This article was written for the Unz Review: http://www.unz.com/tsaker/putin-is-finally-purging-the-medvedev-government/
While the word was focused in rapt attention on the outcome of the US Presidential election, Vladimir Putin did something quite amazing – he arrested Alexei Uliukaev, Minister of the Economy of the Medvedev government, on charges of extortion and corruption. Uliukaev, whose telephone had been tapped by the Russian Security Services since this summer, was arrested in the middle of the night in possession of 2 million US dollars. Putin officially fired him the next morning.
Russian official sources say that Uliukaev extorted a $2 million bribe for an assessment that led to the acquisition by Rosneft (a state run Russian oil giant) of a 50% stake in Bashneft (another oil giant). Apparently, Uliukaev tried to threaten Igor Sechin, the President of Rosneft and a person considered close to Vladimir Putin and the Russian security and intelligence services.
Yes, you read that right: according to the official version, a state-owned company gave a bribe to a member of the government. Does that make sense to you? How about a senior member of the government who had his telephone tapped and who has been under close surveillance by the Federal Security Service for over a year – does that make sense to you?
This makes no sense at all and the Russian authorities fully realize that. But that is the official version. So what is going on here? Do you think that there is a message from Putin here?
Of course there is!
Remember the corrupt Minister of Defense Anatolii Serdiukov? He was first fired from his position and only then arrested. But this time around, it is a member of the government which is arrested in the middle of the night. For a few hours, his subordinates could not even reach him – they had no idea what had happened to him. Was that a mistake? Hardly.
The way Uliukaev was detained was carefully choreographed to instill the strongest sense of fear possible in all the other 5 th columnists still in power because in so many ways Uliukaev was a symbol for all the the “Atlantic Integrationists” (those in the Kremlin who want to integrate Russia into the US controlled international security system): Uliukaev was a known liberal, just like Nikita Belykh, governor of Kirov Region, who was detained in a high-publicity arrest in June for taking a 400’000 Euros bribe. I would even say that Uliukaev could be considered the ultimate symbol of the Atlantic Integrationists and a faithful member of the Russian “liberal” (meaning the “Washington consensus” type) sect who, in the past had worked with Egor Gaidar and Alexei Kudrin and who now has been brought down by the Russian “siloviki”, the top officials of the so-called “power ministries” (defense, state security, intelligence).
This was immediately recognized by everybody and the main headline of the popular website Gazeta.ru could not be clearer, it read: “The Siloviki brought down Uliukaev” and featured a photo of the key actors of this drama, including the tough-looking man thought to have brought Uliukaev down, Sergei Korolev, the Head of the Economic Security service of the FSB (shown on photo here).
In April, I predicted that a government purge was in the making. I have to admit that I thought that this would have happened earlier. Apparently Putin decided to take action while Uncle Sam was busy with his own, internal, problems. If that is indeed the reason for the late timing, that says a lot about the power of the USA still wields in Russia. Some observers noticed that the arrest of Uliukaev took place after the telephone conversation between Trump and Putin, hinting that Trump might have given Putin the go ahead for the arrest. That is, of course, utter nonsense, but if that can make Putin look bad – it’s good enough for the 5th columnists.
The list of potential ‘candidates’ to be purged next is still long and includes names like the Deputy Prime Minister Arkadii Dvorkovich, the First Deputy Prime Minister Igor Shuvalov, the Governor of the Russian Central Bank Elvira Nabiullina, the Minister of Finance Anton Siluanov and, of course, Prime Minister Dmitri Medvedev. Uliukaev was only one amongst many more. Still, he was definitely a top-level target and the manner in which he was arrested must have sent a chill down the spine of all the other 5th columnists in the Kremlin. Just the fact that his phone was tapped for so long is quite unthinkable and clearly points to the fact that nobody is safe from Putin’s purges. And that, by itself, is truly a most welcome change: every member of the Medvedev government now has been put on notice that his/her life is now spent under the close scrutiny of the FSB.
It really matters little what will happen to Uliukaev next. He has be formally arraigned, now his case will be further investigated and then Uliukaev will have his day in court (right now he has only be detained and he will be kept under house arrest for the next two months). Potentially, he faces 15 years in jail and a fine equivalent to 70 times the amount of the bribe he took. Judging by the case of Serdyukov, who is managed to escape any prison time thanks to a Presidential Amnesty for the 20 years of the Russian Constitution, Putin seem to be reluctant to inflict any form of retribution upon his enemies. But even if Uliukaev does not get to enjoy the fresh air of the Siberian taiga, he is already finished as a power broker, and that is all that really matters to Putin.
What matters here is that in the course of one night, a top level Russian Minister went from his Ministerial Offices to a holding cell and that absolutely nobody saw it coming or could prevent this. Yet again we have a case of 100% Putin style: no warnings of any kind, no hints even, just sudden dramatic action with an immediate result. His “handwriting” is clearly all over the case.
The reaction to this arrest in Russia was predictable, especially after sources in the security services told the Russian media that Arkadii Dvorkovich and Andrei Belousov were also under investigation. Anatolii Chubais, for example, declared that he was in “total shock”. Even better was the reaction of Prime Minister Medvedev who said that this development was at the “edge of his understanding”.
It will be interesting to observe the inevitable reaction from the Atlantic Integrationists: if they really feel defeated, they will pay lip-service to the need to “fight corruption on all levels” and generally keep a low profile. If they still have some fight in them, they will denounce a “Stalinist” crackdown, the return to “1930’s -like purges” and a “new campaign of terror” against democracy. The western corporate media, whose only “value” is money, will write about how the Russian “secret police” is cracking down on “business entrepreneurs” and how that will end up damaging the Russian economy. Basically, a repeat of the whining which we all heard when Putin dismantled the infamous semibankirshchina. As Elton John would say, we “have seen that movie too…”
As for the rabid Putin-hating nationalists, they will say that this is too little too late. For years they have been complaining about corruption and how top level officials were never investigated, and now that they seem to have gotten their wish, it’s “too little, too late”. But that doesn’t really matter, since they have almost as little credibility with the Russian general public as the pro-western parties like Iabloko or Parnass.
The main media outlets and political commentators are all giving Putin a standing ovation right now. That is hardly surprising since they are the ones who for many months now have been loudly and constantly complaining about the “economic bloc of the government”, meaning the pro-US 5th columnists inside the Medvedev government. Quite literally all the main political commentators have been begging and demanding a purge of this “economic bloc” and a radical change in the economic policies of Russia. Well, they got one villain purged, which is a good start, but there are no signs that more heads will roll or that the economic course of Russia will finally break from the Washington consensus kind of policies and be replaced it with much needed policy of internal growth. But then, knowing Putin, we should not expect any signs – only action.
In Russia, just as in the USA, changing the people is far easier than changing the system while the only way to achieve real change is, precisely, to change the system, not the people. So far, Putin has only succeeded in kicking some of the worst people out and, to his credit, getting some very good people in. Now that a threat of war with the USA is very substantially reduced and that Uncle Sam will be busy with his own, internal, struggles, I hope that Putin will finally take some very strong action to liberate Russia from the Washington consensus types and replace them with real patriots who will finally make it possible for Russia to become a truly sovereign country, even in the economic sense.
“The list of potential ‘candidates’ to be purged next is still long and includes… the Governor of the Russian Central Bank Elvira Nabiullina…”
The central bank did a good job in the end in managing the fall-out from the collapse in the price of oil. What reason is there to purge its governor?
The RCB made huge mistakes, like free-floating the Ruble or keeping interest rates high. The emission of the Ruble is also pegged to the purchase of dollars, which is plain crazy, and Russia is still investing in Tbonds. Bottom line: the RCB does everything exactly right if you are Soros and everything completely wrong if you are the average Russian.
A floating exchange rate is the least painful way for an economy such as Russia to adjust to shocks such as the collapse in the price of oil, for reasons akin to those for arguing that the Mediterranean countries should not have joined the Euro – with the exchange rate fixed, the adjustment to relative prices is effected by painful grinding deflation. The average Russian has reason to be grateful for the decision to allow the ruble to float, despite the fact that it made imports more expensive.
Despite high nominal Interest rates inflation persisted in recent years at double-digit rates. This tells you that monetary policy was not excessively tight. Quite the contrary. Cutting interest rates would merely have stoked inflation further, which does the economy no good – and does the average Russian no good, unless the average Russian has borrowed heavily.
“The emission of the Ruble is also pegged to the purchase of dollars.” I genuinely do not know what this means or what process it refers to.
“I genuinely do not know what this means or what process it refers to.”
If you don’t know, why are you arguing?
What I understood, I argued with. What I couldn’t understand, I didn’t. I’m willing to learn. Do you understand it?
My understanding (don’t take it as gospel) is that there are two ways to not have free floating: one is to peg it to a foreign currency, with control being in the hands of foreign power, and the other is for the government to fix the exchange rate as it chooses. The latter might be like free floating to an extent depending on how the government handles it and what rate it chooses — and the variable there would be if and how many foreigners want to ‘buy’ the currency at a given price, like a store that sets the price for a product and the customer can take it or leave it, while free floating is like a flea market where each potential customer haggles with the different sellers over prices. Money, even sovereign fiat, can be treated more like a commodity in international finance and foreign exchange. That’s as much as I can say now before I’m floundering in the deep end.
With regards to floating exchange rates:
After Nixon closed Gold Window in 1971, the world transitioned to floating exchange rates. Supposedly, if one trading nation has a trade imbalance with another the rates would float up and down relative to each other, to then balance trade. Note I said supposedly.
After Bretton Woods and up till close of window, the world used a trading gold standard. (Note: this is one of the few times gold was useful in monetary history.)
If two countries were imbalanced in trade, they would satisfy goods imbalance with gold flows. For example: Germany sends too many BMW’s (goods) to America, now Germany is holding Dollars in excess. Germany sends dollars back to buy American goods – or gold. If gold is bought by Germany, America is then forced to adjust its exchange rate relative to German Mark downward, to then have American made main-street goods more attractive to buy. Perhaps German’s start buying Buick’s because they are less expensive now? American’s don’t want to lose their gold, hence exchange rate adjustment.
One thing you need to permanently fix in your mind: All foreign trade is only BARTER. Read it to yourself several times and put in memory. Don’t forget.
Keyne’s Bancor system was/is the best accounting device invented so far to adjust trade flows. Bancor’s account for goods flows, and then rate adjustments are made. It signals only for goods flows, and does not include pricing manipulations such as exists from finance sector.
The world needs an accounting system to allow international trade, and said system must disallow mercantilism, bear raids, currency rigging and the like.
A third circulatory system like a Bancor would stop a lot of the sophisticated economic crime going on today.
For example, exchange rates are collapsed purposefully using techniques such as shorting bear raids, a technique that Soros uses. Germany’s hyperinflation, which led to Hitler, was of this type of raid. (not enough space here to explain it.)
In the case of Russia, Oil prices were collapsed purposefully (Saudi pumping etc.), to then collapse Russian Central Bank reserves, to then lessen Ruble emissions. Less Ruble emissions = need for foreign credit as money as investments. Need for foreign credit as money, requires lowering Ruble exchange rate. Did Russia have any control over this foreign attack?
