Nikolai Starikov,

History of US Dollar and it’s possible future, Video

February 17, 2014   ·   0 Comments

By Nikolai Starikov, interview, Russian

Transcript of the Video, English

Nikolai Starikov is an economist, historian, and socio-political writer
Author of over 10 books:
Chaos and Revolution as The Dollar’s Weapons
Solution to The Riddle of The Russian Revolution
Nationalization of The Ruble as The Way to The Freedom of Russia
and more

Appeared as an expert in documentaries:
Parvus of the Revolution
The Storm of the Winter Palace. The Refutation.

To understand the financial system of today we should go back in time and bring to memory the stages of its establishment. And here, interestingly, we see an apparent historical co-incidence – or not a co-incidence? In my opinion, it is not a co-incidence by any means. I mean that the stages of creation of today’s financial system mysteriously overlap with the two World Wars that happened in the first half of the XXth century.
In December of 1913 the Federal Reserve System (a private organization emitting the only reserve currency of the world – the American Dollar) was created. And practically immediately, in August of 1914, breaks out World War I. As a result of it, not simply several empires are destroyed, but several Gold-based currencies, several financial systems are destroyed. The American Dollar and the British Pound become the strongest world currencies as a result. That was the first stage of formation of the modern financial system.

The second stage was World War II. At the end of the WWII the dollar became what it had been until now. In 1944 in Bretton Woods, USA, was conducted a conference. The results of the war were quite clear at the time. The winners were building the post-war world. The Soviet Union’s delegation also took part in this conference. At the conference the decision about the American Dollar becoming the only world-wide currency  was adopted.

What did this mean in reality? It meant that from that point on, all of the world-wide trade would be conducted in dollars exclusively. But that was not all. The American dollar would be the only currency that was based on gold. All other world’s money would tie into the dollar through the fluctuating courses of the countries’ national currencies. These agreements were designed to fix the dominance of the dollar and the dominance of the US economy.

But in 1945, when the war was over, the Soviet Union refused to ratify these agreements. It is precisely due to this position of Stalin, and not to some ideological differences, that the West put down the Iron Curtain. USSR refused to ratify the Bretton Woods agreement in December of 1945, and in March of 1946 Churchill went on the air with his famous Fulton speech. This is how the confrontation started. Please note, the confrontation was not initiated by Russia, it was not initiated by the Soviet Union. It wasn’t us who divided the world into the two camps, but the West. This was the second stage of how the modern financial system was getting established.

What did all this bring to? All of the world’s trade was conducted in dollars. A certain gold-base equivalent of the American dollar was fixed. But as time went by, Americans started to release dollars, let’s put it this way, in the quantities far exceeding the Gold Reserve of the United States. It was complicated to check what amount of dollars was being released.

In 1966 the President of France at the time Charles de Gaulle caused definite complications in the financial world, which denoted the third and final stage of modern financial system formation.Charles de Gaulle collected a large quantity of the US dollars France possessed at the time and asked the US to exchange them into gold at the pre-set rate. There was a problem: if all of the world’s holders of a dollar were to act the same way, the United States would not have enough gold for everyone, and the US economy would be in default. Charles de Gaulle was put under certain pressure, but he didn’t deviate; moreover, he left NATO and kicked out its military structures from the French territory. That’s why they moved closer, to Brussels, very near by. They were in Paris before that. France did exchange its dollars into gold. Germany and Japan did the same thing behind the curtains. The United States realized the process would be endless and – against its will – had to announce that beginning in 1973 the dollar has no gold content any more. Thus happened the “untying” of the dollar from any material value; the dollar became “the thing in itself”.

Now imagine: there is a country on the planet that can print the absolute treasure – the dollar – in any quantity. The printing of the treasure is not limited by anything; it is only tied down to the needs of this country. That’s what the economy of the modern world we live in is, in all its strangeness and absurdity.

A lot of time went by since 1973. Utilizing its monopoly on printing dollars, the United States cranked the printing press to its maximum power. The quantity of over-printed dollars is what the so-called “debt” of the United States is today. It grows astronomically fast and today’s equals to 14.5 trillion dollars, whereas only ten years ago the number was about 2.5 trillion. You can see how fast it grows.

So what is this “debt of the United States” simply put? United States emits money that is not based on anything, and a private enterprise called the Federal Reserve System loans the money to the State. Quite the complicated system is created, but the essence of it is rather simple: if the US budget doesn’t have enough money for the new aircraft carriers, for supporting some “young democracies” abroad, for paying out the benefits and allowances to their people, or for anything else, the United States – unlike the rest of the planet’s states – don’t have to work to make that money. They simply borrow it from the Federal Reserve System. Then this money gets in the budget so that US can execute its spending’s, but! The problem is, world’s economy now has a great quantity of not backed by gold (or anything else, really) dollars that need to be somehow sucked back out of the world’s economy.

