To support its previous decision to raise interest rates, the Central Bank argued that “inflationary risks had increased, including rising geopolitical tensions and their possible impact on the dynamics of the course of the national currency, as well as changes in the tax and tariff policy.” In the same policy statement, the Central Bank explained its decision to raise interest rates by “a stronger than expected effect of exchange rate dynamics on consumer prices, rising inflation expectations, as well as the unfavorable trends in the market for certain goods.”
This reasoning does not stand up to criticism.
Any entrepreneur dealing with the real economy and not with the utopian models of market equilibrium will say that the increase in the interest rate leads to a rise in the cost of credit. This leads to increased costs for the borrowing enterprises and, consequently, to higher prices for their products. Increasing percentage in excess of the rate of return on assets does not make sense for financing investments, nor does excess of profitability of manufactured products make sense for working capital. It results in reduced production, which in return causes an increase in cost per unit of production and a further increase in its prices. The inability to get investment loans deprives businesses of opportunities to reduce costs by increasing scale and technological improvements of production, which shuts off the main ways of reducing prices.
All of the above have been proven many times theoretically and confirmed in practice. An increase in interest rates and accompanying contraction of the money supply led to the same consequences in all countries – the decline in investment and production on the one hand and increased costs on the other. The result was a dramatic bankruptcy of many enterprises faced with the impossibility of refinancing their production processes. Today, just as in the 1990s, this policy drives the economy into a stagflationary trap and deprives it of development opportunities.
Apparently, the heads of the Central Bank are guided by fantasies gleaned from student textbooks on macroeconomics. In some of them, to facilitate students’ understanding, market mechanisms are simplified to primitive mathematical equilibrium models, which were brought to economic science from classical mechanics almost a century ago. The economy in these mechanistic models is presented as a set of economic agents oriented towards maximizing profits, having perfect knowledge, and working in conditions of perfect competition and instant availability of any resource. According to these models, an increase in the money supply, as with any other product, leads to lower prices, which is equivalent to higher inflation. And vice versa, an increase in the price of money (interest rates) entails reducing their supply and falling inflation. On this basis, a favorite monetarists’ Fisher identity (equation) postulates a direct proportional relationship between money growth and prices. Despite the fact that it is not statistically confirmed, the advocates of this theory continue steadfastly to profess the dogma of a direct linear relationship between money supply growth and inflation, and, accordingly, the inverse relationship between inflation and the interest rate. Amateurs, in their simplicity, seem to believe it’s obvious and impose it on public opinion. It’s an equivalent of trying to cure all diseases by bloodletting, a practice of medieval doctors on trusting patients.
In reality, none of the assumptions taken as an axiom in equilibrium models is being observed. Being guided by them in economic policy is akin to building socialism guided by the Communist Manifesto of Marx and Engels, without taking into account the diversity of the people and institutions built by them, without distinction of enterprises, industries and technologies, and without mechanisms of development. Such economic “theory” degenerates into scholasticism, unsuitable for practical use. Therefore, none of the managers in developed countries uses the equilibrium theory in practice. Instead, they are guided by extracting profits in non-equilibrium situations and developing an economy by its complexity. A mechanistic picture of the equilibrium of the economy remains for amateurs; it is used to convince them of the uselessness of government intervention in the economy. This theory is being hammered with special tenacity into the public consciousness of developing countries in order to deprive them of the ability to creatively develop their institutions, which are replaced with the “free market” forces and managed by developed capitalist countries’ monopolies. Unfortunately, our monetary authorities willingly adhere to this mythology without understanding the basic meaning of how credit functions in a modern economy. This meaning should be explained.
The birth of modern capitalism is associated with the invention of public money as an unlimited source of credit through the issue of national currency by a special institution, the Central Bank. Currency issue is essentially a mechanism to advance economic growth, and its use is in both the private and public interest. In the first case, of which the US Federal Reserve is an example, the money issue is subordinate to the interests of the owners of the Central Bank, which receive huge access to market manipulation. From the experience of financial crises, these manipulations are undertaken by them to not only receive income from the emission but also to appropriate national wealth. By lowering interest rates and expanding the money supply, the Central Bank stimulates the growth of production and investment. By increasing interest rates, it provokes bankruptcy of companies that are hooked on the cheap loans needle. The assets of these companies are transferred to the banks that are close to the Central Bank, which gives them unlimited access to the created loans.
When the Central Bank is a state monopoly, as is the case in most countries, its right to issue money can be used to ensure the development and growth of the national economy by providing the necessary amount of loans. This happens in Japan, China, India, Brazil, the Eurozone, Iran, and Turkey. In other cases the right to issue money may not be used if the country is not independent and transfers control of its Central Bank to external management. This is typical of many former colonies, the elite of which have their interests closely linked to those of their colonial masters, who still control their monetary policy.
In the postwar period, many developing countries were caught in the debt trap when trying to finance their development through external loans. Under the threat of bankruptcy, they were forced to give up control over their monetary policy to creditors, whose collective interests were represented by the International Monetary Fund. These interests mainly came down to the opening of the national economies to the free flow of foreign capital; the requirements of which the monetary policy was subordinated to. The latter include free convertibility of the national currency, removing any restrictions on foreign investment and outflow of capital, and the binding of the issue of the national currency to the growth of foreign exchange reserves, which were formed in the currencies of creditor countries. Thus the economies of the debtor countries were subordinated to the interests of capital of creditor countries, an absolute leader of which was the United States, which imposed the use of the dollar as a world currency in the capitalist world.
Russia, having taken upon herself the external responsibilities of the Soviet Union, found herself in precisely such a colonial state, caught in the debt trap. Moreover, even though the Russian state has now paid off those debts the Russian Central bank still subordinates itself to the interests of International capital. As a result the fiscal authorities refuse to implement capital controls, subordinating fiscal policy and particularly the stimulation of the money supply to the growth of foreign currency reserves and handing over the grading of credit risk to the American rating agencies. These policies are justified by the expectation that this will attract inward investment and that the chief engine of economic growth is indeed such foreign investment.
Actually, the expectation of an inflow of foreign capital yielded the opposite outcome – colossal capital flight. Russia became one the main net donors to the world financial system, giving practically free credit to the USA and the other G7 economies cash reserves of almost 100 billion USD annually. As a direct result of these policies serving international capital we see the further degradation of an economy already based on low value-add extractive industries whose production is sold again on the market denominated in USD and Euros. Under such conditions foreign capital extracts, as a result of these financial policies, enormous profits which again artificially inflate the domestic financial markets.
It is straightforward to evidence that for every dollar invested in speculation on vouchers and securities issued as a result of the privatisation carried out between 1993 and 1996 international ‘investors’ received up to five dollars in profit. The expansion of speculation as a result of the State issued short term bonds (GKOs) between 1996 and 1998 doubled that profit. International investors then repatriated of that capital from Russia and the resultant destabilisation of the financial markets led the state to default which, in turn led to securities being devalued to a 10th of their previous value. The International investors then returned and scooped up those securities at fire-sale prices creating a new spike in the market and, yet again doubling their capital and then, predictably, withdrawing the lot just before the 2007 global financial crisis struck.
It was in precisely this way that the subordination of national fiscal policy to international capital gave the international investors a return of two hundred dollars for ever invested dollar. The vast majority of that profit was simply taken out of the country. These profits were harvested from the state and the Russian population. The share of that money which translated into direct investment in productive industry or into tangible securities was negligible.
It follows that the Russians who collaborated with these ‘investors’ were not left out in the cold. Many of them became genuine pioneers of the ‘offshoring’ of the Russian Economy constituting themselves a new caste – The Offshore Oligarchy. The temporary commission of the Russian Federation set up to investigate the reasons, circumstances and consequences of the 1998 default were given evidence of direct collusion between the representatives of international capital and an entire pantheon of the ‘great and the good’ of both the Central Bank and the Russian government. Some of those individuals to the present day, regardless of the recommendations of the federal council, still occupy influential posts within the state. I quote “To ensure that persons involved in the preparation and decision-making of 17 August, could no longer hold any position or in the public service or in organizations where there is state ownership”
During the 2008 financial crisis the Russian Oligarchy, having by now mastered the methods of the earlier foreign investors began to interfere with the money supply themselves. Having now paid external debts, the Russian financial authorities no longer needed to subordinate themselves to the IMF or to their masters in the United States. Under pressure from crisis-driven capital flight they started to stimulate the money supply with no further regard to pegging it to hard currency reserves. However this was not done with the aim of stabilising industry, shrunk by the crisis by around 5 to 40% but rather to enrich a group of privileged commercial banks. They directed that expanded, tax and interest-free money supply straight to the financial markets extracting 300 Billion Rubles (12 Billion USD) of profit again, with the cost being borne by the devaluation of domestic savers’ holdings.
And today the majority of the cash issued by the Russian Central Bank to refinance the commercial banks has been used for pure speculation which contradicts the policy aims of the central bank itself. It is clear that by increasing the interest rate while adopting a free floating currency rate, the central bank, on one hand is blocking the inflow of credits to the industrial sector and on the other is enabling the extraction of super-profits from speculation against the Ruble. Its precisely by doing this that a speculative vortex has been created where the savings of the population are (yet again) converted into super profits in speculators’ bank accounts not to mention the equities of Russian corporations which, when unable to pay the spiralling interest rates thus created are more fodder for the hard currency speculators pillaging the market from their offshore accounts.
In this way the “holy Simplicity” of the managers of the central bank, these unquestioning believers in the inconvertible truth of the mechanical representation of the world given to them by the laws of economic equilibrium, but not innocent rather subordinated to transnational capital, of which the Russian offshore forms a part. It is entirely plausible that being true believers in the Washington Consensus, they not know not what they do. However their activities are highly regarded by the academic priesthood in the American universities. In the not-to-distant future those finance ministers and central bank representatives will again be singled out for praise as “best practice” just like their predecessors in earlier years. “Best practice” in the sense that they have created the most efficient conditions for the legal enrichment of the “oligarchic international” on the backs of the wealth of our country and its citizens.
The escalating crisis that we see today in more than one way, reminds us of the situation which prevailed in 1997. Now, as then the government decided to sharply decrease export duties which removed significant resources from the budget. International capital began to move out. Now as then, instead of instituting capital controls, interest rates were raised leading to capital contraction on the financial markets. As a result, then as now, there was no incentive to provide credit to the industrial sector and the rate of investment in industry began to fall.
The main difference is that the budget is in surplus and there is no state debt (this is made up for by similar amounts of corporate debt) and decision not to maintain a stable ruble is made in the presence of large foreign exchange reserves. In summary, default does not threaten the state but the same cannot be said of corporate borrowers.