These factors: Floating exchange rates, dollar loans, dollar as reserve, private credit banking, are elements of full spectrum economic war.
For more on economic war mechanisms see Perkin’s book, “Confessions of an Economic Hitman.”
Sorry, Russia has to raise rates to attract foreign credit. The linkages can get complex as there are so many knock on effects.
But, why do you have to attract foreign credit?
A country that has innate resources and human capital, can simply make their own credit, and then channel it into productivity modes.
This then leaves behind a wealth effect, as the labor energy of the people was put to effective use.
The only reason for acquiring dollars or other national units, it to acquire those things you cannot easily acquire on your own national economy.
A multipolar world needs a bancor system, not floating rates, and not SDR’s.
“A country that has innate resources and human capital, can simply make their own credit, and then channel it into productivity modes.”
Reads like Alexander Hamilton’s grounding for the First National Bank of the US. Love to see it again, certainly in the USA. In Russia , too? Great.
To which you can add the opinions of ‘experts’ in economics, particularly those ‘anointed’ with plaudits:
Like Trump says he wants to do in the US. I won’t be happy until Russia re-industrializes and stops importing products from the West that can be produced in Russia. So they can’t be cut off with Western sanctions or blockades.Russia is a major oil and gas producer.And yet much of the equipment needed for those industries is imported from Western countries.She exports the oil and gas to the West. Where some of it is used to produce products. Which are then exported at high prices back to Russia.Russia is a major market for commercial aircraft. And has a great history of producing aircraft. But today most of those commercial aircraft are imported from the West.The same can be said for the automotive industry.And yet Russia is a major importer of Western made vehicles.There is a huge list of products like those that are imported.If you watch Russian TV programs you’ll see ads running for Western brand products ,same name,same color packages in most cases. Only the alphabet on the label is different (and not always even that).If the commercials weren’t in Russian,they’d be no different than the commercial for that same product in the US. And yet these products could and should be produced inside Russia. Russians complain bitterly that they can’t get loans to start up companies to produce goods because the Central Bank forces banks to have high interest rates on loans.Making it almost impossible for anyone except the major players to pay them and still make a profit to build the company.And that there is no sustained government policy to put a “made in Russia” stamp on their economy. Countries that can’t produce and advance from internal sources,can never really be independent and have or regain their sovereignty.
Uncle Bob 1 is on spot. The heart of the darkness lies in the independent Central Banks. The policies of those banks, everywhere, are killing the local real economy. Independent Central Bank is one of the main tools(weapons) of the globalists, and very efficient tool. Russia don´t need crappy western brands. Build your own economy on your own brands and maybe some day you will export those brands in numbers. After that nobody will dare to call Russia “a giant gas station”.
The Germans already know how to do make things, and they have the laws in place that promote national self-sufficiency and a corresponding high standard of living. Why don’t the Russians translate German laws in Russian and adapt them for Russia? No need to reinvent the wheel.
Germany depends largely for its prosperity on the competitiveness of its export sector. That isn’t self-sufficiency. That is trade.
@ lindsay hall
“Germany depends largely for its prosperity on the competitiveness of its export sector.”
True, but the full equation is: ‘Germany derives its prosperity from exports that are competitive only because its currency is inordinately weak compared with the strength of its economy.’
This is really interesting – if Germany had its own currency, its export market would be inversely related to the strength of its currency i.e. the stronger Germany, the stronger the Mark, the more expensive their exports would be. This wonderful, export assisting weak currency explains Germany/France’s love of the Euro and why they love poor economies joining (E. Europe) and remaining in the Euro when bust (the Med countries). Perpetuating the Euro crisis is a real big winner for Germany.
The same dilemma is at the heart of Russia’s economy: Russia sells its raw materials in competition with slave-based economies (middle east) and African nations. Well, its currency and economy must remain weak if it is to compete with these. So how can it invest in industry, make itself a major producer, build a broad economy, strengthen the ruble and at the same time maintain a competitively priced mineral export market?
The beauty of the US’s attack on the ruble is that Russia now has a wholly new external reason why the ruble will stay weak, aiding exports. It can only now seize the chance to build its production and industrial economy because sanctions and monetary warfare from the west are keeping the ruble artificially low. In any other scenario, Russia’s economy becoming strong would put huge pressure on its mineral exports. What the shitty Euro aids German manufacturing and exports, so attacks by the west are for Russia. It is another sweet own-goal by the neo-cons that no one talks about.
This is not entirely correct. Germany does indeed benefit from the Euro – but it was competitive in much the same way for decades before the Euro’s launch in 1999, when a persistent real appreciation in the DM did not prevent a persistent trade surplus.
You are a theorist, I can see that. Germany had a consistently weak currency relative to its economy merit of repeated costly set-backs (re-unification, etc) which held its currency down. There were no events or policy which caused a real appreciation in its currency, if you look through its charts. The Euro is a significantly weaker currency yet. I work in manufacturing of a kind and use foundries and engineers all over Europe. We have seen our engineering drain out of our country (UK) to Germany on the basis of relocating for export and currency weakness reasons. Any other explanation plays the old racial superiority tune, which I don’t buy.
And for Russia? Lets ramp up the ruble, and then what?
I don’t think what you say can be quite right. Yes, there was a period of adjustment around unification. If you look at the whole post-War period, you will see a steady real appreciation. I don’t know how you measure fair value “relative to its economy merit”, but I don’t recall anyone claiming the DM was “cheap”. German was competitive because it kept its costs of production down. As for the euro, it’s not cheap enough for most of its members!
Proper gander, I agree that the Euro helped the German exporters, but not so much with move from D mark to Euro, but mostly because they gained market share from their French and Italian competitors who previously had costs denominated in (much weaker currencies) F franc /lira.
The euro zone is a zero-sum market: German producers gain is the other countries’ producers loss.
How can a pan-european market with exports from all member states governed by a single law be a zero sum market? That makes no sense. Germany benefits because it has sequestered by treaties signed in the 70’s and 80’s the engineering element of a centrally planned market.
One single country in a fiscal union is the worlds second largest exporter? How? Their externally oriented market share (as opposed to agriculture for example) benefits inordinately from a weak currency.
What makes you think the Euro is a weak currency? At introduction in 1999 was designed to be around 1.00 :1.00 USD. Historically, the Euro was much stronger than the USD on average trading 1.0: 1.20 EUR:USD even reaching 1.0:1.5 EUR: USD.
The German DMark was locked into the Euro at a slightly lower (weakness due to reunification which is what you pointed out) Due to this, Germany gained a trade advantage over its it’s European competitors who adopted the Euro.
Dollar dependence for the ruble has also been decried by both Michael Hudson and Paul Craig Roberts. they both ask, why not MMT; what’s the stall? (me: is it link to the Yuan? is it lack of economic diversification? i don’t get it.)
furthermore, is the balance of power in Moscow so tight that the neocons must appear crippled, just to permit domestic Russian corruption charges? is there a generational factor in play?
addressing pt 2, the Trump presidential victory may yet be contested. uncounted ballots in each of the swing states are multiples of Trump’s victory margins; and that’s just the uncounted, not the defrauded. it’s all in the numbers – Greg Palast;
“why not MMT; what’s the stall?”
I think it’s two fold: one is the Atlanticist/corporate 5th column, and the other that so many Russian economists got their education in western schools or by western standards with the same sort of assumptions as made by the Chicago School and neo-classical economists — which is similar to why the West hasn’t caught on the MMT and other heterodox systems.
That’s the way it’s done because that’s the way it’s done, with the high priests watching their own pockets and status, like how they all tend to be stuck in capitalism, or any established system.
There is a challenge to the results, but what I was able to find in the fake news site Truthdig (California-based and pro-Democrat) is a reference to another fake news site, The Guardian:
“A growing number of academics and activists are calling for US authorities to fully audit or recount the 2016 presidential election vote in key battleground states, in case the results could have been skewed by foreign hackers.”
Read those last two words carefully.
From what I understand, it means the central bank is backing their newly created rubles with foreign capital. In other words, the ruble is NOT printed out of thin air.
What you are describing is a currency board, I think. Halfway between a fixed exchange rate and a single currency. Argentina tried it and came to grief. Russia has its own currency, issue of which is determined by its central bank. So the Saker’s comment still puzzles me. He, or someone else, may yet clarify.
I agree with Lindsay Hall.
The Sakers point is understandable if he is a sociaist.
Currency is a complex issue.
It was a major mistake to allow Russian companies and private people to borrow in euros and dollars. Those companies and people now face serious problems. And that is also what drives the push for a higher exchange rate.
The falling exchange rate did a lot to keep Russia’s trade balance positive and to keep it from being too vulnerable for sanctions.
What really went wrong are the things in between: There was no need for a high interest rate: its imposition showed a flawed understanding of what inflation is and it harmed investment. Russia needed major investments to get profit from the low ruble – but it got almost none: the government foolishly expected the private sector to do the job while the private sector didn’t consider the turbulent times and high interest rates a good investment climate.
The latest reports claim that Putin is pressuring state companies to sell rubles in order to keep the exchange rate up. It sounds rather foolish to me. Russia still has a positive trade balance so there must be money flowing out of the country. There are many steps short of a fixed exchange rate that could influence this process – from an obligation to register every money transfer out of the country to obligatory delays to formal permission requirements.
Free-floating the Ruble and opening up Yuan/Ruble swap lines was the way for the country to blunt an obvious hybrid war attack via the financial markets, so was raising interest rates.
That was 2015. Today with inflation over-stated at around 6% the BoR with its 10% benchmark rate is doing the Atlanticists job of keeping the Russian economy from recovering fully by short-circuiting the virtuous part of the credit cycle.
That’s the current problem. Nabullina needs to aggressively cut rates to around 6-7% in 2017 to stave off being purged under the anti-5th column laws.
If she doesn’t then the Russian economy will slip back into recession, making the Ruble even more susceptible to exterior shocks. Glazyev’s proposals of low interest loans from the BoR to businesses is a good reform.
But, The Saker and Glazyev are wrong about the Ruble. Floating the Ruble was the right course of action. Price controls are always stupid. Putin would have been overthrown and the whole edifice of Russia would have collapsed again and Soros would have won.
Now, the question of who issues the currency and why? That’s a separate problem that needs to be addressed. The BoR needs to be reformed, to be sure.
Saker, here is a link with some explanation for those unfamiliar with situation:
Hudson has other articles about topic.
This article basically advocates printing money “ex nihilo” ie out of nothing. So if this truly is the solution, then why work? Just print up the money and be done with it.
What works for the reserve currency may not work for resource-based emerging economy.
Read up on MMT — Randy Wray and Stephanie Kelton are good sources, as well as Hudson.
The economy is always based on the tangible reality, and money is a way of measuring that — even when talking about expected returns on investing resources. Money is accounting, not real wealth, but accounting is a very important tool although it should be realistic: that is, reflect the real wealth.
Money is created out of nothing (as a legal entity) by governments in a way similar to how grades are created by teachers or points are created by ball game scorekeepers — and those should also reflect reality (including future expectations of production). When a farmer plants seed he also creates something out of nothing: the crops he expects to get at harvest time, and he can trade that expected yield for products he needs now. He can count his chickens before they hatch, and sell them, but such futures may be pen to some speculation as to what the weather will be, and might fetch a lower price than chickens he has now because there are risks involved which the buyer want’s to insure against.