This is what a whole system of so-called “Independent Central Banks” is for. These banks are, in fact, branches of the  Federal Reserve System in all countries. Please note what the main function of these “independent” central banks is: allegedly, they serve to provide stability of their countries’ financial systems. In reality, their main function is to buy out Treasury Notes of the United States. Our Central Bank (Central Bank of Russian Federation) does just that. The Central Bank buys dollars entering Russia with rubles and invests the said dollars into the Treasuries of the United States. Thus, the “extra” dollars US printed to pay for their trading operations return back into the US. In other words, this huge mass of the over-printed dollars becomes neutralized. The main function of the Central Banks of all other countries is dollar support, and not support of the financial systems of their respectful states.

But all this huge enterprise only works while all other world countries agree and keep buying Treasuries of the United States, and if all of a sudden the demand for the US Treasuries drops, an unavoidable collapse follows. That is why the main guarantee of the American dollar is not the American gold reserve or the American industry, as liberal economists will have you believe, but the American military. The American military is a huge enterprise of compulsion, that can come crushing down on anyone who refuses to live according to the plans American imposed on the rest of the world. The foundation of today’s prosperity of the American state is its military.

This financial system comes to a halt today. China, Russia, and other countries are less eager to buy the American treasure notes… As an alternative to a dollar Euro emerges… the Yuan strengthens its position… The world simply doesn’t have the huge quantity of money needed to keep buying out American treasury notes. An astronomically fast increase of the American debt comes to a point, where even if the rest of the world were to pump the oil 24/7, process it, produce something, sell it to each other, there will still be not enough money in the world to keep buying the treasury notes US keeps producing. So there is a problem here. The system needs a re-boot. And now let’s think back how the dollar was established. Twice world wars helped the US to come out of the crisis and take one more step towards the world dominance. Now Americans need a war on a global scale again. The war will bring exclusive pluses for the American economy.

First of all, weapons production makes up a significant portion of the American industry (they do not just make burgers and develop services), so there will be a high demand for American weapons.

Second, in case Americans are successful in provoking conflicts they do not fight in, they will assume the position of a judge, which will increase their political weight and influence in the world. They will be the ones to decide who is right and who is wrong, who is a “bloody dictator” and who is a “democratic rebel”. Besides, using a “war conflict” and a “crime against humanity” excuses they will get an opportunity to interfere in any region they deem necessary. We see it happening now already: Americans entered the strategically positioned Afghanistan, they entered Iraq, they tried to enter Iran, today they walked into Libya, tomorrow they want to walk into Syria; in other words, their plans are vast. A war started in any region gives them complete cart-blanch and unties their hands. The United States will be able to do anything they want to without losing face.

At this point the economy of the United States practically exhausted itself. The large State’s debt, not only of the United States, but of other countries as well, is just an above-water part of an iceberg we are viewing. The problem is that “Bolivar” cannot feed and keep up such high life standards for so many people any longer. The decline of living standards is inevitable. The expenses of the Western world must be brought in accordance with its income, which means people’s salaries and other incomes will be decreasing, the benefits and allowances will be decreasing; life will be getting worse. Life there simply cannot be getting better any longer.

This economy exhausted itself. That’s why a good explanation is needed now to justify why people are getting less and less well-off. The war and difficulties associated with war were always the best explanation of it in human history. Presently people may be unhappy with their government because they don’t have a second hamburger and because they cannot exchange their car after three years since the company they work for is having difficulties. Well, if a global war starts, people will be praising their government for the fact that they do have their one hamburger and that they have gas for their old car. The war will allow them to “write off”, if I may say so, the high living standards.

Those same high living standards that they once used as a bait to catch the people of the Soviet Union. We ruined our country exclusively out of the desire to live just as nice as the western shop windows we were shown looked. But what’s done is done. The circus left. And now – even though not too well – we must live on.

/Translated by Svetlana V. Nuss
Note form the translator: Please help us translate more articles from our site into English and other languages. We can help with editing. Thank you!