Given that there is far more stability than in 1997, the fiscal authorities are actually themselves the greatest threat provoking a collapse in business activity and destabilising the currency. However this will not avert crisis, simply prolonging it to the delight of the offshore oligarchy who can now, without risk and at their leisure plan their speculation. It is inevitable that the consequences of these policies will be a fall in the rate of industrial activity and investment, a fall in profits and a stream of bankrupt corporations and thus the subsequent and successive devaluation of the population’s savings.
This fiscal policy is taking place in the background of a sustained global trend towards stagflation which manifests as a volatile ruble and high inflation on one hand coupled with a fall in the rate of investment and economic activity on the other. The trigger for this crisis was the imposition of economic sanctions. On one hand this materialised in the refusal by western creditors to renew / rollover loans made to Russian corporations and the collapse of foreign investment. On the other side we see acceleration in already unprecedented capital flight. The volume of which, in the current year, is expected to exceed 100 billion USD. Incorporated into this is tax evasion which, comprising up to one third of this amount, represents a direct loss to the state budget of up to one trillion rubles annually.
Currently more than 50% of the fiscal base created by external credit and through offshore accounts comprises between 30% and 40% of the non-state investment. The aggregate external debt of Russia stands at 650 billion USD (74% of which is denominated in Euro or Dollars), which exceeds the currency reserves standing at 420 Billion USD. The majority of this debt at over 60% is owed by state owned corporations and banks. In fact the majority of external debts are from countries residing under the jurisdiction of the NATO member states. The sanctions imposed by them lead to a capital outflow of 11000 billion rubles to the end of 2014. The intensification of sanctions could lead to the blockade of Russian capital from offshore zones, through which flow over 50 billion USD yearly in investment.
As a result of the ruble destabilisation we shall see the ‘dollarization’ of the population’s savings which in turn will become another form of capital flight which already amounts, through this means alone 30 billion USD.
Regardless of the US imposed war on Russia, our central bank continues to treat the US Dollar as the reserve currency, referring to it as the definition of value, the means of capital accumulation and the base rate for FX trading. The central banks current politics envision the dollar being utilised as a parallel, de-facto base currency in which the foreign currency reserves, external trade debts and credits are denominated and to which the ruble is effectively a subordinate currency. These policies clearly resemble those inflicted by the 3rd Reich on the Soviet territory occupied by them during the 2nd World War.
The Central Bank does not take any measures either to stop capital outflows, or to replace ebbing external sources of loans with internal ones. Though the U.S. has waged a financial war against Russia, the Bank is still governed by the Washington consensus, which develops macroeconomic policy in favor of foreign capital. This exacerbates the impact of sanctions in manifold ways, whereas it could be neutralized by simple measures of currency control combined with amplifying internal sources of credit.
The latter is exactly what Mr Gerashchenko Victor V. [ex-chairman of the Russian Central Bank] did in order to pull the country out of the 1998 crisis. Having pegged the currency position of commercial banks and refused the IMF-initiated rise in interest rate, the Bank of Russia was able to increase the money supply. Contrary to what the Central Bank’s managers thought, this did not cause a rise but in fact a swift fall in inflation accompanied by an upsurge in production and stabilization of the value of the ruble. Today the Central Bank is doing the opposite and the results are as expected: a fall in production, the ruble’s depreciation, and the growth of inflation.
Loans allocated by the Bank of Russia to the banking system offset neither capital withdrawn by western creditors nor money transferred by the Government to stabilization funds. This causes the monetary base to shrink and consequently results in credit crunch and slumps in investment and production. So far, the Government has taken money out of productive industry, having withdrawn 7 trillion rubles into reserve funds. At the same time, the Central Bank has provided 5 trillion rubles in loans to the banks, which then use these loans for monetary and financial speculation. In this way, the monetary authorities pump money from the productive industrial sector into the financial sector, reducing its supply. By the end of the next year, if the Central Bank’s policy is not changed, the external loan freeze will lead to a monetary base squeeze of 15-10 %. This in turn will cause spasmodic contraction of the money supply, investment fall-off by more than 5 %, and production decline of 3-4 %. The reduction of money supply poses the threat of a 2007-2008-like crash of the finance market. The capital outflow may provoke defaults in many lending entities, and the number of defaults might become overwhelming.
The policy of increasing the refinancing rate set by the Central Bank results in a rise in the cost of credit, and secures a tendency to shrink the money supply and worsen the deficit in addition to the aforementioned negative consequences. For all that, inflation does not decrease, due to the ongoing influence of non-monetary factors, increased losses due to the rise in the cost of credit, production decline, and ruble devaluation. Since credit is inaccessible, currency devaluation has no net positive effect on export expansion and import substitution. Due to the worsened conditions for capital growth, money continues to be exported, despite the increase in interest rates. The economy is artificially sucked into a whirlpool of dropping supply and demand, and sagging incomes and investments. Attempting to hold onto budget gains by increasing taxes exacerbates the capital outflow and decline in business activity.
Forcing the economy into this stagnation trap happens solely due to monetary and loan policy. Meanwhile there are available production capacities that are only 30-80 % employed, part-time idleness, savings exceeding investments, and an excess of raw materials. The economy, which continues to be a donor to the world financial system, uses just 2/3 of its potential capacity.
To exit this stagnation trap it is necessary to halt the “capital outflow – money supply reduction – demand drop and credit crunch – rise in costs – inflation growth – production and investment decline” spiral. To do so, simultaneous measures to stop capital outflow, to stabilize macroeconomic situation, to de-offshore the economy, and to create mechanisms to nourish economic growth from internal sources must be taken.
In order to stop capital outflow it is critical, first, to burden cross-border transactions so that their illicit gains are offset, second, to cut speculative operations meant to destabilize the currency and finance markets, and third, to close off the channels of internal flow of capital into accounts in foreign currency.
The first task can be performed by introducing a tax on capital outflow at the rate of the VAT imposed on cashless cross-border transactions in foreign currency. In the event the legality of those transactions is confirmed (delivery of imported goods, service rendition, confirmation of interest payments and cancellation of loans, dividends and other legal returns on invested capital), the VAT is refunded. In this manner, only the illegal, tax-dodging outflow of capital will be subject to taxation. Whilst the tax is being introduced, the Central Bank can call for reservation of the potential tax money for all suspicious cross-border operations for up to a year or until their legality is confirmed.
In addition, the VAT should be reimbursed to exporters only after submission of export earnings. A penalty must be imposed for overdue debit debt under importation contracts, non-reporting of export earnings and other types of capital export in its full amount. It is essential to stop including non-residents´ distressed debts owed to Russian enterprises into non-operational expenses (and thus decrease assessable income). Claims must also be filed to indemnify an entity or state for losses against managers, if such debts are reported.
To restrain illicit capital export accompanied by tax evasion, a unified information system of currency and tax control must be created, including electronic declaration of operation IDs and insertion of these IDs into databases of currency and tax monitoring institutions. Rules must be introduced to determine the responsibility of the entities´ managers in cases where there is an accumulation of overdue debit debts related to export and import operations.
To stem cash export, a rational limit must be set, which, if hit, signals capital export operations (e.g., 1 million rubles, a sum obviously greater than gastarbeiters’ combined wages, tourism expenses, and other day-to-day operations). The export of foreign cash in an amount exceeding 1 million rubles shall then be taxed (tax on capital outflow).
Transparency of cross-border transactions for tax and currency control must be achieved. Following the example of America, agreements with foreign countries must be concluded in which tax information is exchanged and foreign banks register and share information concerning all global transactions involving Russian Banks’ money. At the same time, Russian beneficiaries must be responsible for declaration and taxation of their foreign accounts, assets, and operations in conformity with Russian laws.
To separate legal and illegal export of capital, the Central Bank should require licensing of capital export operations in foreign currency. This should include in-advance notification of capital export, increased regulation of operations in foreign currency by Russian banks, and a limit on the scaling-up of the currency positions of commercial banks.
To avoid excessive losses, restrictions should be placed on the amount of foreign off-balance sheet assets and valuables, including U.S. treasury bonds and securities having large budget deficits or high national debt.
To stop internal capital outflow, opening deposit accounts in foreign currency or depositing the money into previously-opened accounts should be banned. The system of safeguarding citizens’ bank deposits should be confined to deposits in rubles. These measures are necessary because the state cannot secure preservation of valuables denominated in foreign currency while there is a financial war against Russia. At any moment, they could be devalued or frozen due to enemy activities or for other reasons beyond Russia’s influence.
Currency control should encompass not only bank operations, but all financial operations including those involving insurance, which can be used to export capital and evade taxes. It is necessary to at least stop making insurance agreements in foreign currency. In addition, the monopoly wielded by the City of London on reinsurance operations, through which much income is exported, must be abolished. Experience shows that, if a party asserts force majeure, it is idle to expect foreign companies to meet their insurance obligations. The most efficient and sustainable solution is to establish a state monopoly on reinsurance, which could be allotted, for example, to the Export Insurance Agency of Russia.
Generally, during financial war regulators must deem transactions performed in rubles more reliable than those conducted in foreign currency. At the same time transactions in the currencies of the belligerent countries (which imposed sanctions against Russia) should be considered the most risky ones. In view of this, the Central Bank should establish higher reserve requirements and standards of evaluation of risks involved in bank operations in foreign currency vs. those made in rubles.
In order to de-dollarize the economy and to insulate the currency and financial system of the country from speculative attacks, it makes sense to levy a 5% tax on the purchase of foreign currency or bonds denominated in foreign currency.
Aforementioned measures to regulate cross-border transactions should be applied exclusively to foreign-currency transactions. Up until the 2007 financial crisis, the lack of such operations did not have a great impact on macroeconomic stability due to a more robust trade-surplus growth, which was greater than a non-trade deficit. Although the Russian financial system suffered big losses, the foreign currency reserves grew and secured the strength of the ruble. But as capital is exported and corporations’ and banks’ external debt went up, the risk of destabilization of the finance and currency system appeared. This risk was manifested in a 1.5-fold reduction in the ruble’s value and a three-fold stock market crash, along with the loss of the 2007-2008 reserves worth $200-billion dollars.
In the near future, the same thing, but on a larger scale, might take place.
Unlike the export of foreign-currency assets, the export of ruble assets does not create a direct threat of macroeconomic destabilization provided the above-mentioned measures of currency control are in place. There is, of course, the risk that an avalanche of foreign-accumulated rubles could flood the internal market causing inflation and/or strengthening of the national currency beyond the equilibrium level. However, applying the above measures to discourage speculations against the ruble creates a fairly high and essentially insurmountable barrier against speculators when there are sufficient currency reserves.