The farmer who invests in seed still has to do the work of farming to harvest the crop — unless he is also a financial investment company who can run a Ponzi scam or sell the same crop to dozens of different people using CDO tranches that rating companies give top scores to.
Surely money is also a claim on real assets, so Serbian Girl’s point is valid.
It may be a diluted claim on real assets, however — making it a less strong claim, which can be seen as inflation. If you take out a loan from a bank and pay it back the next6 day with interest, that interest, that endogenous money, is created from nothing and is not contingent on the production of more real assets. The real estate bubble (or DotCom or whatever) shows how massive amounts of money can be created with no relation to real vale. Keeping money and value in sync requires intention, regulation, and control structures.
“Keeping money and value in sync requires intention, regulation, and control structures.”
… or a competent central bank managing the money supply.
You seem to be a little confused by all these ‘fancy’ rambling articles, reports, written by Western ‘educated’ (= uneddicated) ‘economic experts’ (e.g. Hudson & Roberts are an exception), no wonder, because that’s exactly their (the system’s) intention, to cover up a monstrous fraud.
Russia & the US of America are rich countries, which ought to issue their own money, instead of having to pay (usury, interest) for their money to (& having it controlled by) a bunch of monstrous (un-Russian/un-American) criminals & Bernie Madoff-like frauds/charlatans (e.g. the Nazi bank BIS in Basel – the former trans-Atlantic slave traders/exploiters). It is pure slavery.
Spot on. Debt = slavery. Its issuers are vampires. The effective extraction of interest from the enslaved can only be realistically pursued if its issuance is backed up by thugs. Removing the dollar from the gold standard in ’72 allowed the west to spend more than it earned. Happy days. Unfortunately, the rest of the world was forced to fund this – to buy esp the dollar at the point of a gun, and then pay interest at the point of a gun. This is what Russia is attempting to pull down.
There can be no peace in the world so long as there is debt, because debt collection requires thugs.
This is also not correct. Lending and borrowing is a perfectly good mechanism for increasing economic efficiency by directing capital to productive investment and allowing greater choice between present and future consumption. Usury is bad. Excessive borrowing is likely to end in tears. The US exploitation of the U$ status as the world’s reserve currency is something the rest of the world should seek to put a stop to. None of this means that debt is a Bad Thing.
Lindsay, you are a bit bookish and apply theory over reality. You are talking about banks lending against their deposits at a 1:3 ratio at a non-userous rate. That has not been seen for 50 years. Lending in a currency that is backed by nothing but a force of arms, in which the majority of currency in circulation is issued by private banks as debt is not a ‘perfectly good mechanism for increasing economic efficiency by directing capital to productive investment’. It has destroyed western productivity as much as it has destroyed our culture by allowing power and influence to concentrate in the hands of non-productive entities i.e. banks and governments. Maintaining this false international economy has also, since 2000 alone, cost the lives of over 10 million people in wars against banking and currency independence. Wake up. This isn’t a theory.
The notion that borrowing and lending has produced all the ills of neoliberalism is just not correct. When something goes wrong, it is important to identify precisely what. A sound banking system is essential to any modern economy. It is foolish to advocate sweeping it all away. What is surely needed is to reverse some of the reforms and deregulation which allowed commercial and investment banks to merge and allowed them to engage in excessive and inappropriate lending (e.g. mortgages in the US), and which extended to them an implied bail-out guarantee, which gave traders an incentive to take huge short-term risks knowing that their bonuses would be safe even if their trades eventually blew up etc. etc. Sweeping and inaccurate condemnations of everything and anything to do with current practice is unhelpful.
In your comment you refer to excesses by commercial bank gamblers and traders. As if these mattered! These are silly boys and flies on the back of the hog. They caused a little pain to a few plebs. You still talk hopefully about better regulation, even after the outrages of 2008 bailouts. This article and my comments are about the great ideology of debt and enslavement. That is the issue of the article, and the issue Russia and China et al are trying to navigate and break.
You seem to be missing the whole outrage of the post Bretton Woods imperial US/UK exercise of debt and death skipping and felling hand in hand through the fields of humanity. Un-backed debt/credit based economics is at the root of all, all, all, the ills of social society, economics, environmental degradation, labour rights and geopolitics. Period. And, on point with the article, not because it is an unregulated mess as you imply, but by deliberate regulation and law that favors and promotes debt and indebtedness. If you can’t follow the consequences of willful, debt favoring regulation and international treaty from its intent through to its inevitable excesses and societal, environmental and geopolitical consequences, or understand how that concentrates power and leverage into the hands of corporations, including banks, and un-elected power structures, start thinking again.
I sense the moderator is getting weary of our blunderbuss duel.
One final question: what debt is it irks you in particular? Private sector debt or public sector? Debt in one country or international debt? U$ debt poor countries are induced to take on (Economic Hitman style) or US debt with the rest of the world? Or is it all debt everywhere and everywhen?
False. It is a fact of modern monetary fiat currencies that the soveconstraint areign issuers of those currencies have zero fiscal constraint to spending on available resources in their unit of account. The ONLY constraint is the availability of REAL resources, i.e. labor power, material, etc. The following series from Australian economist Dr. William Mitchell is the best and most assessable explanation that I’ve found regarding the function of a modern monetary economy: http://bilbo.economicoutlook.net/blog/?p=332
Yuck! Printing money “ex nihilo” destroys workers, retirees, savers and families. It benefits oligarchs, debtors, politicians, special interests, cronies and various insiders. Best never to do it.
@ Serbian Girl “This article basically advocates printing money “ex nihilo” ie out of nothing. So if this truly is the solution, then why work?”
That is exactly what happens in economies with a central bank where the central bank is Rothschild controlled (almost all western countries but don’t know about Russia). They have assets of say 1 billion and “fractional reserve lending” allows them to lend something like 9 billion. That is printing money.
Hi Redadare, no, fractional reserve is not printing money. It simply defines which fraction, % of the total cash deposit may be loaned out by the banks .
This does not affect the total volume of the money supply, only the amount that is loaned out. The government can increase or decrease the % of this reserve depending on how much money is needed in the economy.
What Michael Hudson’s article is saying is that the central bank may print as many rubles as needed without any reserves whatsoever.
sorry, that’s not the case. when banks make loans they create currency ex nihilo, and when the central bank buys treasuries it also creates currency ex nihilo. please watch mike maloney’s concise and extremely informative video on the subject:
Bro of the sorrowful,
you are right. Credit is money.
We all agree creating money out of thin air is a bad option whether it’s through fractional reserve or central bank.
What I was questioning why are there are economists that advocate this for Russia.
No, we don’t all agree, because all credit (money) is created out of thin air , and what varies is writing standards, collateral, etc. There is no credit that is not created out of thin air. It is an institutional artifact, it has no existence outside of law, courts, enforcement, human institutions. Cows, foxes, birds, mice don’t care what credit is. Only humans, and only in context of institutional framework within economy. (rodents might make nests out of paper money, but they don’t care what the human, credit value is)
And we don’t all agree that credit created out of thin air is bad, because of the importance of what the use is going to be. Productive credit vs unproductive credit.
All credit is not created out of thin air. When a saver takes his existing money and lends it to a borrower that’s credit.
Some practices of fractional reserve banking do create credit out of thin air and this should be considered as increasing the money supply. But this does not apply to all forms of credit.
Serbian Girl, that money you mention, “When a saver takes his existing money and lends it to a borrower that’s credit.” That existing money is credit that was created out of thin air. There is no commodity money anymore.
And BTW, banks haven’t done fractional reserve banking for a long time. Banks don’t lend deposits, they create them. The Bank of England says this also. Instead, banks put the vast bulk of deposits into government bonds, to earn interest. Bank lending is capital constrained, not reserve constrained. Some countries have done away with reserve requirements, because they serve no purpose for lending. Banks don’t lend deposits, they create them. Ask the Bank of England. Textbooks that talk about fractional reserve lending are all out of date. Banking practices have changed a lot over the years.
All existing credit has been created out of thin air. No one has commodity money any more.
I don’t agree that creating money — credit — is bad. As anonymous says, it depends on how it is used (although it’s possible to create credit if based on something real, as when I might loan you money which I then don’t have — but this a very small part of existing credit).
The problem with credit in Russia is that it becomes entangled with foreign entities, and it doesn’t need to do that because Russia can create money ‘from thin air’ if it chooses, and especially if it does it just for domestic investing — which is financial way of, say, people going out to plant a field with seed, investing in the future, where they don’t invest money but labor, land, and seed. Credit is based on the passage of time — doing something now with expectation for something related happening later.
One might almost say that squirrels bury nuts on credit — expecting, in their instinctual way, to be able to retrieve them when winter comes. Animals may not have an abstract and conscious notion of credit, but when they feed their young there is an expectation, in evolutionary, ethological, terms, of propagating their species. Animals who invest in building social relationships by giving up immediate things of value also express this primal behavior, getting shared food, allies in defense during combat with others, or mating partners (the ‘alpha chimp’ can’t always bully everyone because others who are socially related come to help defend).
Such animal behavior is generally (although not always) confined to immediate social groups: credit is not usually sought from or given to foreign tribes, ‘countries’ or ‘investors’ — which could be detrimental to the community, as well as having more risks.
As experts point out, money lent by banks is not deposited money. The bank creates an entry for both sides of the books, one on the credit side and the other on the debit side.
“Many authorities have said it: banks do not lend their deposits. They create the money they lend on their books.
Robert B. Anderson, Treasury Secretary under Eisenhower, said it in 1959:
When a bank makes a loan, it simply adds to the borrower’s deposit account in the bank by the amount of the loan. The money is not taken from anyone else’s deposits; it was not previously paid in to the bank by anyone. It’s new money, created by the bank for the use of the borrower.”
“While this story assumes that banks need your money in order to make loans, it is actually somewhat misleading.
According to the above portrayal, the lending capacity of banks is limited by the magnitude of their customers’ deposits. In order to lend out more, a bank must secure new deposits by attracting more customers. Without deposits there would be no loans, or in other words, deposits create loans.”
Blue, this is correct: The bank makes a loan AND credits the borrowers money with cash, without removing it from the lenders account. This is is how credit increases the money supply- out of thin air.
This is a criticism of fractional reserve banking practices, not a criticism of credit which exists in many different forms.
To summarise my perspective: (since I mistakenly believed we were all agreed)
1. Money out of thin air: bad
2. Credit that it increases the money supply: bad
3. Credit that does not increase the money supply: fine
Printing sovereign money requires great political discipline not to print too much in response to economic crisis. For this reason, even now the main measure for fiscal solvency is tax revenue; a government wants ideally to spend no more than it takes in taxes. People must have confidence in the currency as a store of value for goods and services.
Printing money only looks like the easy solution; it is but it isn’t. When the money supply no longer reflects the value of the real economy things like inflation and speculation get out of control.