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By myfuamerica

aaa111 katasonov USA controls CB central bank of Argentina and of Russia and all others

http://www.strategic-culture.org/news/2016/07/15/central-banks-the-untouchables.html

Central Banks: The Untouchables
VALENTIN KATASONOV | 15.07.2016 | WORLD | BUSINESS
Central Banks: The Untouchables
Central banks are key institutions responsible for issuing currency, monitoring private banks and carrying out a country’s monetary policy. In terms of their influence on a country’s economy, central banks may surpass all the economic agencies of an executive branch, including ministries of finance (treasuries). Central banks are not a part of any of the three branches of government (legislative, executive and judicial). Their special status, which makes them independent from the state, is set out in constitutions and special laws. It is believed that such independence is necessary to pursue a balanced monetary policy and prevent the government from abusing the printing press and covering its expenses by printing unsecured currency. These days, however, there are many who would prefer this argument to be forgotten seeing as the US Federal Reserve System (the central bank of the US), the Bank of England, the Bank of Japan, the European Central Bank and many other central banks in the Western world switched their printing presses to full power and masked what was going on with references to ‘quantitative easing programmes’.

The pyramid of financial power

It is clear today that a new structure is being built in the world alongside the state machine that has existed for centuries and represents national sovereignty, and this structure is designed to gradually replace nation states. It is called a world government and the supports of the structure are central banks. The structure is in the form of a pyramid. At the top is the US Federal Reserve System, which issues dollars that acquired the status of a global currency 72 years ago at the Bretton Woods Conference.

The next layer of the pyramid is made up of central banks that issue reserve currencies. These are first and foremost the European Central Bank (ECB), the Bank of England, and the Bank of Japan. The layer below consists of central banks in the eurozone, which kind of act as ECB shareholders (chief among these is the Bundesbank and the Bank of France). It also includes the central banks of Canada, Australia, New Zealand and some Scandinavian countries. At the base of the pyramid are the vast majority of the other central banks in the world, which are such in name only. In practice, they are ‘currency boards’ that issue national currencies by purchasing US dollars or other reserve currencies. These ‘national’ currencies are really just repainted Federal Reserve dollars. This entire network of central banks is presided over by the US Federal Reserve System and the Bank for International Settlements (BIS) in Basel. The BIS is a kind of private club for central banks that was established back in 1930 and played a not insignificant role in the build up to and unleashing of the Second World War. 

Central banks may have the status of public sector organisations, private or mixed (public-private). The form of ownership has absolutely no effect on their ‘independence’. The US Federal Reserve System, for example, is a closed corporation. The Bank of England and the Bank of France used to be privately owned, but were later nationalised. The central banks of Japan and Italy are organisations with mixed ownership. Every year, the central banks expand their range of functions and powers. Many of them are becoming ‘financial mega-regulators’ that are usurping control over the economy. 

Some of the events taking place in the world can only be understood in light of the fact that central banks have immunity that protects them from any attempts by the state to encroach upon their ‘special’ status.

Slovenia puts the ECB in its place

On 7 July, global news agencies circulated two stories. The first came from the BBC and the second from Reuters. The headline of the BBC news item was «Argentina: Former leader Cristina Fernandez has assets frozen», while Reuters published its article under the headline: «ECB threatens legal action against Slovenia after police raid». At first glance, there does not seem to be any connection between the two stories, but a connection does nevertheless exist.

In 2013, one of the leading private banks in Slovenia found itself on the verge of bankruptcy. There was a possibility that the bank’s collapse would bring down the country’s entire banking system. The government of Slovenia, which is a member of both the European Union and the Eurozone, did not receive adequate financial support from Brussels and was forced to bail out its own banks, giving them more than €3 billion from the state budget. The distribution of public money took place on the basis of recommendations and suggestions prepared by the Central Bank of Slovenia. And now three years later, compelling evidence has emerged that casts doubt on whether the Central Bank provided the government with an objective picture of the financial position of individual banks in the country’s credit system. There is a suspicion that some of the information the Central Bank of Slovenia gave to the government was corrupt. Slovenian police have searched the offices of the Central Bank and seized a number of documents that compromise the governor and senior officials of the Bank of Slovenia.

And all of a sudden, the actions of the Slovenian police have sparked a violent reaction from the European Central Bank. ECB President Mario Draghi said that he deplored the seizure of property and information, referring to it as a violation of the ECB’s legal privileges and immunities and calling on European Commission President Jean-Claude Juncker to look into the situation. Mario Draghi has also sent a letter to the Slovenian State Prosecutor General that says: «Seized equipment contains ECB information and such information is protected under directly applicable primary EU law». The European Central Bank also threatened Slovenia with legal action (although the case will obviously be filed with the supranational European Court of Justice rather than the national court of Slovenia). It turns out that any attempts by national authorities to monitor and control their central banks are considered to be an encroachment upon the ‘independence’ of the European Central Bank. The incident in Slovenia has made it clear to the authorities of all Eurozone countries that their ‘national’ central banks are actually nothing more than subsidiaries of the supranational ECB.