At the same time, ruble export of rubles implies that the profit accruing to the currency issuer (seigniorage) remains in Russia´s financial system where it can be used to multiply investments, to boost imports of vital commodities and services and to expand reserves. Within certain bounds, building up capacities of the financial system, decreasing foreign transaction costs and increasing competitive edges are beneficial to the national economy. Making the ruble the reserve currency is indispensable to ensuring the stability of the Eurasian integration. This is why it is necessary to withdraw from imposing restraints on cross-border ruble operations, create conditions for recognition of the ruble as a reserve currency by money authorities in other countries, and stimulate the import and export paid for in rubles.
To widen the demand for rubles and thus impart more stability to the national currency and finance system, switching to mutual payments in rubles within the CIS must be encouraged and also when arranging payments with the EU – in rubles and euros, and with China – in rubles and yuans. It is appropriate to recommend business entities to settle payments for exported and imported goods and services in rubles. Herewith it is necessary to provide for allocation of tied rouble loans meant for the countries that import Russian commodities, in order to maintain the commodity circulation, and also to use the currency-linked credit swaps.
It is of the utmost importance to expand the settlement system in national currencies between establishments of the CIS states through the CIS´ Interstatebank or through Russia-controlled international financial organizations (IBEC [International Bank of Economic Cooperation], MIB [Moscow Industrial Bank], Eurasian Bank of Development [EABD] and others). It would make sense to create a payment and settlement system in the national currencies of the EurAsEC [Eurasian Economic Community] members, develop and deploy internal independent system of international payments, having included Russian banks, those of the Customs Union and CIS member states as well as those of Chinese, Iranian, Indian, Syrian, Venezuelan and other traditional partners.
These measures will create all necessary conditions protect the value of the ruble and the financial market to external threats. Therewith, the internal threats related to migration of the money supply into the currency market persist. Although this threat became apparent in the 90s, when rubles were emitted to provide agriculture and other branches of non-financial sector of economy with loans and these rubles then migrated into speculation in the currency market. It revealed itself in 2008 as well: 2-trillion rubles emitted for anti-crisis purposes went into currency market speculation and this depreciated savings once again. The monetary authorities keep disregarding this threat and do so despite the fact that, while the Central Bank amplifies the refinancing of commercial banks, capital export grows. This leads us to assume that commercial banks use most of the loans received from the Central Bank to speculate against the ruble in the global currency market.
In order to stabilize the currency and finance market, it is necessary to stop inflating the finance and currency market by emitting rubles. It does not mean that the Bank of Russia should cease refinancing commercial banks. Quite the opposite; to overcome the recession and ensure economic growth, refinancing should be stepped up. But it should be done cleverly, imposing liabilities on banks which resort to refinancing for illegitimate ends. In particular, the receipt of a loan from the Bank of Russia might only happen on the condition that commercial banks assume responsibility to properly use the credit, excluding the possibility of banks using loans for speculation. To control the fulfillment of this liability, the currency position of commercial banks could be fixed, special accounts used, the bank margin restricted, and project financing tools applied.
The Central Bank could considerably enlarge and extend refinancing operations for banks that consent to the Central Bank’s monitoring of loan use. And the Central Bank should preferably do so on security of bills receivable of end-use borrowers, which exclusively should be manufacturing enterprises, than upon sale and repurchase agreements. The manufacturing enterprises should be monitored by lending banks in order to see whether the loans are properly used, solely to replenish the current capital or investments into core assets. Considering that either company can carry out a vast range of financial operations, including the speculative ones (among them those of capital export), there are good reasons to bring the standards of maximum allowed ratio between credit and debit debt on all legal bodies and to limit financial leverage to no greater than double value the principle.
The very mechanism of refinancing commercial banks should be varied to comply with objective needs for credit. Refinancing service for loans made to manufacturing enterprises should be rendered at interest rate of less than 4%, with bank margin reduced to 1%, so that manufacturing enterprises could take out a loan at a rate that does not exceed their profitability; for other purposes, at current rate according to financial market.
The above measures are about monitoring the offer rate of the ruble and designed to limit demand for foreign currency, purely in order to pay for imported commodities and services, pay interests on external loans and recompense other legal operations. It is obvious that measures to ensure stable offering of sufficient currency are required for stable ruble value. More specifically, it makes sense to reestablish obligatory sale of currency earning by exporters.
After taking the above measures to block rampant speculation, the ruble value could be taken under control. To stop speculation in foreign exchange, it is possible to temporarily fix the exchange rate of the ruble with a value lower than the market one, then to purposefully adjust it without warning. The market insiders will therefore have to consider the balance of payment and optimization of a balance between the need for import and the need for maintaining the competitiveness of national commodity prices. International experience convincingly shows that, when stabilizing, discrete modification of the value of a national currency is better that the floating one, because it halts speculative eddies.
Applying the specified macroeconomic stabilization measures creates conditions for resolving the issue of replacement of external loan sources with internal ones without the risk of starting the inflation.
In order to prevent bankruptcy of backbone companies, it is necessary to replace external loans taken out by Russian corporations with Russian banks’ loans. For this the Central Bank must conduct well-aimed emission of credit resources and supply them to companies on the same conditions as external creditors do. Taking into account the scale of this task (credits subject to cancelation before the end of the next year are worth $180-billion), it needs to be completed only through state-controlled lending institutions. Their managers must bear personal responsibility for appropriate use of credits allocated to specified corporations so that they could meet their obligations to external creditors.
In order to prevent commercial banks’ default on external bonds, those banks should undergo stress tests, while the Central Bank, if needed, allocates stabilization loans to them on terms equal to those of external borrowings.
A special problem is presented by the need to replace the foreign loans which Russian enterprises obtained from European development institutions in order to pay for new equipment. In particular, to prevent the termination of equipment leases financed by foreign lenders, credit facilities must be issued to fund [new] development institutions that would operate in a similar way, using the funds allocated to them for that same purpose. In each case we have to consider, in parallel, whether domestic products could be substituted for foreign imports. Even if they cost more and are inferior in quality, ultimately this approach may be more advantageous, as it reduces the risks, expands the revenue base and opens the way to modernization and growth. We should also stop using state credit resources to lease foreign technology.
The de-offshorization of the economy should begin with the selection of those business activities that are most vulnerable to the corrupt practices that tend to go hand in hand with the use of offshore tax havens. For this, it makes sense to introduce a legal definition of the term “national company” – a company registered in Russia and having no affiliation with foreign entities and jurisdictions. Only such companies should be given access to mineral resources, state subsidies, and to work that is strategically important for the state.
The ultimate owners of shares in Russia’s strategic enterprises should be required to step out of the shadows off-shore and register their ownership in the Russian registers. There has been talk, for a long time now, about the need to follow the example of developed countries by concluding agreements covering the exchange of tax information with offshore tax havens and doing away with existing agreements on avoidance of double taxation, including with Cyprus and Luxembourg, which are known to be offshore transit points. We need to define a uniform list of offshore companies, including those that are part of onshore companies. Transferring assets to offshore jurisdictions that shy away from such agreements must be prohibited.
In addition, we need to require offshore companies owned by Russian residents to abide by Russian legislative provisions on furnishing information about the members of the company, as well as on the disclosure, for tax purposes in Russia, of tax information on all income received from Russian sources, under threat of establishing a 30% tax on all transactions with those who are “un-cooperative”.
Implementing the above measures will create the conditions necessary for the extension of credit without the risk of a flood of money being issued and returned to the currency and financial markets from offshore for speculative purposes. After these measures are adopted, the non-inflationary expansion of the money supply becomes possible along with the re-monetization of the economy in order to increase investment and business activity.
The current decline in production is mainly caused by a contraction in the money supply, deteriorating credit conditions, and the destabilization of the currency and financial markets which resulted in the flight of capital and a drop in investment activity. To stop the downward trend in investment activity, we have to give businesses the opportunity to increase their working capital to allow for the optimal utilization of existing production facilities.
As explained above, we need to establish channels for the unlimited refinancing of commercial banks by the Russian Central Bank, secured by manufacturing companies with the credit already granted requirements to production companies already issued credits at a rate not higher than the average profitability of the manufacturing industry, with the mandatory condition that the credit resources be provided exclusively to manufacturing enterprises, with bank margins limited to 1%. This will result in the changing the credit market from a buyer’s market, where banks enjoy the advantage of a monopoly and business-borrowers have to take loans at usurious rates, into a seller’s market, in which banks will have to compete for customers. This will give solvent manufacturers access to credit on the same terms their competitors see in the West and in the East.
Providing a way to finance working capital will put an end to declining production and will ensure growth at existing facilities. In this way the output of the manufacturing industry, construction and agriculture will be increased by 10–15% within two years.
If we take extra steps toward import substitution, the returns will be commensurate. This would require establishing a lending mechanism earmarked for projects to expand existing production facilities and to create new ones based on the existing technological base. The relevant sectors and agencies need to work actively to prepare and evaluate the proposed import substitution projects. Projects that are selected as promising should receive guarantees from the government or federal agencies in order to attract loans from development institutions and commercial banks, which would subsequently be refinanced by the Bank of Russia at a rate of 2%, while bank margins are limited to 1%.
Productivity growth and import substitution will provide economic growth in the next 3 to 4 years. Sustainable growth in the future requires long-term investment in the modernization of existing production facilities. This means creating a means for the Bank of Russia to refinance commercial banks, through loans secured by bonds and shares in strategic enterprises, at a rate no higher than the average return on shares in the manufacturing industry, while holding the commercial banks liable for the proper use of the credit received. The principles of project financing must be applied broadly.
To achieve rapid development, we need a sharp increase in R & D and investment in the development of promising new technologies, which form the material and technological basis for a long new wave of economic growth. At present, the institutions supporting innovation are patently unable to cope with the task. In order to increase investment in the creation of new industries and the development of new technologies, channels must be established for the refinancing of development banks and state-controlled commercial banks by the Bank of Russia, with the right to claim 2% of the assets generated per annum and on the condition that the credit facilities are used in accordance with the principles of project financing with a margin of no more than 1%. In order to expand the means of financing development institutions, it is desirable that the budget line for their funding be supplemented with a mechanism for refinancing by the Bank of Russia at 2% per annum for the purpose of project financing, secured by the assets thus created.
Along with creating mechanisms for greater lending and for investment in general, special lending institutions should be designed to encourage large scale expansion of those industries that show low profitability. These include strongly seasonal industries, where the turnover cycle is not less than a year (agriculture, resorts and recreational services) and industries with a long production cycle (machine building, construction) lasting more than 3 years. For companies in these sectors, there should be mechanisms for subsidizing interest rates through specialized credit institutions, some of which are already in place. These funds could come from stabilization funds accumulated by the government out of oil and gas revenues. In this case, the Reserve Fund should be converted into a development budget, whose funds should be spent to encourage investment in promising areas of economic growth by funding development institutions. To do this, the capital accumulated in the Reserve Fund should be placed in development institutions, bonds of state-owned corporations, and in infrastructure bonds.