The German Weimar Republic, and present-day Zimbabwe and Venezuela, are examples of what happens when a leader thinks a currency printing press can solve everything. Even with a soundly run economy, the confidence in the currency can be gamed by central bankers and currency traders well outside the reach of the Russian government. By going through the central bank, the appearance of responsibility is shifted to bankers, not politicians.
The Bank of Canada, for example, used to print sovereign money to only cover needed infrastructure like the St. Lawrence Seaway and other great public works. That money wasn’t ultimately printed out of thin air; it was to be backed by tangibly valuable goods and services, which is what real money represents.
Canada was always careful to follow a conservative monetary policy until the early Pierre Trudeau years. Joining the Bank of International Settlements in 1974 halted sovereign currency in Canada.
After 1974 Canada issued national bonds – public debt – (like every other country) which was sold to the banks who then could claim the government owed them money, when really the government was loaning public wealth to the banks. However, this resulted in the illusion of to government having lots of cash; the cause and effect was hidden.
The danger of government overprinting is then hidden in shellgames of private transactions wherein retagged public money is used for speculation instead of real loans to bricks and mortar industry. In the meantime, the government is never free of debt and debt payments into the future every single budget, and debt-holders ensured of a steady, if cheated, ‘income’.
Pierre did many good things for Canada in his time, but everything was undercut by overwhelming public debt. Canadian debt has never stopped growing since and the economy must expand with it or bust.
Canadian currency then and now may not be a world reserve currency but it is seen as a safe one whose value will remain stable over time but its far more vulnerable to ‘losses of confidence’.
Canada could say no and return to the former system, but once the financial system is based on free fiat money games its tough to wean powerful people off the gravy train. That nest of parasites is global. Some people still rightly believe only a return to sound public banking can restore economic sovereignty; its just getting there.
So no, Putin can’t just print money and be done with it without laying careful groundwork to insure all-out currency war isn’t waged against the ruble before its ready (a low-level war is the case now). When such a war is waged anyway, Putin must ensure that the Russian economy can win in the long term, meaning, that it has developed enough to provide for the Russian people even if they are forced to near-autarky by sanctions and can’t import on the white market.
The ruble like any truly world currency has to be backed by a value triage of military power, real financial-economic strength, and tangible commodity currencies like gold that can back the fiat currency. Behind that must be a people knowledgeable and nationalistic enough to support the system through honest economic dealings.
When your currency depreciates your economy becomes more competitive. Domestic products become cheaper than imports. This acts as a stimulus for the economy and allows domestic substitution of foreign products. Isn’t this exactly what Russia wants? They already started doing this with the agricultural products.
This cannot happen with a dollarized economy or with a peg. It can only happen with a free float.
Just beware of the old computer joke:
An OEM was selling computers for $10 below cost. The financial guy asked the sales manager how they could possible make money like that. The sales guy said “Don’t worry — we will make it up on volume.”
Again, your joke only works in one currency. Serbian Girl is describing an open economy i.e. with exports and imports and exchange rates between currencies.
The exchange rate matters no more in this than whether you measure tomatoes in pounds, ounces, or kilograms because you still have the same amount of tomatoes.
If you see something for less than it costs, regardless of currency or denomination, it is not sustainable. It is an error to mistake the currency for the wealth (mistake the map for the territory). While devalued currency may be advantageous for some domestic producers it can be detrimental for others — or for consumers who have to buy some foreign goods because there is no domestic equivalent. There is no one abstract solution or policy which fits all specific instances equally. Being able to make exceptions is an important capability.
Of course the exchange rate matters. We’re talking about whether you buy your tomatoes from a domestic supplier or a foreign supplier. If your currency falls by a huge amount, it makes a correspondingly huge difference to the relative prices of domestic versus foreign supplied tomatoes.
It doesn’t matter in terms of trying to make money while paying more in costs than what you can sell product for — as per the joke. The point I was making is that it always comes down to the real economy — tangibles — so that has to be considered before the abstractions like money.
If it’s cheaper to grow tomatoes domestically, or somewhere else (taking into account the externals and side effects), than one can impose tariffs (or give subsidies) to keep domestic farmers going, or shift production to something else — use fiscal policies. Other ‘externals’ is if you are trying to capture a market by short selling, or if you deplete your resources, or become dependent on foreign sources for critical products, and these need to considered in both long and short term, and what is good for the overall economy of the nation, not just one sector or oligarch.
A general policy or maxim may break down in specifics.
I don’t think anyone is arguing that it’s not ultimately about the real economy: the efficient use of resources to provide goods and services. Trade is more efficient than producing everything yourself. Money facilitates trade.
That’s assuming you can export, Russia is under a limited EU sanctions regime, which amongst other things, is clearly designed to limit the extension of gas exports, you will be aware of what happened with South Stream (Juzni Tok), & look what happened to Serbia in the 1990s, or Iraq for that matter, under a real extreme UN sanctions regime. Currency depreciation didn’t help there, so it depends on the circumstances. If a country is in a position where it can export, depreciation may help, depending on how this impacts upon other variables.
You guys really need to get up to speed. Try this:
Mark, it is almost impossible for people taught in main stream economics to comprehend these issues, as the concepts of the difference between earned and unearned income, and between productive and unproductive credit and labor has been erased, in mainstream economics/neo-liberalism. The comprehension of rent extraction is contrary to the interests of the backers of mainstream economics. So it isn’t taught. The importance of decreasing rent extraction, and creating a low cost economy is lost.
MMT also conflates private banking with the Government. This is a serious problem, that even Hudson doesn’t own up to.
Private banks emit their ‘bank credit.” It is emitted in proportion to those who are willing to show up and be hypothecated (take out a loan). It does not channel into productive means, and often is used for consumption (a mistake). It also can come into being to collapse exchange rates – a point that I make earlier.
Here is a critique of MMT. I find Huber accurate in all cases.
My two cents is that fixed exchange rates are a recipe for the development of a currency black market (e.g. like in Venezuela). It requires such enormous policing to deter this, that people with dollars will soon benefit, as the implied (black market) exchange rate starts to diverge from the official one. Can Russian authorities prevent this? Is the price worth paying if they fail?
To the degree that Russia’s internal consumption is based on imported goods, the respective sectors will face the main brunt of the black market surge. In this regard, Russia is most definitely NOT Venezuela and can better cope with this development.
As for the other aspects, I humbly defer to Michael Hudson’s and Saker’s diagnoses. Lending in rubles SHOULD be cheaper for the Russian economy, but only for investment. Investment should definitely proceed with specially created funds from the RCB, and not with borrowed from abroad.
Well, that’s my 2 cents…
She works for the Yanks and was placed their by them.
She may well be, but this does not mean the CBR’s policies are incorrect!
Here is Alexander Mercouris take on this:
“Russia is also working hard and successfully at getting its microeconomic conditions right. In other words the people who run Russia’s economy know their job and by and large they do it well. ”
“That does not mean they are infallible. In my opinion interest rates are far too high, with the 4% inflation target for next year in danger of becoming a fetish. However compared to the appalling mismanagement one sees elsewhere, far from being the collapsing kleptocratic empire of Western fancy, Russia looks like an island of stability and good sense.”
If an economy has to serve a lot of outstanding dept in foreign currencies, a weakening of the domestic currency is a giant inflation driver. As more Rubles must be earned by companies to serve their Dollar and Euro dept, the prices of their goods go through the roof. I would call this effect cost-driven inflation. The Russian central bank is concerned about demand-driven inflation that could materialize if consumers are willing to buy at higher prices just because they can afford it.
The internal Russian economy will hardly expand unless loans for investments are cheaper in Ruble than in Dollar or Euro.
Would you call it a TRUMP tsunami ??
Good! I hope it keeps going, hopefully, Putin has binded his time, and used it to collect absolute proof against the liberals over previous months and years and maybe decades, and waited until he has enough evidence on them all before he ordered the arrests, and now, with this first arrest, the mass-arrests will begin and during the coming months, one after another they will be locked up.
The reason all were not arrests at once might just be PR reasons, it would look a bit bad if so many political enemies of Putin were dragged off at once into the night, better to do gradually, over a few weeks or months.
If I read it correctly, it seems ICC has declared Russia and Ukraine to be in a state of war, and that Russia is occupying Crimea, CIA has also begun to leave Ukraine according to various sources. Could this be an indictator that USA intends to order Ukraine to attack Russia? With the ICC ruling, doesnt that mean that Ukraine legally in accordance with international law, can attack Russia in Crimea and it will count as “Self-defence from an aggressor” and the reason CIA has left could be because they do not want to be in Ukraine for the Russian counter attack?
Trump has made it fairly clear he will dump Ukraine, and the globalists are desperately looking for a reason to cause trouble now to inhibit Trump, could it be that the current USA elites figures that they did not spend 2 years building the Ukrainian army for nothing and now they intend to throw it at Russia in one last gasp?
That also means no more IMF money for Kiev as the IMF(if it respects his own charter)can not lend money to a country in a state of war.
The IMF has already broken their own rules lending to a country who has defaulted on a sovereign loan, so I don’t hold out much hope for the Law to come to the rescue. Trump on the other hand…
Hah, yea, I doubt IMF cares about that thought.
NATO ‘strategic advisors’ from the US, the UK, Canada and Lithuania arrived in Ukraine on Tuesday as part of an ongoing effort to reorganize Ukraine’s military to alliance standards. However, Kiev’s acknowledgement that the advisors also “discussed the situation in the east of Ukraine” has observers concerned.
Ukrainian Defense Minister Stepan Poltorak met with the advisors on Tuesday. According to a Ministry press release, the meeting was devoted to “proceeding to the practical stage of work” between NATO strategists and the Ukrainian Armed Forces. Poltarok stressed that alliance advice and assistance at all levels was crucial, and that advisors would soon be meeting with the heads of the Defense Ministry reform subcommittees. © AFP 2016/ YURIY DYACHYSHYN Group of Foreign Advisers Starts Working in Ukraine’s Defense Ministry Worryingly, the Defense Minister also confirmed that the two sides “discussed the situation in eastern Ukraine.” That region has been embroiled in a civil war since April 2014, when Kiev moved its army into the Donbass, where local residents came out in opposition to the Maidan coup d’état in February of that year. Locals quickly formed militia units, and the two sides fought a fratricidal war against one another until February 2015, when they agreed to a ceasefire deal in talks brokered by Russia, France, Germany and Ukraine in the Belarusian capital of Minsk. A shaky ceasefire has been in place ever since, although violations are regularly reported. Kiev has been criticized for refusing to adhere to the Minsk peace plan by insisting that its provisions can be fulfilled out of order. Leaders of the self-proclaimed Donbass republics, meanwhile, say that the agreement’s thirteen points must be implemented in the order they were agreed to. It remains unclear what exactly the NATO advisors’ tasks will be in the Donbass, given the unstable situation there, but Kiev’s guests assured their hosts that they have “a lot of ideas on the exchange of experience and the development of bilateral relations.” Observers have described the advisors’ presence and their focus on the situation in the Donbass as “alarming,” adding that these NATO officials could “advise President Poroshenko to repeat the 2008 Georgian scenario in the Donets Basin,” i.e. to restart the war in the east.
Read more: https://sputniknews.com/europe/201611101047298427-senior-nato-advisers-in-kiev/
as posted elsewhere-hysterics in Lithuania continue………………I posted elsewhere’s re Ukr is fast? developing its missile capability to reach Moscow it asserts…..NATO CIA moved staff to Romania etc out of safety concerns…provocations?
One thing is clear beyond question. If the Ukie’s fire missiles at Moscow it will be their end. They won’t be able to hide behind NATO anymore. The choice would be given to NATO “die with them,or move aside”.Then the liberation of Ukraine starts,along with the nazicide.
I dont believe Ukraine can be liberated, because the population actually support these anti-Russian parties. 2 years of war and pro-USA rule has changed the popular sentiment, and opinion polls show that Ukraine that used to be 70%+ pro-russian is now 70% anti-russian.
Even if Ukraine was “liberated” and all its parties destroyed, the people would just vote in the same type of parties during next election.
Wrong — it can certainly be liberated. And the template for how this would be achieved is available courtesy of similar cesspits such as the Brown And Little Tiny Insect CountrieS. There, the beloved Western Liberators have brought about a mass exodus leaving behind an aging, declining population. Neoliberalism is, at bottom, totally unconcerned with the well-being of the people whereas neoconservatism is outright hostile to it (100% distilled elite contempt and class hatred). Grovelling domestic reactionary populations, however gung-ho, soon find out that they cannot eat Western propaganda and nationalist delusions with their countries deliberately asset-stripped and de-industrialised. Consequently, they pack up and leave. At the rate things are going, the bulk of the Ukro-trash will have left within a generation (20 – 25 years). Hence, Russia could — and should — populate these places, effortlessly re-uniting them with the Motherland.
Ergo: Totally peaceful liberation at the expense of the EU with the latter becoming gradually swamped by proud “über-Europeans”, committed to commodified sex, petty crime, and toilet cleaning.
The military exercises were led by Canada thru NATO, called Maple Arch 2016. See the news release for more…
Any journalists out there?? If so, there is an email address for a contact person who can answer questions. At the bottom of the news release.
Anonymous to OT: This is the best explanation I’ve heard yet! It makes sense.
I found this wonderful and fascinating. I have seen Elvira Nabiulina leading the Central Bank as one to purge some time ago as well as Medvedev and was worrying neither might not be touched. I am relieved.
So Saker wrote this? It is excellent. Thank you.
Many admit Vladimir Putin is a stellar leader. But, we should not make mistake thinking that everything is done under his direct orders in Russia. Putin’s real power is the Russian people’s supports for him and that’s the reason the US gangsters cannot touch him.
A piece on the current state of readiness of the US military. I am unsure if this is just another one of the military’s pleas for yet more trillions of dollars for thei industry, or if the US military is relatively “weak” right now.
“But, we should not make mistake thinking that everything is done under his direct orders in Russia”
Authorisation may be a better term than orders in a case like this.
Another denunciation, Saker knows about history of this one, the AI could bring out the ‘Napoleanism’ charge. Of course it can’t work.
Maybe I made mistake, is it called bonapartism? Not napoleanism?
Yes, the consecrated term is ‘bonapartism’. It refers actually to seizure of power by military leaders in a coup d’etat. This is in no way the case in Russia.
Napoleon was a Zionist asset, probably Crypto-Jewish.
Also it was used as a term in Soviet Union in attacks on people like Zhukov, to remove them from their positions. That is the sense here, that AI could try to pull out these kind of slanders.
The end of Clintonian “Pay for Play” … Russian style.
Now let’s wait for the “Trumpland” style.
Btw, while on the topic of systemic corruption, it seems Hillary has crawled back on stage recently looking like she’s just had a week out with the Exorcist.
That hag’s bag of bones must be shaking all over with the amount of devils she’s got dancing inside.
The one guy that I worry about the most is Anatolii Chubai. He seemed to have been a central figure of the move from communism to capitalism. Except that he is still around while many others were crushed. There was a lot of anger directed at him with how the whole privatization process went but he somehow managed to stay close to power.
I would love to understand what factors determine which person sinks of floats in russian politics. It is difficult for an outsider like me to make heads of tails of it. It looks like the mafia. One day you are friend with The Boss, the next day you are buried in a shallow grave. I dont really get it.
Even the woman in ukraine with the hair, what you call her? Ulia Tymoshenko? First she gets arrested for being too pro russia, spends years in jail. Then next time you hear about her, there is a leaked video where she wants to nuke all of russia… It is difficult for me to keep up. Which side is she on? Does she even know herself?
She wasn’t arrested for being pro-Russian.She is a nationalist anti-Russian. She was arrested for bribe taking and skimming huge sums off the gas contracts. Sort of the “Hillary Clinton” of Ukraine with corruption.
Thank you for that clarification about her but what of Chubais? Is he just another honest businessman or is there more to him? Like I suspect?
He was another “economist”,that bought into the Western model. And was more than willing to sell out Russia to the Western looters. Its a disgrace that those from that time are still walking around freely. And not rotting in cells for their crimes during the Yeltsin years.They cost Russia untold sums,and cost the lives of hundreds of thousands at least. If you figure the birth and death rates from Russia under the USSR. And Russia from the post-USSR. Russia today would have a population at least 18% higher than today’s.And if Yeltsin and the other two traitors hadn’t been allowed to breakup the Rus heartland .The population today would be around 230 million.The firing squad is too good for the traitors of that era.
Wow, this lame duck has legs!
The other day Swedish prosecutors finally started speaking to Assange. Obama gave the best speech of his two terms in Greece the other day, lambasting inequality and ruling class excesses. John Kirby at the State Dept finally cracked and gave RT a spray (congratulations Gayane Chichakyan). And now the long-awaited Putin Purge, one some of us feared wouldn’t happen.
I know I am not supposed to gloat, but I can’t help feeling some elation. The days got so dark there for a while.
The Anglo-Zionists will also suddenly be able to identify large numbers of key terrorists and take them out using conveniently pre-embedded special forces. Those killed will be western nationals with links to both the wahabbists and the western intelligence services. Dead men tell no tales.
They have to be killed in order to stop them bringing terroism to the west – allegedly. That concern didnn’t seem to be relevant when Merkel opened the floodagtes enabling Soros’ mass migration scam to go ahead.
Sounds like a great move by Putin. No retribution too is good.
And what a good pr job you have done, lap dog!
But really, this sounds like a very important step for Putin.
So who is the lap dog?
Paul… Paul… where have I seen that name before? Your full name would not be Paulus Trollius?
Thanks for the good news. I would love to know what Putin and Trump talked about. They seem to have the same enemy. Time will tell.
First they declare peace and safety and then sudden destruction falls upon them. Nuclear threat level down – BS. Obama knows his time at the helm is about to end – his time is short – very dangerous situation actually. The guy is delusional and approaching grievous loss of reputation and all is good.?
Putin needs someone who understands, like Brown (unlike Rogers, that economic ignoramus on Crosstalk):
Trump’s $1 Trillion Infrastructure Plan: Lincoln Had a Bolder Solution
Posted on November 14, 2016 by Ellen Brown
Donald Trump was an outsider who boldly stormed the citadel of Washington DC and won. He has promised real change, but his infrastructure plan appears to be just more of the same – privatizing public assets and delivering unearned profits to investors at the expense of the people. He needs to try something new; and for this he could look to Abraham Lincoln, whose bold solution was very similar to one now being considered in Europe: just print the money.
In Donald Trump’s victory speech after the presidential election, he vowed:
We are going to fix our inner cities and rebuild our highways, bridges, tunnels, airports, schools, hospitals. We’re going to rebuild our infrastructure, which will become, by the way, second to none. And we will put millions of our people to work as we rebuild it.
It sounds great; but as usual, the devil is in the details. Both parties in Congress agree that infrastructure is desperately needed. The roadblock is in where to find the money. Raising taxes and going further into debt are both evidently off the table. The Trump solution is touted as avoiding those options, but according to his economic advisors, it does this by privatizing public goods, imposing high user fees on the citizenry for assets that should have been public utilities.
Raise taxes, add to the federal debt, privatize – there is nothing new here. The president-elect needs another alternative; and there is one, something he is evidently open to. In May 2016, when challenged over the risk of default from the mounting federal debt, he said, “You never have to default, because you print the money.” The Federal Reserve has already created trillions of dollars for the 1% by just printing the money. The new president could create another trillion for the majority of the 99% who elected him.
Another Privatization Firesale?
The infrastructure plan of the Trump team was detailed in a report released by his economic advisors Wilbur Ross and Peter Navarro in October 2016. It calls for $1 trillion of spending over 10 years, funded largely by private sources. The authors say the report is straightforward, but this writer found it hard to follow, so here the focus will be on secondary sources. According to Jordan Weismann on Slate:
Under Trump’s plan … the federal government would offer tax credits to private investors interested in funding large infrastructure projects, who would put down some of their own money up front, then borrow the rest on the private bond markets. They would eventually earn their profits on the back end from usage fees, such as highway and bridge tolls (if they built a highway or bridge) or higher water rates (if they fixed up some water mains). So instead of paying for their new roads at tax time, Americans would pay for them during their daily commute. And of course, all these private developers would earn a nice return at the end of the day.
The federal government already offers credit programs designed to help states and cities team up with private-sector investors to finance new infrastructure. Trump’s plan is unusual because, as written, it seems to be targeted at fully private projects, which are less common.
David Dayen, writing in The New Republican , interprets the plan to mean the government’s public assets will be “passed off in a privatization firesale.” He writes:
It’s the common justification for privatization, and it’s been a disaster virtually everywhere it’s been tried. First of all, this specifically ties infrastructure—designed for the common good—to a grab for profits. Private operators will only undertake projects if they promise a revenue stream. . . .
So the only way to entice private-sector actors into rebuilding Flint, Michigan’s water system, for example, is to give them a cut of the profits in perpetuity. That’s what Chicago did when it sold off 36,000 parking meters to a Wall Street-led investor group. Users now pay exorbitant fees to park in Chicago, and city government is helpless to alter the rates.
You also end up with contractors skimping on costs to maximize profits.
Time for Some Outside-the-box Thinking
That is the plan as set forth by Trump’s economic policy advisors; but he has also talked about the very low interest rates at which the government could borrow to fund infrastructure today, so perhaps he is open to other options. Since financing is estimated to be 50% of the cost of infrastructure, funding infrastructure through a publicly-owned bank could cut costs nearly in half, as shown here.
Better yet, however, might be an option that is gaining traction in Europe: simply issue the money. Alternatively, borrow it from a central bank that issues it, which amounts to the same thing as long as the bank holds the bonds to maturity. Economists call this “helicopter money” – money issued by the central bank and dropped directly into the economy. As observed in The Economist in May 2016:
Advocates of helicopter money . . . argue for fiscal stimulus—in the form of government spending, tax cuts or direct payments to citizens—financed with newly printed money rather than through borrowing or taxation. Quantitative easing (QE) qualifies, so long as the central bank buying the government bonds promises to hold them to maturity, with interest payments and principal remitted back to the government like most central-bank profits.