To start on the path of accelerated development requires a multipronged expansion of financing for innovation and investment projects. But this will make sense only if responsibility for their effective implementation is radically increased. This means we should make a transition to our own domestic way of evaluating a project’s economic worth. In particular, to reduce systemic risks, we must replace foreign credit rating agencies, and auditing and consulting companies with Russian ones for every step involved in investment decision-making by public authorities and by banks that are partly state owned. In addition, to make the investments more efficient, a system needs to be created for evaluating and selecting the priority areas for scientific-technical and economic development within the framework set by the strategic planning system.
The implementation of such a comprehensive system of measures to stop capital flight and make the transition from foreign to domestic sources of credit, with the simultaneous de-offshorization of the economy, makes it possible to pursue a policy of rapid development on the basis of a multi-faceted increase in investment and innovation, in key areas of building a new technological foundation. The re-monetization of the economy by having the state boost the lending capacity of the banking system, and the return from offshore tax havens of the capital that has been taken out, will enable us in the next 2 years to see annual GDP growth of 6–8% per year, while investment increases by 15% per year, and R & D spending by 20% per year, all while keeping inflation in the single digits.
1 Report of the Interim Commission of the Federation Council to investigate the causes, circumstances and consequences of the decision of the Government of the Russian Federation and the Central Bank of the Russian Federation, dated 17 August 1998, on the restructuring of short-term obligations, the devaluation of the ruble exchange rate, and a moratorium on executing capital foreign exchange operations.
As my dad used to say, “Stupidity is the most expensive thing in the world – you pay for it all your life, and often with your life”.
I hope Russian team had envisioned this obvious outcome right from the very start. Putin should’ve known that the West will try to hurt Russia where it hurts the most– Economy.
Everyone knows, the NATOists can’t defeat Russia militarily and they purposefully kept Russia away from any opportunity that could’ve allowed it to build a better/healthier financial system. Now, there is only one way out of it and it has to be radical – forget the west, wipe it out of your memory, kick the banksters in the balls like Iceland did and learn from those who are successful, Malaysia, N.Korea , Iceland, Finland and perhaps even China. Maybe Russia should build something that is totally unique and something that is truly optimized for the Russian way of life.
Sergei Glaziev is a true patriot!
It seems rather clear that the western ziofascists are using their emplaced “assets” in the Russian banking systems to deliberately bring down the Russian economy as part of the ziofascist all out war against Russia. And that this is why the “Russian” Central Bank is following “inexplicable” policies that directly hurt Russia. Clean the zios (the real hand manipulationg the 5th element)out of the banking system (through prosecution of their many crimes and treasons), and put the banking system under full public control, making it accountable to the people instead of a select few oligarchs.
вот так
At this point, the only thing that will save Russia, Novorossia and in fact the rest of the world is socialism. The ideals of the Soviet Union still stand, as do the ideals of the American Revolution. The longer today’s governments continue corporate capitalist repression, the longer the people maintain their voluntary slavery and fail to rise up, the higher the chance that nobody is gonna make it in the end. Time is running out fast.
I am most happy to know that knowledge of MMT has spread to Russia.
My only disagreement with Sergei is WRT his preferred means of financing sectors of the economy. He advocates loans for this purpose, while I advocate Government Contracts.
Agriculture, for example can be financed via crop purchase agreements, at profitable prices, eliminating market uncertainty.
Manufacturing can be financed via Govt purchase contracts.
This provides funds to the civilian economy without interest of any kind due to anyone.
He is getting very close to my ideas WRT currency control, and issuance of electronic Rubles as encrypted serialized notes in denominations of 1 million, 1 billion, and 1 trillion Roubles, gives the RCB total control over movement of funds abroad.
INDY
INDY
The author complains that the Central Bank has raised interest rates “above the average profitability of manufacturing industry” (i.e., return on investment). But it has done so because the rate of inflation exceeds the average return on investment in industry. That means that new investments that cannot support the current interest rates (i.e., yield a return above the average for manufacturing industry — and in excess of inflation) will generate losses. But there will always be investment opportunities expected to yield more than the average return in manufacturing industry, therefore an interest rate similar to the inflation rate should not prevent productive investment.
If the bank is to be faulted, it is, surely, for allowing a “consumer lending boom [that] drove millions of citizens into a 10-trillion ruble debt.” But that is now water under the bridge and the consequences have to be accepted. Below-inflation interest rates would only exacerbate the problem of excessive consumer debt.
The author states that “the Russian Central bank still subordinates itself to the interests of International capital. As a result the fiscal authorities refuse to implement capital controls…”
I don’t see the logic of these statements. Whatever the Russian Central Bank may do, it does not have the authority to implement capital controls, which would be a responsibility of the Government and Finance ministry.
Anonymous said…11 December, 2014 19:22
“kick the banksters in the balls like Iceland did and learn from those who are successful, Malaysia, N.Korea , Iceland, Finland and perhaps even China.“
I believe China is the ultimate target of this ZPC/NWO war against Russia. Specifically because the ziofascists have been largely unsuccessful in penetrating the Chinese banking system and that this system is the one major economy that still remains outside their control. So, unlike most of the victims of ziofascism, they can’t work their rot from within, and must attack from without instead. They are working to isolate China in all spheres to prevent China staying independent. Russia, being China’s most important ally, and one in which significant ziofascist mechanisms of control are still in place, naturally bears the brunt of the ZPC/NWO attack. Without Russia on its side, China would unable to challenge ZPC/NWO world dominance.
вот так
it looks like a lot of war planes are coming to holland airspace from the north sea-most likely british or american war planes from england airfields -they have been coming from west to Holland and going to east for last 5 to 6 days continuously. so the anglos are enhancing /preparing the war capability on east of europe .
Russia must take action or be prepared for the nasty people to give surprise.
“According to these models, an increase in the money supply, as with any other product, leads to lower prices, which is equivalent to higher inflation…”
lower prices??? Lower prices usually mean deflation not inflation!
Some mistranslation or confusion here, unless the author is saying that money has a price (in goods, presumably) that is lowered through inflation (of the money supply) — but that would be a very obscure way of expressing the point.
Nothing new. People insist on holograms i.e. money (dollar and by extension rubel) and wonder why the economy is crashing. Lets print some toilet paper to give people the illusion of wealth . It’s like insisting on having unnecessary illusions to act, build etc. . Guess The Saker blog questions the capitalistic system only so much. It took scientist and factories to make the moon mission possible – not printed paper, a concept to difficult to comprehend I suppose.
Still a big thank you to all of those people who try to deconstruct failed believes and make the information available for a broader audience.
ZerOne
please ask thse russian central bankers who worship IMF as to why IMF congratulates usa and england on alsmot zero interest rate regiem and money printing while the same IMF wants other non-anglo nations to do belt tightening and contract the money supply.
in fact IMF several times warned USA not to stop money printing “
so why Russians are raising interest rate ?
what is good for goose is —
http://www.counterpunch.org/2014/11/25/trotsky-at-the-imf/
Why usa/uk/ Sarkozy plotted against Strauss-Kahn .
Sarkozy obviously wanted Strauss Kahn disqualified for presidential election.
But usa/ uk had different agenda.
Dear Saker and friends,
Even why, pro-Russian people in Europe and the so-called West in general, tend to fall victims of the anti-Russian and anti-Putin propaganda that the MSM presstitudes have been waging against Russia since time immemorial. Before reading the text by Glaziev, I am inclined to post a link to an article published on the Russia Insider website about the Russian economy. There are many surprises if one just goes into the bother of looking at the facts and not the anti-Russian propaganda. For example, the oil and gas sector is far smaller as a proportion of the total economy than we ever thought. It is actually less than 19% (still vital though since it forms the bulk of exports) There are many more complete falsehoods being said about Russia in the MSM. To give one more example, Russian manufacturing production is higher than in France or the UK (manufacturing consists of industrial production minus the oil, gas and commodity industries in general)
http://russia-insider.com/en/business/2014/12/09/03-23-27pm/study_shows_russias_economy_resilient_backdrop_sanctions
Dear Saker and friends,
Even why, pro-Russian people in Europe and the so-called West in general, tend to fall victims of the anti-Russian and anti-Putin propaganda that the MSM presstitudes have been waging against Russia since time immemorial. Before reading the text by Glaziev, I am inclined to post a link to an article published on the Russia Insider website about the Russian economy. There are many surprises if one just goes into the bother of looking at the facts and not the anti-Russian propaganda. For example, the oil and gas sector is far smaller as a proportion of the total economy than we ever thought. It is actually less than 19% (still vital though since it forms the bulk of exports) There are many more complete falsehoods being said about Russia in the MSM. To give one more example, Russian manufacturing production is higher than in France or the UK (manufacturing consists of industrial production minus the oil, gas and commodity industries in general)
http://russia-insider.com/en/business/2014/12/09/03-23-27pm/study_shows_russias_economy_resilient_backdrop_sanctions
Russia must take out alive and then try for crime that dog larry summer who forced austerity on Russia in 90s but recommended free money printing and increased money supply to bankrupt usa in 2009.
“The IMF’s managing director wanted to give Greece, Portugal and Ireland the time needed to put their accounts in order, and he also argued for softening the austerity measures associated with the bailouts for those countries.
Greek economists say that under Strauss-Kahn’s leadership, the IMF was a counterbalance to the strict austerity policies favored by northern European leaders. In fact, according to the daily Le Monde, Strauss-Kahn is fond of calling those who argue for tighter austerity “fous furieux,” which roughly translates as “mad men.”
Strauss-Kahn’s view is that shock-therapy measures imposed on Greece and other European countries with sovereign debt crises will lead only to economic recession and severe social unrest.
Right. Except DSK got the ax for a sexual encounter at New York’s ritzy Sofitel Hotel. So the changes he had in mind never took place, which means that the distribution of wealth continued to flow upwards just like the moneybags constituents of the IMF had hoped for.
Funny how that works, isn’t it? Funny how it’s always the Elliot Spitzers, and the Scott Ritters, and the Dominique Strauss-Kahn’s who get nailed for their dalliances, but the big Wall Street guys never get caught. Why is that?”
The IMF and world bank have ever been a tool for the england and USA to rob other countries. The book “Confessions of an economic hitman” by an CIA agent describes how it works.
The British effort to keep Central Asia (Russian and China) from aligning with central Europe, (Germany) against the maritime powers (the British and the US) was described by H.J. Mackinder in the following 1904 essay. It makes clear by inference that the Anglo-Americans are determined to keep Germany and Russia separated, if not killing one another, at any cost, lest they combine their resources and know-how to challenge Anglo-American dominence.