Helicopter money is a new and rather pejorative term for an old and venerable solution. The American colonies asserted their independence from the Motherland by issuing their own money; and Abraham Lincoln, our first Republican president, boldly revived that system during the Civil War. To avoid locking the government into debt with exorbitant interest rates, he instructed the Treasury to print $450 million in US Notes or “greenbacks.” In 2016 dollars, that sum would be equivalent to about $10 billion, yet runaway inflation did not result. Lincoln’s greenbacks were the key to funding not only the North’s victory in the war but an array of pivotal infrastructure projects, including a transcontinental railway system; and GDP reached heights never before seen, jumping from $1 billion in 1830 to about $10 billion in 1865.
Indeed, this “radical” solution is what the Founding Fathers evidently intended for their new government. The Constitution provides, “Congress shall have the power to coin money [and] regulate the value thereof.” The Constitution was written at a time when coins were the only recognized legal tender; so the Constitutional Congress effectively gave Congress the power to create the national money supply, taking that role over from the colonies (now the states).
Outside the Civil War period, however, Congress failed to exercise its dominion over paper money, and private banks stepped in to fill the breach. First the banks printed their own banknotes, multiplied on the “fractional reserve” system. When those notes were heavily taxed, they resorted to creating money simply by writing it into deposit accounts. As the Bank of England acknowledged in its spring 2014 quarterly report, banks create deposits whenever they make loans; and this is the source of 97% of the UK money supply today. Contrary to popular belief, money is not a commodity like gold that is in fixed supply and must be borrowed before it can be lent. Money is being created and destroyed all day every day by banks across the country. By reclaiming the power to issue money, the federal government would simply be returning to the publicly-issued money of our forebears, a system they fought the British to preserve.
Countering the Inflation Myth
The invariable objection to this solution is that it would cause runaway price inflation; but that monetarist theory is flawed, for several reasons.
First, there is the multiplier effect: one dollar invested in infrastructure increases gross domestic product by at least two dollars. The Confederation of British Industry has calculated that every £1 of such expenditure would increase GDP by £2.80. And that means an increase in tax revenue. According to the New York Fed, in 2012 total tax revenue as a percentage of GDP was 24.3%. Thus one new dollar of GDP results in about 24 cents in increased tax revenue; and $2 in GDP increases tax revenue by about fifty cents. One dollar out pulls fifty cents or more back in the form of taxes. The remainder can be recovered from the income stream from those infrastructure projects that generate user fees: trains, buses, airports, bridges, toll roads, hospitals, and the like.
Further, adding money to the economy does not drive up prices until demand exceeds supply; and we’re a long way from that now. The US output gap – the difference between actual output and potential output – is estimated at close to $1 trillion today. That means the money supply could be increased by close to $1 trillion annually without driving up prices. Before that, increasing demand will trigger a corresponding increase in supply, so that both rise together and prices remain stable.
In any case, today we are in a deflationary spiral. The economy needs an injection of new money just to bring it to former levels. In July 2010, the New York Fed posted a staff report showing that the money supply had shrunk by about $3 trillion since 2008, due to the collapse of the shadow banking system. The goal of the Federal Reserve’s quantitative easing was to return inflation to target levels by increasing private sector borrowing. But rather than taking out new loans, individuals and businesses are paying off old loans, shrinking the money supply. They are doing this although credit is very cheap, because they need to rectify their debt-ridden balance sheets just to stay afloat. They are also hoarding money, taking it out of the circulating money supply. Economist Richard Koo calls it a “balance sheet recession.”
The Federal Reserve has already bought $3.6 trillion in assets simply by “printing the money” through QE. When that program was initiated, critics called it recklessly hyperinflationary; but it did not create even the modest 2% inflation the Fed was aiming for. Combined with ZIRP – zero interest rates for banks – it encouraged borrowing for speculation, driving up the stock market and real estate; but the Consumer Price Index, productivity and wages barely budged. As noted on CNBC in February:
Central banks have been pumping money into the global economy without a whole lot to show for it . . . . Growth remains anemic, and worries are escalating that the U.S. and the rest of the world are on the brink of a recession, despite bargain-basement interest rates and trillions in liquidity.
Boldness Has Genius in It
In a January 2015 op-ed in the UK Guardian, Tony Pugh observed:
Quantitative easing, as practised by the Bank of England and the US Federal Reserve, merely flooded the financial sector with money to the benefit of bondholders. This did not create a so-called wealth affect, with a trickle-down to the real producing economy.
. . . If the EU were bold enough, it could fund infrastructure or renewables projects directly through the electronic creation of money, without having to borrow. Our government has that authority, but lacks the political will.
In 1933, President Franklin Roosevelt boldly solved the problem of a chronic shortage of gold by taking the dollar off the gold standard domestically. President-elect Trump, who is nothing if not bold, can solve the nation’s funding problems by tapping the sovereign right of government to issue money for its infrastructure needs.
Some economic idiocy from Bannon (God help us) with corrective remarks from R. Mosler.
When I become president, or king, whichever comes first, I shall name Warren Mosler as my Minister or Secretary of the Treasury. Maybe Trump will beat me to it (wink, wink, with fingers crossed)?
Mossler can be said to be the father of current thinking about MMT.
thanks so much Saker for this very interesting and fascinating article.
Like the left in the west was more or less left homeless after the fall of the USSR and communism, the governments that have moved far to the right since then, and the likes of the pro US crowd in Russia will be left homeless with the fall of the US, or the fall of the US as global hegemon.
I would think Putin’s timing was more about smooth transition rather than the US wielding a lot of power in current Russia.
From what I had read earlier, I think at fortruss, it was a sting operation that caught the economy minister. Two milling dollars is a very temping bait that caught a big fish.
Two milling dollars….. typo… Two million dollars….
I think it was 20 millions.
Considering that a random military colonel got caught with 150 millions recently in Russia, these two millions are just a pocket money for guys with that calibre. As Saker already wrote, all of it doesn’t really make sense and that was just an excuse to remove this guy.
Two touching videos showing the good Russian soul, both of Russians risking their lives to save drowning and freezing dogs from certain death. The first good Samaritan gets bitten for helping, but he continues to work to save the frightened dog:
In the US, they build a 40 million dollar gas station in the middle of Iraq. And what do we get? Silence.
Last week Abbas and netanyahoo were in Russia for negotiations about Palestine and political and trade discussions with Russia. I saw a couple articles about how they met with Medvedev, but nothing about either meeting Putin.
Perhaps the timing of the arrest of Uliukaev is connected to netanyahoo’s visit with Medvedev and what those two may have been up to behind closed doors? Or maybe netanyahoo also met with Uliukaev.
Saker, I hope you’re right here. Russia doesn’t need any fifth columnists. They need patriots, as does the USA.
“Some observers noticed that the arrest of Uliukaev took place after the telephone conversation between Trump and Putin, hinting that Trump might have given Putin the go ahead for the arrest. That is, of course, utter nonsense, but if that can make Putin look bad – it’s good enough for the 5th columnists.”
There is probably a bright side to that. If the 5th columnists believe that to be true (even if it isn’t) then their morale would plummet if their main supporters are washing their hands of them. They would be falling all over each other to cut a deal with the fsb and snitch one another out.
So, of course Trump is not a Kremlin agent. But if the traitors in Russia convince themselves that he is, why would we bother to persuade them otherwise?
I confess to know very little about the internal division of power inside the Russian government and how the ministers are appointed. In a parliamentary democracy the government is formed from the parties who command a majority in the Parliament, therefore the government composition should reflect the will of the people.
My understanding is that the great majority of Russian people abhor the 5th columnists as traitors of Mother Russia. Yet they are the government! And not different from the US government corrupt system, where appointments are bought, but where at least there is the formality of appointments being confirmed by congress.
My experience of the ‘rabid Putin-hating nationalists’ is that they would do exactly what the US wants Russia to do in any given circumstance e.g. they proposed shooting down Turkish (=NATO) planes after the Su-24 shootdown. That would have played straight into the US playbook, leading to closure of the Bosporus and the end of Syria. Russia on the other hand went for carefully-targetted economic retaliation which fairly rapidly brought Turkey to its knees (total ban on Russian tourism, visas for guest workers, bans on fruit/vegetables etc).
In short, the rabid Russian nationalists are as simple-minded as the US regime.
Putin has simply sent a “beat this” signal challenge to Trump.
We’re all just waiting for the current empty suit-in-charge to finally pass through the D.C. colon and out the corporate Wall St anus. Then the new “D.C. Fun Show” series will begin.
It has already started for some rats on the ship of fools — “James Clapper quits as director of US intelligence” …
Clapped out it seems, but he’s still taking 64 days to vacate the office. No doubt a lot of ‘things’ to clear up first. Come on Wikileaks…!
Uncle Bob 1
“…the Central Bank forces banks to have high interest rates on loans…”
I don’t think this can be quite right, except in a recession when there is unused capacity in the economy. Otherwise, if the central bank cut interest rates – let’s say (to exaggerate the effect) setting nominal rates below the rate of inflation – demand for credit would rise because the cost of borrowing had fallen relative to the expected gains from investment – in my exaggerated example, the banks would in effect be paying borrowers to take their credit (real interest rates would be negative). If there were no unused capacity, the result would surely be inflation. Higher inflation would make it even cheaper to borrow – which would cause more inflation. And so on until the central bank raised interest rates.
In effect you are advocating boom and bust and the Russian central bank is attempting to eliminate boom and bust.
This is me bungling. I thought I was replying to Uncle Bob 1 on November 17, 2016 · at 11:32 pm. I also thought I’d identified myself. Sorry.
You are looking at things from a Western economic position. I’m looking at what needs to be done to make Russia strong without being crippled by dependence on the West. To spur the Russian economy. And cut imports ,without doing without needed products. It is necessary to re-industrialize Russia.Unless we go for massive government ownership of most production. We must find a way ,as the saying goes” to release the creativity of the Russian people”. And the only way to do that is to free up cheap loans on targeted projects.Russia can not be sovereign “and” be vitally dependent on imports from hostile enemies. That “is” the bottom line,there is no other line.The current Central Bank fails in that. It doesn’t serve to free Russia from dependence.
What Russia can do is directly fund the productive industries needed to get them built. At a later time it can offer the facilities to workers for collective ownership. No interest necessary.
As Mosler points out, importing more than you export is a real gain in tangible wealth, but a side effect can be dependency on foreign sources, so it’s best to be self sufficient and then some, and use the surplus product for trade to get the things necessary or desirable from others (without making your own workers redundant withou alternatives for them).
A nation needs to have sound fiscal policies and programs — problems cannot be solved through purely monetary adjustments. First deal with the concrete and then fiddle with the abstractions such as currency.
Blue says this:
A nation needs to have sound fiscal policies and programs — problems cannot be solved through purely monetary adjustments.
Blue, you are confusing the readers:
First of all Monetary and Fiscal policy are flip sides of the same coin. Monetary policy includes emission volume, velocity, channeling, and money type.
Fiscal Policy is taxes and law on money (regulations). Taxes take up money that already came into being. In the case of debt money system, this banker credit comes into being simultaneously with a debt instrument. In the west QE is monetary policy because it is run by the banking sector. Central Banks for the most part are agents for banking corporations, and in many cases are stock owned companies, not of the government.
Currency means to make money current, to have flow. It is not abstract, but in fact is key to how people survive. They use currency to price and trade their output.
Go ahead and read MMT, but it has some serious flaws that can lead you down cul-de-sacs of bad thought that don’t comport to reality.
Fiscal can also mean direct government spending, such as to improve infrastructure, employ people, and increase utilization. (‘New Deal’).
Currency is abstract in that it is not tangible, and is (supposed to be) used as a metric to measure the tangible. Physical, ecological, economy operates without abstractions such as money. Fiscal is oriented more towards physical reality that abstraction and metric (food on the table, drivable roads) — although both monetary and fiscal are fairly abstract. Inflation, for example, and especially hyperinflation, is a problem real goods available, and it’s relation to money, and changing monetary policy (issuing money, changing interest rates) won’t change a shortage in goods and production. The flip sides are like Janus, looking in two different directions. In Zimbabwe the problem was the fall off in production by removing land from those skilled in growing; in Weimar it was in other countries taking the factories and what they produced leaving the Germans without a way to earn money to pay the reparation.
That’s the orientation I’m trying to bring out.
Fair enough. Think of it this way – the abstractions need to be held to limits.
For example, money that fluxes on the ledger, should transform into tangible currency in the same ratio. In other words tangible and intangible money should have the same value. This is done by monetary science and is easy to do, providing laws are in place. Note that today many countries are trying to do away with physical tangible cash, so they can then devalue intangible ledger money… rent seeking by changing the law, and screwing over savers.
What we do as humans is pretend that these limits don’t exist; people who promulgate this hypnotism are usually rent seekers.
So instead of calling it abstract, call it law. The law can then define limits and such definitions can be made moral.
With regards to Germany’s hyperinflation, it was initiated by an exchange rate collapse. This was a monetary phenomenon, where foreign currency was used to short the mark. This bear raid action is an unwanted positive feedback that drives the currency into becoming worthless, and it was the private sector that was responsible – reichsbank was privatized at the time because of Morganthau plan. In other words, the law didn’t prevent this monetary action, and in fact still allows positive feedback. This feedback is instability, and is a feature of the system till today. We don’t learn.
So, if you want to look at it in terms of legality, then fiscal policy should control monetary policy. I said should..but we don’t. All hyperinflations in history save Zimbabwe are exchange rate related. Zimbabwe was blacks killing off the white farmers, so the country became unproductive, and hence goods did not flux in relation to money volume.
I don’t know what tangible money could mean, since money is an instrument and creation of law. I mean tangible as tools, food, land, required services, perhaps knowledge, materials, etc.
Paper and coin as money is not tangible, except maybe the value of metals used for coin. The amount of currency in circulation should reflect two thing: tangible wealth, and realistically expected returns on investment: crops being planted, building going up, etc. Interest should reflect the opportunity costs in lending, and the risks in an investment not returning what was hoped for (which could be done on a purely barter basis with no money involved). Profit — rent — might be expected but can be a problematic addition which must be limited in some fair way.
I’m saying, first figure out the economic system in terms of tangibles, without money, and then money can be used to make transaction easier and more accountable (literally using accounting). This is like one can build a house without measurements (abstractions) by fitting pieces of wood together as one goes, but using measurements make it easier and permits a more uniform and reliable way of doing it.
Of course money can do one other thing: it facilitates manipulation and wealth transfer by those in power, and allows accumulation of (abstract) wealth far beyond the ability of someone to hold and control actual wealth (no one can have a billion sheep in their yard). According to Hudson and Wray the original use of money was to allow the governments to extract wealth from the people *requiring people to have money so they could pay their taxes).
Tangible is something that you can hold, and has physical form. Ledger money is ink on a ledger, or digital bits in a computer, hence it is not tangible. Tangible and intangible should morph forms and not change in value. Note I said should. Negative interest rates on bank credit is desired by Bankers, hence the thrust to do away with tangible paper money.
A real money economy (sovereign money) has money issued initially into productivity modes or the commons, This then leaves a trail of wealth in its wake. The money then goes on to become private savings. In this way, the money represents wealth and comes from the past.
Since people will have savings, their money is on-lent through trusts or savings banks. (This type of banking is also called gyro banks.) In this way it can be non usurious, as saving creditor and debtor can share in risk. Banker is only a middleman who takes fees for his services.
By contrast, when bank credit is hypothecated into existence, it makes demands on the future. It also fluxes in an accounting periodicity.
So, when talking about an economic system, one must define the nature of the money within that system.
A bank credit system will behave different than a money system.
With regards to rents, then there should be law codified to prevent rent seeking. And yes, money’s true nature is law.
Hudson defines the first use of money in history as used in Temples. It was metal by weight, and was measured in barley weights on a balance scale. Hence metal was weighed as “grains.” The temples used metal as an extension of their ledger, to then trade long distance. It was only much later in history, when money was coined i.e. stamped, and at that point it took on the King’s law.
Uncle Bob 1
What you’re talking about then is credit rationing and centralised allocation of credit, which is not what you described earlier. It has its good points and bad points, like the alternatives. It’s a form of socialism which may (who knows?) be more feasible now than it was in the old days.
… sorry, not socialism, central/state control.
As usual The right move at the right time… Trust Putin… !!!!
Many have succumbed to the Trump hope just as I did with Obama and I have been watching not his words, but his behaviors and it’s not all bad.
Wouldn’t it be grand if all this window-dressing were really for the good of our Nations? I’ll keep my peripheral vision thank you. I don’t know Putin any better than Trump, but I’m just suspicious enough to doubt their purity. I will keep an open mind however as I am not yet immune to facts and logic like those who voted for they-know-not-what.
You seem to have fallen into the same pit as most amerikans believing empire’s policies toward Russia will substantially change or that the threat of war between the powers has been substantially reduceb as well. Does the name John Bolton hold any significance for you? Don’t believe the hype dear Saker.
And after all that, no-one has explained what the Saker’s comment actually means:
“The emission of the Ruble is also pegged to the purchase of dollars…”
I’m not an expert, you have a much greater knowledge in economics – money policy , but how about the introduction of the gold standard in Russia ?
Why? The central bank is doing its job as well as can be expected, ensuring that the banking system is sound and the price of money stable. Everything else is for others to accomplish.
The more I think about economics, the less I think I understand – which makes it a puzzle why people are so scathing and righteous in demanding this or that and calling for purges because the emission of rubles is…
On the Gold Standard, it makes monetary conditions dependent on the supply of gold. In the 19th century there were long deflations when is was in short supply, and inflations when new mines were discovered. In the 1920s, when Britain went back on the Gold Standard, it crippled the economy. And when it proved awkward, France and the US cheated. So it isn’t the perfect solution. And is it not a bit like a global Euro – which isn’t good news for half its members. And I don’t know how we would get from the current arrangements to a gold standard. There has to be some other way, and some other way to get there, that will stop the US extorting resources from the rest of world by way of the U$ status as reserve currency.
If Russia decides to walk her own way and become economically independent, achieving self-sufficiency, then the gold standard can be an outcome. But – and there is a great but – if she wants to participate in the global economy as well, then the gold standard is not good for others. The countries which produce(mine) the biggest amount of gold are China, Russia, USA and Australia. For them, would be good, for others would be not. On the other hand, the price of gold is fixed upon the dollar since 1944.( it has been modified many times).But the fiat money system is also bad at some stage – and that stage is already here – by opening the door for monetary speculations as we know it, leading to horrible debts. So, if there is a talk of a new world order, a new system has to be agreed upon, if is gold standard and something else, mixed. In my opinion, there might be a new system, but the old one cannot be defeated so easily because there is a price to pay for those who played the wrong way, by accumulating too much wealth on behalf of others. These elements will not give up just like that. How to figure out such a change without a huge crisis, that’s the big problem today. Of course, they may be playing again to postpone the decision, in that case will be even harder and harder to make something without a major catastrophe.
It’s no mystery.
It’s a step-wise process.
First you stop the threat of nuclear button blackmail by the occultists that run the false “One Eye” (Mon-ey) false religion of maintaining human consciousness under their mind control. This was accomplished November 8 in the USA by the defeat of Hitlery. Although many people here prefer the time before Nov 7 because that provided much more to complain about. A lot more openings means a lot more actions to take, and decisions to make, and responsibility to assume for those actions and decisions. How much more comfortable to not have all of those headaches, and just be able to gripe, gripe gripe, bitch and moan to your heart’s content!!! So you have a lot of that sort of static obscuring the clear signal that is needed for subsequent steps that can now be taken.
Second you level the credit and monetary playing field between humanity and the high priests of the false One Eye religion, by re-instating Glass Steagall. Right now, Wall Street and London have it set up so that when they win speculative bets they win, and when they lose they also win because clearly they are such geniuses that every economy in the world requires that they be repeatedly and indefinitely rescued by bail-outs, bail-ins and other forms of slow suicide for humanity, but extended gambling privileges (free chips, anyone??) for themselves. @ Nov 1 Trump publically endorsed the re-enactment of Glass-Steagall in a campaign even in North Carolina. If he does this, he deserves support. If he fails to do this, he becomes worthless, because re-enactment of Glass Steagall is a pre-requisite for all other subsequent effective measures that need to be taken.
In the Cafe, I will lay out in my own words, the further steps required to realize the vast positive potential of this moment in history, plus links to those of some others, if time permits. If not ( I must leave for a meeting in 20 minutes) then in the next one.
But before I go, something there on Germany, Merkel, etc, from a German woman who is her explicit philosophical and political opposite. The swamp is in much of the world and it is slowly draining. I must check in there quickly every day!
Many of the bad things you mention follow not from the monetary standard, but from the deregulation of banking and lifting of capital controls. Reform is an option.
There are various alternative monetary standards. You mention the gold standard. There is the bimetallic standard. Various commodity baskets have been proposed. It is not obvious that any is better than fiat money and floating exchange rates, which may turn out to be the least bad (certainly if it proves possible to do away with reliance solely on the U$ as the reserve currency).
It is not obvious how we get from one standard to another. It can’t be unilateral.
Thanks for your very useful reply and for your patience to my questions and thoughts.
Viva Vladimir. Keep on a-truckin’
Agriculture Minister Aleksandr Tkachev. Governor of the Kuban , from 2001-2015. Denied his communist past. Largest Landowner in Europe, reported to own over 500,000 hectares, that is over 1’250,000 acres of the finest land on earth, Chernozem, and a large number of enterprises that gyrate around those agricultural lands that form the core of his holdings.
Started as a simple Mechanical Engineer at a collective Feed Mill. Apparently, an insider of the V. V. Putin circle. Two times elected governor of Kuban, in his third 5 yr. term he was appointed to that position by V.V.P.
“In autumn 2010 there was an investigation into the murder of twelve people in the village of Kushchevskaya in Krasnodar region. It turned out that this village had long been under control of a criminal gang that had connections in the government and law enforcement agencies. On November 24, 2010 Tkachev, commenting on events in Kushchevskaya, said that “such criminal groups are everywhere to this or that extent and the police and officials of all kinds support them.” He even admitted that events like that crime in the village could occur in any part of the region.”
Source: RIA Novosti, 24 November 2010
His rise to the great heights of power is shrouded in claims of mafia connections, and mafia tactics.