=====================
What it tells is that Chinese establishment has been fully compromised since the british manipulated the ouster of Bo and had him removed on flimsy charge of his wife beign murderer of british businessman.
Another issue that I am convinced is behind the latest war on Russia is the precarious and unprofitable nature of shale oil and gas production in the US and tar sands oil production in Canada. Simply put, the AZs wish to damage/sanction Russian oil production as much as possible so that as much oil can be removed from the global market hence placing an upward pressure on global prices and putting a floor under North American losses from oil extraction activities. The article below, explains very well how vulnerable and economically unsustainable the current North American oil production boom really is:
http://www.zerohedge.com/news/2014-12-09/time-same-housing-bubble-fed-ignoring-shale-bubble-plain-sight
best regards,
Stavros H
In the hierarchy of “Economic Hit Man” John Perkins, first the US sends the people in suits to arrange the IMF loans and establish the protocols of securing the dictator in place. If this fails they send in the jackals for regime change and terror. Only if this fails do they send in the military,
IN 2008 Russia and china had the opportunity to destroy IMF and world bank and the american -british system of looting the world ;but foolishly these two countries went on ,prompting from parasite england, recommended IMF and world bank to lead new economic system! How stupid of these countries and that is why they never go up in world because of their stupidity.
Therefore china and russia must prepare for war which is coming their way
Russia needs to discard being sloth and its naivety and foolishness and get ability to recognise who is the main enemy and who are just distractions put up by the main enemy. after that it must get prepared to destroy its main enemy-no pussyfooting around. It is matter of life and death for Russia.
“It is clear that by increasing the interest rate while adopting a free floating currency rate, the central bank, on one hand is blocking the inflow of credits to the industrial sector and on the other is enabling the extraction of super-profits from speculation against the Ruble.”
On the contrary, a cheap ruble should draw investment capital to Russia, while promoting import substitution and driving up exports. And indeed investors such as Jim Rogers are talking about great opportunities for foreign investors arising in Russia.
It is true that a decline in the ruble has created opportunity for large speculative profits, but not at the expense of Russian citizens. The only profiteers were either holders of rubles who switched to gold or dollars, etc., before the plunge in price and then repurchased rubles for a large round-trip profit at the expense of those — mostly foreigners — to whom they sold rubles, or people who shorted the ruble. In the latter case, those on the other side of the trade would have been either speculators, for whom we need spare no sympathy, or foreign parties with future obligations to pay in rubles.
All those words, those speeches, reports, analyses, etc. are nice, but here is reality: oil now in the 50’s.
So, my question is, how long are they going to keep talking?
As long as naked shorts are allowed, none of the complicate remedies suggested will ever work. That’s the real speculator’s nuke.
I have read Glaziev before and he is constantly talking about needed measures to be taken,but using broken tools.
e.g. the Central Bank of Russia,the IMF,the World Bank,the UN.
Is it obsfucation? or lack of understanding?..too much attention given to unobserved law?.
No sovereign nation needs a ‘central bank’ a Treasury suffices.
The Treasury issues currency,debt free! and controls the quantity, then.. voila! liquidity enters the market place of real things!.
The problem for Russia and V.V.P is that Russia is not financially sovereign since the Gorbachev years,endorsed by Yeltsin.
The ‘Gordian Knot’ solution is only possible once all other parts of the puzzle are in place!.
I repeat myself but these are not stupid people…
one characteristic of asian cultures is telling you what you want to hear.
In the so called ‘West’they tell you what they want you believe like now!.
cheers.
i don’t understand economics, but i would like to know what will happen with money outside Russia when ruble became gold backed (if). i mean, money took all value from goods,products. bag of potatoes is worthless until is sold, but, one can still eat potatoes. paper has no proteins and vitamins. money itself is value – i don’t mean represent value, it is value. how else rich are rich despite they produce nothing. it is ridiculous to me that Russia is in some crysis. land rich of everything cannot be in crysis.
sorry for my bad English.
P.s. Turkey starts blackmailing, as easily expected:
http://www.hurriyetdailynews.com/turkey-and-russia-meet-again-to-negotiate-gas-discount-.aspx?pageID=238&nID=75412&NewsCatID=348
Could we for a minute stop arguing about interest rates, and think about this?
Anonymous said…
it looks like a lot of war planes are coming to holland airspace from the north sea-most likely british or american war planes from england airfields -they have been coming from west to Holland and going to east for last 5 to 6 days continuously. so the anglos are enhancing /preparing the war capability on east of europe .
Russia must take action or be prepared for the nasty people to give surprise.
11 December, 2014 19:52
Unlike tank convoys in Ukraine, there are no photos of this all over the internet. If anonymous is in the Netherlands, as I assume he is, he is SEEING THESE with his own eyes.
What does this mean?
Russia and Turkey’s gas deal can save Europe and the World by Joaquin Flores
“Now that Russia and Turkey have announced to the world that they will not have their interests placed at odds with each other through the manipulation of the US, EU, and Israel, we can see a geopolitical shift in the making, of tectonic proportions.”
“Some analysts have looked at the low prices and attractive terms which Russia have offered to its partners, including China, and now Turkey and India, regarding energy markets. Some have said that Putin is showing Russian weakness with such a low price. Others, more accurately have said that Putin is broad in thinking, and is focusing more on market share than market price. This is a fair point, and closer to the truth.”
Study: Russia’s Economy Resilient in Face of Sanctions
“Far from “relying” on oil & gas, the Russian government is engaged in massive investments in all sectors of the economy, biggest investments going to aviation, shipbuilding, manufacturing of high-value machinery and technological equipment.”
The Russian real economy is much stronger than the we are led to believe in Western Press, as we see in the above referenced articles. S. Glaziev highlights some problems and solutions regarding the Russian Central Bank and credit in the Russian economy. It seems to me, one must remember the admonition when ‘fixing’ a problem, one must first do no harm.
The central economic problem world wide is whether finance shall dominate the real economy or whether finance should serve the real economy. Parasitic finance prevents the real economy of production and distribution from serving the physical needs of humanity.
The world is turning its back on the $IMFS, which is a tool of one world dominance by London and New York oligarchs. Vladimir Putin is a realist who believes in the sovereignty of nations and can back up Russian sovereignty with political and military power.
The world monetary system is changing, as the USD is repudiated as the world’s reserve asset. The real economy cannot support the USD debt which burdens the world real economy. I think the world central banks have a system in place for the end of the USD, but it appears 100 trillion dollars of USD debt will be destroyed in the move to a new world monetary regime. Talk about a hair cut!
The new world monetary regime will have to accommodate a realist perspective, which is multi-polar. All Central Banks are constrained by the consensus use of the USD as a reserve asset. This will change when the USD expires. It is best to let the inevitable event take place of its own inertia. It seems the world’s people suffer austerity to preserve the USD monopoly, but it may be the world pays to avoid thermonuclear war during the reset currently nearing its denouement.
Anyway….thanks for the translation of the serious thought on monetary affairs by S. Glaziev.
Anonymous said…
All those words, those speeches, reports, analyses, etc. are nice, but here is reality: oil now in the 50’s.
So, my question is, how long are they going to keep talking?
11 December, 2014 20:23
Russia can’t do anything about the oil price, other than cutting her own production (LOL) in order to prop up everyone else.
The oil price will spike up once North American oil production (which wholly unprofitable at current price levels) goes out of stream.
Or maybe the AZ Empire will find one or two major oil producers around the globe and exports some more “democracy” to them.
Thanks to everyone that worked on this and will have time to read tomorrow
Unlike tank convoys in Ukraine, there are no photos of this all over the internet. If anonymous is in the Netherlands, as I assume he is, he is SEEING THESE with his own eyes.
What does this mean?
11 December, 2014 21:47
The NATOists are trying to provoke Russia as much as they can, so that Russia will respond in some kind of way so that they can beef up even more antu-Russia hysteria through their assets in the MSM.
If you are worried that they will launch an attack on Russia I will have to disagree. Western armies in this day and age only attack completely defenseless opponents. I have not heard anything about any western tanks in Ukraine, only in Poland and the Baltics. These are merely provocation moves in my mind.
@ Anon:
“how long are they going to keep talking?”
Good question.
When private and state owned corporations took on huge foreign currency loans ($600 billion, according the author) they were in effect speculating on the future value of the ruble, a currency heavily dependent on the price of oil, which everyone knows is volatile.
Now they’ve lost their bets it’s time for them to pay the price. Businesses that made fatal errors of judgement should be allowed to go broke. That way, both the inept owners and rash foreign lenders will pay the price, not Russian taxpayers.
However, the government might enact legislation enabling it, through a specially created agency, to match any foreign offer for what are deemed significant national industrial assets (i.e., bankrupt companies).
But in any case, no rubles should be spent (causing a further fall in the ruble/dollar exchange) to buy foreign currency to pay off unwise foreign lenders. And given the general hostility of the West toward Russia, such a tough approach to foreign lenders would be entirely appropriate. Indeed, any other approach would amount to collusion with the enemies of Russia.
@Stavros:
“Russia can’t do anything about oil price”.
This is where I disagree. They can do something, but it can’t be one of those half-ass solutions. It has to be bold, something that will truly make a difference in that industry, something that will shake it up.
I say, they want to pressure oil prices down to levels where it will hurt Russia, Iran, Venezuela and Brazil? ok… those countries should help them in bringing prices down… take it all the way down to the equivalent of $20 a baril, payable in gold only.
Tacu said…
P.s. Turkey starts blackmailing, as easily expected:
http://www.hurriyetdailynews.com/turkey-and-russia-meet-again-to-negotiate-gas-discount-.aspx?pageID=238&nID=75412&NewsCatID=348
11 December, 2014 21:35
The Turks will use their recent deal with Russia so that they can blackmail the West for their full accession to the EU under their own terms. Unless the EU caves in (Turkish entry into the EU is a colossal no-no for Germany, Austria, France, Holland etc) and admits Turkey, the deal between Russia and Turkey will go ahead.
I am sure that Putin and his advisers had this in mind all along, and are seeking to further capitalize on even more Turkish-West and intra-West frictions over the EU accession and pipeline business. Putin is not idiot, and neither is Erdogan.
My comment/suggestion on the de-dollarize point.
I have always felt that a key weak point in the Russian economy (other lesser financial adept economies as well) is the tendency of savers to hoard US dollars as a hedge against currency fluctuations in their resident currencies. And Russia as well as other countries keep playing into this paradigm. This is stupid. It provides an economic fifth column where these people/savers gain a vested interest in the US dollar.