The Kuban is the region South Soutwest of the Don River up to the Caucasus mountains roughly speaking. Home to the Don Cossack host, who suffered during the times of the Kulaks and their exile during the 1930’s. Kulaks were Cossack landowners more or less succesful at agriculture.
Exiled by the Stalin Government for resisting collectivization, dispersed through Siberia and the Far East. A great number died, their property collectivized. After the fall of the USSR, many former Cossack families returned home, those who had remained loyal to the Comunist Party have also tried to regain their ancestors land. Not an easy task as is required enormous paperwork, and documents that in many cases were long lost.
Because of that large parcels of land remained supposedly without owners, maybe property of the State or the collective farms, but they had had a proper owner, generations developed those lands.
It is stated in the Kuban that Tkachev has just been grabbing anything he can find.
What can be said is that he has an excellent team of managers, and his family has also benefited greatly. But Cossacks who claim that land have not had a fair hearing, as he practicaly owns the Kuban and its government. His companies employ over 20,000 persons.
Therein lies a crux, to support an Oligarch because he provides jobs, or to do justice and recognize the rights over the land of thousands of descendants of the Kullacks who were dispossesed almost a century ago. Or as the Soviet system developed those farms as the large farming units, with varying degrees of efficiency, should that land belong to the people heir to the Soviet Union, the whole population of Russia proper.
Millions of rubles flow to the Tkachev clan from government subsidies, maybe billions, even as his enterprises are quite solvent and profitable. Banks readily provide credit to his enterprises, as one Bank executive explained that “it is easier to deal with just one person, than with hundreds or thousands of people”
Thus credit is unavailable to small landowners which leaves them little recourse but to sell their land… to the Tkachev clan.
“The Land belongs to those who work it.” Emiliano Zapata
“Land and Freedom” Emiliano Zapata.
“Kulaks were Cossack landowners more or less succesful at agriculture.”
IOW they were wealthy and didn’t want to share at a time when sharing meant survival for the whole country. No tears here.
Saker, bhadrakumar has referenced you:
Why such morbid fear? McCain, of course, is the chief spokesman of the military-industrial complex in America. Many top arms manufacturing companies are based in Arizona, the state which Mccain represents in the senate. ‘Saker’, the US-based military analyst, gives a satisfactory explanation as to why there’s such panic in Washington:
He (Flynn) has connections to Gazprom, is well-liked in Moscow, and will be a link for American energy companies and perhaps some joint ventures in the gas field development and pipeline industry. Several friends of Trump are from the gas and oil industry… The Arctic, the eastern Mediterranean, the South China Sea and other large development zones have enormous new fields to be tapped and exploited.
The primary interest of the Trump foreign policy will be to make America wealthy again. The Eurasian development has already attracted Trump to the OBOR of China and the AIIB infrastructure bank. Probably the entire New Silk Road of China and EAEU of Russia is not going to be without major US participation.
Read ‘Saker’ on Flynn’s appointment. (here)
I do not see the name of Igor Sechin in your list, and he should be the first on it. His role in the alleged Uliukaev bribe and threat to Sechin are yet to be determined.
Many ordinary Russians are wondering is this is a purge or justice, if it is a purge then Uliukaev should have been only fired (I think long time ago ), and if it is a justice then why for stolen groceries people are arrested, but for 2 million dollars Uliukaev is only under home arrest.
I like the term ” semibankirshchina”, it reminds me of “semiboyarshchina”.
I hope the person offering the bribe on behalf of a state owned company will be arrested too for abusing government assets and the law.
And would you say when you learn that in this case one state owned company – Rossneft is buying another state owned company – Bashneft and the money comes from the budget , i.e. Russians taxpayers money are used to pay for this interesting deal. I would think , corruption at higher than stupid Uliukaev levels, who served as a diversion of public attention. The lizards are dropping their tails in hope to save themselves.
My my things are getting very interesting as we may be looking at a new tag team getting set to take on the neo-liberal owners of unfettered crony capitalism and their neo-con servants in the western Deep State that also infect Russia and the rest of the world. Perhaps the Russian President is giving lessons to his about to be inaugurated American counter part? We the plebs can only hope as we may then actually get a fairer shake for our toils from the rentier class of money sucking vultures that rule over us? We will know this when the money creation business resides with the people “to whom it rightfully belongs.”
Actually, corruption here in North America after Wikileaks is such that the Russian official story on Uliukaev’s arrest seems perfectly reasonable. A high official committing crimes so foolishly its clear the class is well-accustomed to impunity.
As for the length of time it took for Putin to act, that’s not necessarily a problem since a thorough investigation is preferable not only for court, but it allows the target’s activities and connections to be mapped out in detail.
Not unlike how the DAESH in Syria were mapped for years by the Russians before decisive action was taken for maximum effect.
Thanks Saker, a really good analysis. I think, however, that Putin had another reason to wait with this action until the fourth quarter.As William Engdahl writes in his article “Putin: Nyet to Neo-Liberals, Da to National Development,” on June 25, Putin engaged the Stolypin Club to develop economic reforms. These proposals should be presented to Putin in the fourth quarter. I am convinced that this has already happened before the arrest of Uliukaev. Here is the whole article by William Engdahl:
Could Vladimir outsource the interrogation of the fifth columnists to the US base in Guatntanamo ??
They do have a good record of water boarding interrogations ??
Saker, You’ve lost me on this one. If the charges were indeed false and a pretext, why not just fire him? He was after all acting in accordance with the laws of the Russian Federation and serving at President Putin’s pleasure. Are you advocating similar “purges” for all of the other Atlantic integrationists?
Soros lynched several European central banks during that horrific fall of 1992. The result was rise of EURO currency first looking good until nations on the edge (Portugal, Creece, Ireland… latter likely Finland and Baltic states?) had to taste the torture. I’ve never been great lover of inflation, it’s supporting drunkard by more vodka. However devalvation is disaster indeed but to right direction. But in case of EU and USA weak currency ain’t trip to paradise. Chinese will hit back immediately. Trump’s dream to get lost industrial jobs back to U.S is mostly pure fantasy. Only 28% of U.S GDP is now real economy.
A Chinese observer, Qiao Liang, author of Unrestricted Warfare (1999), abused in English translation with the inaccurate subtitle, “China’s Master Plan to Destroy America,” recently identified the germ of the country’s general economic disease in the neoliberal shift from productive to financial investment:
“This financial economy (using money to make money) is much easier than the real (industry-based) economy. Why will it bother with manufacturing industries that have only low value-adding capabilities? Since August 15, 1971, the U.S. has gradually stopped its real economy and moved into a virtual economy. It has become an ‘empty’ economy state. Today’s U.S. Gross Domestic Product (GDP) has reached US$18 trillion, but only $5 trillion is from the real economy.”
“Putin’s purge of the liberals: Will Nikolai Patrushev be Russians next PM?”
“With the recent arrest of the Russian economy minister Aleksey Ulyukaev by the FSB, the Russian equivalent of the FBI, the president Vladimir Putin’s purge of the liberal faction within the Kremlin nomenklatura is now in the full public view. This faction is headed by the Russian prime minister Dmitry Medvedev who succeeded Putin as the president from 2008 to 2012. It now appears that Medvedev is in danger of losing his position and perhaps, just like Ulyukaev, his freedom as well. In fact, the last month’s sudden cancellation of Medvedev’s trip to Serbia, which at this time is the only (and hence very significant) official Russian ally in East-Central Europe, demonstrates that his authority is already seriously eroded.
Therefore, there are two questions that require a thorough investigation. First, why would Putin conduct the purge at this time (or at all)? And, secondly, if the purge of Medvedev does indeed take place, who will be his replacement?
The Russian Liberals’ Fault
We first need to define what it means to be a liberal in the Russian government today. The designation does not refer to political positions (like in the U.S.) as much as it highlights the approach to the economy. Liberals in Russia are those who believe that the role of the state should be minimized and that private, corporate ownership is the best way to run the economy. They are also advocates of Russia’s full-fledged participation in the international economic system dominated by the so-called Bretton Woods institutions, the International Monetary Fund, the World Bank, and the World Trade Organization. Obviously, this means a commitment to the so-called free trade and opposition to any policy of tariffs and import substitution.
The liberals were politically dominant in Russia during Boris Yeltsin’s two-term presidency in the 1990s. Those who brought Putin to power in the late 1990s (the intelligence and military networks) made an uneasy compromise with the liberals, which lasted throughout Putin’s first two presidential terms (2000-2008). The liberals even seemed in ascendance after Medvedev replaced Putin at the helm.
However, soon afterwards, in August 2008, a surprise military attack by the Georgian troops, heavily assisted by NATO and the U.S., on the rebellious enclave of South Ossetia defended by the Russian “peace-keepers” took place. Consequently, the Russian military directly intervened and the Georgians were pushed back. That was the first time since the end of the Cold War that the Russian military crossed the borders of Russia. This created a pattern that will later be repeated in Ukraine, Syria, and no doubt in other places in the future. The genie was out of the bottle.
This was the beginning of the end for the Russian liberals who counted on honest and friendly relations with the West and believed in the existence of a fair playing field for Russia in the global economy. It became clear that the West would allow nothing of the sort. No wonder then that Putin, who initially was ambivalent about running again, returned as the president in 2012.
In the late 2013, the conflict in Ukraine flared up. The U.S.-engineered coup in Kiev, the annexation of Crimea (or the re-unification, as the Russians call it), the rebellion in Donbass, the U.S. and the EU economic sanctions, all followed in quick succession. There was now no going back. The liberal road proved to be a blind alley.
The parliamentary elections in September 2016 put the last nail in the liberals’ coffin. Though Medvedev is a nominal leader of the ruling United Russia party which won two-thirds of the seats, it is clear to all that the real leader is Putin. This is why it will come as no surprise when we soon read in the Russian press that Medvedev no longer heads the party.
Putin is now embarked on a different, non-liberal economic road for Russia. He plans to orient Russia toward building up regional economic and political alliances with its neighbors in East and Central Asia. The Eurasian Economic Union, the Shanghai Cooperation Organization (in which China is a member), the Collective Security Treaty Organization, the BRICS grouping, will all be strengthened at the expense of the Bretton Woods institutions mentioned earlier and supported by the liberals. This is why liberals will increasingly be pushed out, with some of the most prominent ones arrested in order to send the waves of fear through their ranks.
The ordinary Russian people have no pity for the liberals because they know well the extent to which liberal politicians and their business cronies got rich abusing governmental power for private gain. The recently arrested Ulyukaev is the case in point. Most liberal politicians can easily move to the West – their apartments, yachts, and bank accounts are waiting for them. This is why the majority of the population will support Putin’s purge, even though the purge will be far from democratic and may at times turn violent. ”
Less than 50% of article. The rest is here: http://www.newsbud.com/2016/11/21/newsbud-exclusive-will-nikolai-patrushev-be-the-new-prime-minister-of-russia/
(worth reading IMO as supplement to The Sakers article).
Nothings changed, but a different set of crooks, owned by the Oligarchs, by way of their primary tool, which is corrupted government. If the idiot peasants want a change they must violently eradicate all governments and kill everyone remotely associated with their corruption.