It is a simple thing to stop this dead in its tracks. Russia and other countries should eliminate taxes on gold and silver bullion coins. Furthermore, they should have their financial institutions provide buy and sell services for these coins/bullion products. Russians should not be forced into a situation where to protect themselves from currency debasements and fluctuations, they need to resort to US dollars.
People will save in what they believe will keep its purchasing power over time. I personally think US dollars are crap but they have held up better than the fiat crap other countries have spewed. Give them an alternative. Don’t punish them through taxes and other actions on just prudent actions of saving for bad times. God knows there has been plenty of bad times and there will continue to be bad times.
I understand that this idea opens up a can of worms for the fiat money system but it is time to face reality. Gold and Silver are money and have been money for thousands of years. You don’t tax US dollars and you don’t tax Roubles (taxing interest is separate) so why keep up this charade of taxing gold and silver coins.
Greetings from Singapore:
Glaziev going public with this means what?
(1) Putin is not listening?
(2) Putin does not yet have the power to implement a reform. Going public opens a discussion.
Both are,at this very moment of crisis, bad news.
Rgds
Medjeral
Not all members of this community reside in the same time zone so it is difficult to connect.
On another thread Penelope made a comment which I feel needs clarifying to the unintiated.
Many people including those like Jim Rickards,advocate SDR’s as a possible replacement for the US$.
If you check out that acronym you will probably see a 1969 piece of BS…..= XDR.
XDR,XAG,XAU and other ISO numbers were created for the digital trading of real things for digital ‘money’.
The collapse of the ‘London Gold Pool’in 1968 required desperate measures from the controllers,so the existance of ISO numbers,a.k.a greed 101,became lawful.
The SDR was a part of US policy domination dating from 1944,not 1969.
The initial quota system is why Russia,China and others refuse to be parties to this corrupt system!.
I will append an extract from Nikolay Starikov’s book..
Nationising the Rouble.
endit.
Blogger is sh*t….
Part 1.
Re: SDR’s IMF p 116 Starikov,The Rouble Nationization…
“How are the officials of the IMF elected then? Through voting, obviously. Equal and secret? no, not equal. The principle of ‘one country, one vote’ that the classical democracy is based on, is redundant here. The IMF is not a place for discussion but an instrument of world hegemony. As early as at its creation the subordination to the Anglo-Saxons was laid down in the founding documents. The thing is that the IMF uses the principle of quota-based voting. The possibility of member states to influence the Fund’s activities through voting is determined by their share in its capital.1 Just as in a company. ‘Each member state has 250 votes and one additional vote for each part of its quota equivalent to one hundred thousand special drawing rights’.2 We will not go into too much detail about these SDRs (special drawing rights), we will say only that this is the paper gold invented by the creators of the new financial world.
part 2 to follow….
IMF part2..
OK, so in 1944 the controlling stake of the world economy belonged to the USA, Great Britain and their partners, which was immediately demonstrated in Bretton Woods. The quotas were allocated so that the Anglo-Saxons could always guarantee that any decision they wanted to be made would be. After all, in the managing body of the IMF — the Board of Governors — decisions are usually made by a simple majority (no less than half) of votes, and on important issues of an operational or strategic nature — by the ‘special majority’ (70 or 85% of the votes of the member states). The US quota was set at 2759 (million SDR), Britain’s at 1300. The USSR was only allocated 1200, and France, for example, as little as 450. The USA and Great Britain could always appoint the people they wanted and guide the IMF in any favourable direction. And if we consider that the International Monetary Fund was to control the activities of the central banks of all its members, then we will see that the USSR’s prospects were not bright at all. And it all looked a lot like an ultimatum. Money issuing was going to be given to a private central bank and its management to the IMF, which, in turn, was to be controlled from Washington. Would you agree to that?
Two years after the Bretton Woods Conference the third pillar of the new world order was created — the General Agreement on Tariffs and Trade (GATT). This was the prototype of the future WTO, which Russia has been ‘joining’ for the last fifteen years. And I really hope that it will continue to ‘join’. The World Trade Organisation, which seems to have existed forever, is actually very young and is a fruit of the treacherous breakdown of the Soviet Union.3 It was only founded in 1995. While Russia was strong and powerful, the WTO simply could not be established (just like the European Union). The idea behind creating the GATT (today’s WTO), and generally of the whole Anglo-Saxon system, is very simple — it is expansion. Expansion all over the planet through opening up markets, currency systems and state borders. The US economy in 1945 was the strongest and it needed to open the whole world to its goods, which would ONLY BE SOLD FOR DOLLARS and which, in turn, would launch the whole system based on money being printed by some (USA and Britain) and money being saved and all values and resources being sold for it. And as the ‘money-printing machine’ printed more and more money, more and more markets needed to be opened up in order to use it.
Only after the Soviet Union was finally destroyed were the bankers able to finish the construction of the new financial system. The WTO is the last brick laid over the old basement.1 This is a system of regulating trade which has the two-thousand-page-long GATT. The cunning point is hidden in the fourth paragraph of Article XVI: ‘Every member of the organisation shall guarantee the compliance of its laws, regulations and administrative procedures in line with the obligations stipulated in the attached agreements’.2 As soon as a country signs these ‘attached agreements’, any member state of the WTO can dispute any law of this country. Do you want your goods to comply with the local standards on carcinogens, additives and processing? If your standards are stricter than those of the WTO, Estonia, for example, can file a complaint against you. And Estonia will win and you will lose. Do you want to have a fuller list of ingredients on the labels or ban certain E-numbers?3 Another complaint. And the country that violates the rules of the WTO has to prove that there is strict scientific justification for its activities. Environmental measures that restrict export of timber (and Russia is nearly ready for such measures) and our desire to keep the timber prepared in Russia for further processing can be proclaimed an example of unfair trade practice. The country gets completely deprived of freedom — under the flag of unlimited freedom”.
https://www.youtube.com/watch?v=VT085isnyB0
RE: “Sergei Glaziev: stupidity is worse than theft”
There isn’t anything stated that would not be completely appropriate for policy here in the U.S., control capital outflow, stop speculation and use of central bank “emissions” (I love that term) used for speculation, de-offshoring, capital allocation to force domestic production of “real” products, protection of domestic production enterprise from bankruptcy – with strings attached.
Essentially, a structure of command-economy controls at the macro level with some direct “guidance” at the micro level.
Best wished for Russia. Maybe if we ever get a real change of government here in the U.S., we can import Glaziev for a few years. Gosh, I think requiring Russian as a second language in U.S. schools would be a great idea; assuming English as a first language is viable. We have a ways to go on that.
Is Ukraine Preparing for a Nuclear False Flag to Frame Russia?
http://fortruss.blogspot.be/2014/12/is-ukraine-preparing-for-nuclear-false.html
The House Res. 758: US Declaration of War West Ultimately Seeks To Breakup RUSSIA.
http://www.4thmedia.org/2014/12/the-u-s-congressional-declaration-of-war-against-russia/
https://www.youtube.com/watch?v=iXelxAdU4d0
Dear The Saker,
They aren’t even hiding their involvement now.Ukraine is going to negotiate free trade with Israel:
http://riafan.ru/166491-ukraina-namerena-dogovoritsya-o-svobodnoy-torgovli-s-izrailem/
Kind of flies in the face of Nazis/holocaust – in bed together!
Rgds,
Veritas
p.s. I was watching some highlights of Russia’s visit to India and Putin didn’t seem very happy in any of the clips I saw :( – not his usual self when signing big deals and building u BRICS etc. Something is goig on…
Times are tough all over, even N. American shale oil/gas players hit by high interest rates.
http://www.larouchepub.com/pr/2014/141209_oil_debt.html
Hey, Saker:
Why do you keep deleting my comments?
To repeat the last comment which you appear to have deleted, Glaziev says Russian companies have borrowed hundreds of billions denominated in foreign currency, and are now faced with paying back much more than they borrowed because of a 40% decline in the value of the ruble.
So? They gambled on the exchange rate and lost. Why should the state, which is to say the Russian people, bail them out.
If those companies are unable to pay their debts, what’s wrong with bankruptcy? That would punish both foolish borrowers and rash lenders.
If companies that are insolvent go out of business, their assets of any value will remain, and will be purchased out of bankruptcy and returned to productive use.
So the only case for bailouts is simply the case for saving the skins of members of the capitalist class. That was the Western solution to bank failures. Russia can surely find a better solution.
JohnM said, “Russia and other countries should eliminate taxes on gold and silver bullion coins.”
Does anyone know Russia’s tax regulations on purchase and sale of gold bullion?
The USA taxes gold at a collectable capital gain tax rate of 28%. USA encourages saving in USD!
I read Glazievs article with interest. The problem is to implement his ideas and assess the consequences. As he says, there are important legal questions. Russia can’t build a large control apparatus against the laws of the land and there are also international agreements that must be respected. I guess that is what Putin sees first.
The euro was not a bad idea, but the implementation was. We would have been better off without the euro. Glazievs huge control system must be implemented exactly right and that is difficult. Companies will be put under state control. How will they react? The socalled west will make a big thing of it, of course. Imagine the coming propaganda.
New institutions have a tendency to live forever. Glazievs program would put the country on a new path, inviting more state control. Some restrictions have better be temporary.
Glaziev wants different interest rates. What do other economists say about that? When I studied foreign trade models and balances, the financial streams were always a nuisance. I am not an expert on money. I see others have commented on rates and I hope to hear more from them. All I can say is I fear different interest rates will invite more internal speculation and more need for control.
Glazievs is a political program with loft goals to save the russian economy. He has good ideas, but he wants to do many things at once and that is not how Putin thinks. However, it is evident at least something must be done very fast. My advice is to hire a couple of malaysian economists and set up a working team with russian specialists. Let them look at all proposals and evaluate them. Don’t be proud and do everything yourselves. There is much to learn from Malaysia and all of it is not available in writing.
If prevailing interest rates (the cost of money) move from 5 to 10%, the value or worth of a long bond is halved. If rates move from 10 to 5, the bond price doubles. By mathematics, it doubles again when rates go to 2.5 from 5%, or from .01 to .005%. Declines are typical in a deflationary environment where business profits and opportunities are low.
Business assets such as land, buildings, and capital equipment purchased at high interest rates are not cost competitive with similar assets bought during times of lower interest rates. Accordingly, if rates decline capital intensive businesses and industries normally are harmed by extra bond payments during periods of declining interest rates.
The best possible environment is one of low and stable rates, as was the case under the gold standard. There was no bond speculation as it would not be merited because of price stability. This, and no other thing, is the main benefit of having a gold standard.
It seems that RF can ask Ukraine to pay back a 3 billions USD loan because their external debt is now well above 60 pct.It seems to be total panic in Germany.Their finance minister called Putin not to ask Ukraine to pay back the money now because it would force the country to default,with lot of problems for German and French banks(for russian also).
And of course Putin accepted the german request.
Is it a false war,false sanction,just a show or what?
Like RF selling(giving?)electricity,gas and coal to Ukraine.
It seems that the trend is that RF would force LPR and DPR to stay in the Ukraine.
Betrayal once again of Putin.
Is Putin just a puppet in fact?
@KatKan
There are also increased Russian flights. This SU 34 footage made by Dutch military was shown in Russian news. Probably, mutual show-off exercise?
http://www.defensie.nl/actueel/nieuws/2014/12/09/f-16%E2%80%99s-onderscheppen-bewapende-russen
@Anonymous 02:41
Previous Saker blogs have analysed and came to conclusion that Russia wants Ukraine to stay as a united country. But I also do not understand why this sale of gas, coal, and electricity, especially when DPR literally begged publicly for RF to stop the sale of coals…
I am not an economist, but I have to say that CanSpeccy’s points are worth consideration.
One thing that struck me just as an ordinary citizen was that lower interest rates do harm folk such as me, and this is a condition under which we here in the US have been forced to endure for a very long period of time. In effect it seems to mean that saving isn’t profitable – there are other factors involved, assuredly, but this does affect the population in general quite significantly.
Certainly low interest rates are good for corporations, but is that the way Russia really wants to go?
The many variables at work in our reality make it difficult to know what the world will be like 10-20 years from now, but we must still make decisions and some of them must be longterm.
Russian economists should take a look at 3D printers. What they will do to the work force and national and international trade. They can probably revive local economies on the countryside, but how many factories will be closed down? Some, who have studied 3D printers and computercontrolled cars, expect a 20 percent reduction of the work force in the coming years. Are we ready? Can we find a clever way to use the printers? Maximize the gains and minimize the losses when we live in a market economy? What will the robots do to us?
An electric car can soon be printed in 24 hours and we can already produce artificial food. What will happen to countries and companies? Will the elite allow the printers when they start having an impact? Will the printers be taxed? Can we expect new targeted legislation? How will consumers react to printed products? There are many unknowns and they must be studied before making longterm decisions.
If the printers are successful, the economy, including international trade and financial streams, will change in a short period of time and change is always a challenge. Chinas manufacturing industry and perhaps Russias raw materials sector will be affected, if printers become more sofisticated and take over.
Printers are new, I only have questions and I have seen other inventions that got nowhere. Some were not costeffective and others were bought up and disappeared. One good example was a durable nylon stocking for women sold in the 1950s. The company was closed down.
We don’t live in the future and almost not today, we live in the past. Generals fight the wars of yesterday and economists and politicians also live in the past. Russia reorients its economy as best it can, but we may have to wait 20 years before we see what printers, computercontrolled cars and robots have done to our society. We need to study these new innovations so that we can prepare. A 3D printer is like an axe, it can do good or bad.
The function of any government of a nation should be the protection,economic development,and well being,of its nation and its citizens.Not to enrich one class of their people.And certainly not to enrich foreign states and peoples at the expense of your own.It seems in Russia (and many others),some parts of their government have forgotten that.I’ve always thought highly of Glaziev.I consider him a true patriot.As well as a brillant thinker.It was he that gave the speech in Yalta that woke Yanukovich up to the disaster the IMF and EU agreement would bring to Ukraine.Everything he said has or is coming to pass in Ukraine.But for the weakness of Yanukovich the crisis Ukraine is in today could have been prevented.
Uncle Bob
juliania said…12 December, 2014 05:19
“I am not an economist, but I have to say that CanSpeccy’s points are worth consideration.”
Your co-worker misrepresented what Glaziev said and warped the meaning of what he said into something he could “attack”. Glaziev said high interests rates undermined economic expansion because the loan rates were higher than what the businesses securing the loans could expect to earn afterwards. That’s basic math. But your boy, knowing full well he couldn’t attack such logic without being ridiculed as spam, invented this strawman instead:
“”It is clear that by increasing the interest rate while adopting a free floating currency rate, the central bank, on one hand is blocking the inflow of credits to the industrial sector and on the other is enabling the extraction of super-profits from speculation against the Ruble.””
“On the contrary, a cheap ruble should draw investment capital to Russia, while promoting import substitution and driving up exports. And indeed investors such as Jim Rogers are talking about great opportunities for foreign investors arising in Russia.”
That totally misrepresents the gist of Glaziev, and uses a very obvious strawman to attack his views. If CanSpeccy had a real argument, she would have used it, instead, she resorted to the same cheap semantic tricks the zios and fascist spammers use to push their propaganda.
вот так
Dear Saker
Can I please ask you to take a look at this site? http://gizadeathstar.com/2014/12/president-vladimir-putins-state-union-speech-russian-state-duma/
The site is run by Dr Joseph Farrell, an Oxford graduate (in patristics) and he is commenting on Putin’s State of the Union speech.
I think you will be very pleasantly surprised. I have a very high regard for this man, and it is good that he sees Putin’s speech as I see it, and as I believe you see it.
I sent him the speech and he chose to comment on it.
Thank you for the truly wonderful job you are doing of helping us understand where Russia is at – in all important areas.
Kind regards
Daphne O’Brien
their is a GREAT Islamic tax called Zakaah. It is called the ‘Poor Rate’ and is a 2.5% annual tax on ALL assets except for below average value of personal homes. This tax is very much ant-speculation and can also be supplemented with a 1% financial transaction tax. The Zakaah fund is made available to start-up small businesses not as loans but as grants and once these mostly family businesses start employing others, or after a certain term, will themselves contribute to this fund (in perpetuity). I am surprised that ALL countries do not introduce this! Abel Kotze. South Africa
Part 1 of 2
Saker, I posted a comment a few days ago in which I mentioned in passing that (in my own modest way) I – like you – had worked in intelligence. I am a trained historian and researcher, with experience of analyzing data and forecasting trends, for both government and private sector. I have not worked for an ‘alphabet agency’: rather than dealing with espionage and intercepts, those areas of my work most similar to your own involving the analysis of i) criminal intelligence, for police intelligence departments, ii) economic data, for government and business, and iii) international relations, for government and business; but I believe that my skills and mind-set are intrinsically similar to yours. (As I mentioned in my last TVOTS post: I realized that you and I shared professional backgrounds half a year before you stated so on your own blog.)
My previous TVOTS comments raised my fears about Russia Insider censoring posts critical of the Atlanticist, AngZio weltanschauung. Whole reams of key words seem to be banned in conjunction with certain sensitive stories, within the reader comments section of said stories. For example, ‘CIA’, ‘Israel’, ‘Kissinger’, ‘CFR’, etc. Not on every story, but on sensitive stories.
The problem is severe to the degree that I have now decided to stop commenting on Russia Insider. More than half of my posts (sans obscenities or insults, I might add!) are disallowed. Often, I require a painstaking alteration of my rejected posts, changing terms one after another by slow trial and error, until a post is accepted. I find myself reposting stories first with ‘CIA’ removed (I have to use euphemisms like ‘alphabet agency’), then ‘CFR’ removed (I have to use a poor alternative like ‘Globalist establishment’); and so on, until the post is accepted. The banned words and their combinations seem to vary story by story.
Obviously, this is outright censorship. Entire topics have been deemed ‘out of bounds’: most of these topics touch upon the AngZio establishment, its media propaganda, and its relations with Russia. Noticeably, racialist language and rather crass insults are permissible on Russia Insider, provided they are not directed towards Jews; I found the discrepancy apparent.
Within Russia Insider and other ‘friendly’ media outlets, I have noticed that the loudest supporters of Putin’s economic policies are Ashkenazi Jews firmly rooted in the world of the CFR and Federal Reserve, such as Fox News regular and ex-Wall Street Journal ‘journalist’ Martin Sieff (viz “Putin Just Spelled Out a Radical New Economic Policy, And Nobody Noticed” Russia Insider, 11 December). I am greatly concerned that Sieff’s RI puff-piece was not taken from another source: Sieff appears to have written it especially for RI, judging by i) the Google timeline for the article, ii) Russia Insider not crediting the story to a third party website/journal, and iii) the Russia Insider website providing Sieff with a short biography, linked to from his 11 December article.
Part 2 of 2
Sieff’s piece is, to put it simply, the product of a cloaca. I am very familiar with such dross, having analyzed this manner of material over many years. It reeks of being a hastily concocted PR piece written especially for submission to a particular website or periodical, in order to perform ‘crisis management’ by reassure the audience as to a certain philosophy or figurehead. It reads like the kind of classic Wall Street Journal (or Jerusalem Post) self-congratulatory, vacuously puffery one read about Bernie Madhoff or Ken Lay immediately before their falls from grace. It is low on logic, it fails to adapt itself to the intended audience, and it asserts classic neoconservative and neoliberal philosophy. In other words, it reeks of being the product of a Jewish PR agency. “Quick, the goys are panicking! Issue a quick reassurance; those idiots will swallow anything”.
I am equally concerned that both Sieff’s hackneyed dreck, and your own intelligent article, were welcomed by a ream of comments more suited to the National Review or Wall Street Journal than a Russophile, anti-AngZio website. Those commenters critical of your analysis supported the status quo (unsurprisingly) – but with a degree of fervour and neo-liberal orthodoxy leading me to believe that they are likely paid commenters.
The hostile comments read as being scripted, pulling together features that I associate most closely with Israeli Hasbara-style spammers: ad-hominem attacks and insults; inflammatory language; insulting slurs; glaring mis-characterization of the comments of their opponents, and of your own article; outright and inexcusable factual inaccuracies; mis-characterization of the meaning and implications of their own economic arguments; rhetorical devices typical of a highschool debating team; and textbook citation of neo-liberal political and economic dogma.
I will remain a reader of TVOTS. I fear that from now on, I may read Russia Insider only to analayze it.
Sergei Glaziev recommendations should be, in fact must be, seen to be implemented by Putin.
As for now, the Russian economy is bleeding profusely.
Also the ones in the Central Bank resisting these proposals must be fired from office, they are a clear liability to the Russian economy.
The fact that stupidity is worse than theft is also a theorem proposed a long time ago by the economist Carlo M. Cipolla in his essay “Allegro ma non troppo”
Here is a similar discussion on the role of the Central Bank with Evgeny Fedorov, using less technical finesse and a more outspoken style.
Fedorov states that the laws regulating the operation of the Central Bank – originating from the 1993 coup d´état and the 1991 defeat of the USSR – say nothing about the Central Bank´s obligation to act in the interests of the people of Russia but are very clear about its obligation to comply with international agreements, meaning that the Central Bank is de jure subordinated to the IMF.
Now he alleges that the Central Bank, by its monetary policy on behalf of the IMF, is complicit in creating economic hardship to spread mass discontent and facilitate a Maidan in 2015 to remove Putin.
Central Bankers suppressing Russian economy
http://www.youtube.com/watch?v=VT085isnyB0
2:59 Foreign banks own the production in Russia.
8:23 Putin has no authority over the Central Bank.
13:56 Bank of Russia is legally a foreign-controlled Central Bank.
15:21 Road map to Maidan 2015.
Sergei Glaziev said: “Apparently, the heads of the Central Bank are guided by fantasies gleaned from student textbooks on macroeconomics.”
Now, that is an extremely naive remark. The heads of the Central Bank are not “guided” by any textbooks. They are in fact *instructed* by lucidly machiavelian forces into precisely these kinds of measures, the intended effect of which is precisely to asphyxiate the economy and to prevent the emergence of a Russian industry.
Russia needs to nationalize its Central Bank, which means it needs to pull out of the IMF. A tall order, perhaps, but absolutely essential. Nothing at all will be possible without that crucial step. And without that step, everything else will become empty palaver and blather. That much should be obvious.
Russia is indeed playing a high stakes game, where the rules have been laid by moneyboys for the last couple of hundred of years.
These old families have an impeccable track record of never losing a fight. They also own pretty much everything worth owning, including most of this planets assets and they have perfected their game to detail.
There is no upper limit to their ruthlesness
Best of luck to russia.
Economic hardship is being created by the foreign-controlled Bank of Russia’s monetary policies,to spread mass discontent and facilitate a Maidan in 2015 to remove Putin. So claims Evgeny Fedorov, citing the colonialist Central Bank law, established after Washington’s victory in the Cold War.
https://www.youtube.com/watch?v=VT085isnyB0
Joat——things are heating up..
the 5th column are being named..
The American Ambassador,he who organizes colour revolutions,also
the mayor of Moscow,the minister of communications,the regulator of
comminications,the Central Bank is not Russian but imposed as a tribute extraction system.
He did not name Medvedev but I watched Dimitry’s face when V.V.P.
made his address recently.
Absolutly no enthusiasm,face devoid of patriotic commitment,the woman sitting next to Medvedev exactly the same.
They will all be on the same plane to Washington when *it hits the fan
Well worth watching
@Anonymous:My previous TVOTS comments raised my fears about Russia Insider censoring posts critical of the Atlanticist, AngZio weltanschauung
I hear you and all I can say is the following:
1) The folks at Russia Insider are good people. Of that I am certain.
2) Their situation is very different from mine and I can write and say stuff which they cannot. I also get pressure, very regularly, about what I should or should not say, but since I am a one man show I can simply ignore such attempts at silencing me.
3) There are very good people out there who, in my opinion mistakenly, worry about the soundness of the tactic of using words, or covering topics, which might alienate a lot of otherwise good people.
The worldwide community resisting the Empire today is wide and diverse and I think that we should accept that diversity, even if at times it frustrates us. I also wish everybody had exactly the same ideas, attitude and expressions as I do (no, just kidding!), but I have to accept that many/most don’t.
I think that our diversity is somewhat of a liability and, at the same time, a huge advantage so, all in all, I welcome it.
I hope that this makes sense to you.
Kind regards and all the best,
The Saker
If Russia wants to survive the economic “war” with the “western” zionist mafia elites, then it has to make profound changes to its economic system.
(1) Nationalise and radically reform the central banking system,
(2) nationalise the natural monopolies, natural resources and corporations of strategic importance. In other words, the Russian state has to take control of the commanding height of the economy.
(3) Disconnect from globalisation and increase efforts to re-industrialise the Russian economy and to achieve self-sufficiency together with the other countries that are part of the Eurasian Union and other potential allies (Venezuela, Cuba etc)
(4) Withdraw from WTO and reject the Washington consensus and all free trade agreements that only benefit multinational corporations
Watch the documentary “Money as Debt” on youtube to understand whats going on with …
Russia will only be saved if there is a return to a new modernised version of soviet socialism.
Why is Fusion Power not available now??
We now have a working prototype of a fusion reactor.
http://www.energyenhancement.org/UW-fusion-reactor-HIT-SI3-clean-power-concept-is-cheaper-than-coal.htm
Larouche and all his associated scientists have been saying that Fusion power, if seriously pushed, has been possible for 30 years.
Larouche and all his associated economists from Liebniz on have been saying that Fusion power, if seriously pushed, is the one factor that could enable space travel, 10% economic growth, human wealth and thus human evolution to new levels.
We know that 4th generation nuclear reactors are possible.
We know that 4th generation thorium nuclear reactors, thorium mines in Kashmir, are possible and have been possible for a long time.
So, why have supposedly other Empires not developed fusion power yet?
Why have supposedly other Empires not developed Hamiltonian economics in which the Government takes over the Banks and creates zero percent hundred year loans to create infrastructure and fusion power, enabling Wealth creation of 10% per year economic growth?
We can understand that Russia who have a great deal of oil, gas and other commodities want to sell their oil and grow in this way but this is the way of a banana republic benefitting only oligarchs.
Indeed the 2014 Ukraine blowup stems from Russia wanting to sell its oil to Europe. Syria is stopping the American Oil companies Qatar from putting pipelines through Syria. Russia is supporting Syria because it wants to sell it’s gas to Europe by stopping the US pipeline. Europe does not want to be so dependent on Russian Gas.
http://www.informationclearinghouse.info/article40162.htm
Notice this information is not easily available..
But India has no oil, but it does have thorium mines in Kashmir, yet those resources have never been developed in 4th generation thorium nuclear reactors to the benefit of their people.
China has no oil, yet it has developed 4th generation breeder reactor technology such that the reserves of uranium already available in China could produce sufficient power to all China for a thousand years without any ingress of oil or gas.
China has no oil, yet it has no working prototype of a fusion reactor which it could easily create.
Yet no-one is pushing fusion or 4th generation nuclear power.
Why has Russia not developed fusion or 4th generation nuclear power?
Why has Russia not developed Hamilton and Friedrich List economics in which the Government takes over the Central Banks and creates zero percent hundred year loans to create infrastructure and fusion power enabling Wealth creation of 10% per year economic growth??
Why??
Until sovereigns recapture their respective monetary creation processes, taking away the current private banking dominance of monetary creation through the issuance of debt, the battle will be lost. The sovereign must create and spend directly into the economy their currency. There are movement in both the US and Europe for monetary reform. The American Monetary Institute in the US and Monetative in Europe. Movements directed by Doctors Stephen Zarlenga and Joseph Huber respectively. Until private banking dominance of money creation is destroyed and sovereigns retake the process the current situation will be perpetuated. I would suggest reading the NEED ACT put forth by AMI and ex-Congressman Dennis Kucinich for a true explanation. Money need not be debt!!
@canspeccy
I believe you do not really understand economics or accept that Central Banks for the greater part are private banks.
Obviously, your understanding of money itself is very lacking.
@Dr. George
The problem with MMT is two-fold. They accept the current private banking dominance of money creation and they mistakenly believe the sovereign, the US, currently directly spends into the economy, which is a falsehood. Simply their ideas are prescriptive rather than being a true description. Again, I suggest the AMI approach.
Reading Sakers take on Russia insiders [censoring of some comments] policy, I relate to the swedish anti join NATO activism by some notable swedes, like Hans Blix and the former Moscow ambassador Sven Hirdman. Describing the reaction to the ‘change’ in Ukraine they talked about the russian people ‘believing’ in the sense of conspiracy theorizing, that the Us was behind the maidan events. I felt that they probably dont want to position themselves too far from the msm narrative, and calculating that it would be easier to align people no matter how misinformed they may be.
In all the discussion of the economic crisis and battle between Saker’s EurAtlantic Ingetrationists and EurAsian Sovereignists, there is something that is not being addressed.
Putin might want an economic crisis in Russia.
That may sound crazy but a big economic crisis in Russia would have certain advantages for Putin in his confrontation with the fifth column.
First he could blame such a crisis on them, tarring them even further and forcing them to either support obviously harmful policies or slink away defeated.
Second, a crisis would create the political conditions necessary for far reaching policy changes of the sort envisioned by Glaziev.
Third a crisis provides a grand stage for the failure of the policies of the fifth columnists.
In other words, Putin may just be giving the fifth columnists enough rope to hang themselves.
After all if these people are as powerful as we have been led to believe by Saker and others, then fighting them now will cause great damage to the economy anyway. Why not let these people pursue their policies awhile longer, then use the resulting economic crisis to discredit and destroy them while rallying support around Putin’s policies. This will damage the economy, but thats unavoidable, whichever option Putin pursues.
@Charles Fasola said,
“Until sovereigns recapture their respective monetary creation processes, taking away the current private banking dominance of monetary creation through the issuance of debt, the battle will be lost. “
Can you give a concise explanation of how a banking system where banks do not create money through lending would work? I’m just curious.
I agree that the govt should spend directly into the economy. But that does not address the question of lending by banks, either public or private. Neither does it address the question of what happens to household savings.
Many people say money doesn’t have to be debt. But how do you achieve that? Money is always going to be a claim on economic output/resources.
President Putin must take control of the Bank of Russia.
Who does the Bank of Russia serve? At the moment the Bank of Russia is not subject to the Russian government but acts “independetly”. This means that its actions are not neccessarily for the benefit of the Russia people or the Russian state. Actually, most of what the Bank of Russia has been doing the past years is contrary to the interests of Russia. The high interest rates reduce the will and the possibilities of Russian industrialists to invest in Russian industry and economy, thus making the country more dependent on foreign banks and foreign credits for development. The continuing buying of American state bonds strengthens the US economy, not the Russian. This lack of state control over the Bank of Russia is dangerous and improductive. Even most of the Russian oligarchs should understand this fact. This separation from the state was achieved during the catastrofic Yeltsin years, when liberal traitors sold out the whole country. It was made for the benefit of Usa and foreign banks, not for the benefit of Russia. It was done to keep Russia down as a third world country, as just an exporter of natural resources with no own industrial production.
President Putin must immediately take back control over the Bank of Russia and the money policy. This can be done by collecting a 2/3 majority in the Duma (with the help of all parties,) and passing an emergency law that puts the Bank of Russia under the government again. Then the Bank of Russia will stop working for foreign bankers and governments and start working for Russia. I am sure that the opposition parties will support such a step, and even the oligarchs and businessmen should support it (if they are not bought by Usa) as it will be good for business and investments. Just look at the chinese. They have bankers and oligarks/businessmen too but they are chinese first, and proud of it. They do not betray China for dollars. I hope the Russians can be as patriotic as them, then Russia will be stronger and that is good for Novorossia too!
Nik