The money bosses take revenge on a woman

Now let us look at events in Argentina. A court in Buenos Aires has decided to freeze the assets of former Argentine President Cristina Fernández de Kirchner, who has been accused of artificially propping up the exchange rate of the Argentine peso in the final months of her presidency. Following orders from Kirchner, the central bank allegedly sold US dollars on the futures market at «an artificially low price to the detriment of the country’s financial system». The tailor-made nature of the affair is beyond doubt. For many years, this tenacious woman has withstood the onslaught from the US and the money bosses in order to protect Argentina’s sovereignty.

Firstly, she resisted the attempts of ‘financial vultures’ to undermine the debt restructuring agreements that Argentina reached with its main creditors in the early 2000s. The ‘financial vultures’ (several speculative investment funds) that had not signed restructuring agreements began to take action through the courts of New York, achieving full repayment of Argentine debt securities that they had been able to buy on the market for next to nothing. This created a precedent allowing global sovereign debt restructuring agreements to be undermined. It also created a precedent for the blatant pressuring of foreign states using the decisions of courts belonging to other jurisdictions (courts that do not even formally have the status of an international court). Here Cristina Fernández de Kirchner found herself on the frontline of the battle against legal imperialism.

Secondly, Cristina Kirchner created a precedent a few years ago that was not to the money bosses’ liking. As head of state, she decided to place the Central Bank of Argentina under her control. In 2010, she needed the central bank’s currency reserves to pay the country’s external debt. The amount needed was $6.6 billion, which was about a seventh of the central bank’s international reserves and half of the total amount of external sovereign debt. Covering government debts by obtaining foreign loans would make the country even more dependent on global moneylenders, but by using the central bank’s reserves, Argentina would be able to completely rid itself of its foreign debt burden in a relatively short space of time. It is not difficult to guess how the money bosses reacted to this brave woman’s endeavour. The then president of the Central Bank of Argentina, Martin Redrado, refused to obey Kirchner’s orders and she signed a decree for his dismissal. In response, Redrado appealed to the court in Buenos Aires and just a few days later (what efficiency!), the Argentine justice system annulled the president’s decree. The judge who presided over the case justified his decision by saying that «the president does not have the authority to dismiss the head of the Central Bank».

Surprisingly, as well as deciding to reinstate Redrado as central bank president, the court also demanded that the Argentine President’s decision to use the central bank’s international reserves to pay the country’s debt be revoked. 

Central Bank President Martin Redrado was finally dismissed, but the decision prohibing the use of the central bank’s international reserves was upheld. It is interesting that in January 2010, accounts held by Argentina’s Central Bank in US banks were frozen by a court in New York. The decision was made based on the requirements of the holders of Argentina’s external debt. Officially, the decision of the New York court was not linked to Kirchner’s decision, but experts familiar with the rules of the game in the global financial system believe it was a warning to the Argentine president. It is only in light of this story that one can understand why former Argentine President Cristina Fernández de Kirchner is now being persecuted. The money bosses are trying to completely destroy all traces of the ‘Argentine precedent’ that allows for a central bank to be removed from under the control of the global financial International.


Tags: European Central Bank    Ar

The pyramid of financial power

It is clear today that a new structure is being built in the world alongside the state machine that has existed for centuries and represents national sovereignty, and this structure is designed to gradually replace nation states. It is called a world government and the supports of the structure are central banks. The structure is in the form of a pyramid. At the top is the US Federal Reserve System, which issues dollars that acquired the status of a global currency 72 years ago at the Bretton Woods Conference.

The next layer of the pyramid is made up of central banks that issue reserve currencies. These are first and foremost the European Central Bank (ECB), the Bank of England, and the Bank of Japan. The layer below consists of central banks in the eurozone, which kind of act as ECB shareholders (chief among these is the Bundesbank and the Bank of France). It also includes the central banks of Canada, Australia, New Zealand and some Scandinavian countries. At the base of the pyramid are the vast majority of the other central banks in the world, which are such in name only. In practice, they are ‘currency boards’ that issue national currencies by purchasing US dollars or other reserve currencies. These ‘national’ currencies are really just repainted Federal Reserve dollars. This entire network of central banks is presided over by the US Federal Reserve System and the Bank for International Settlements (BIS) in Basel. The BIS is a kind of private club for central banks that was established back in 1930 and played a not insignificant role in the build up to and unleashing of the Second World War. 

Central banks may have the status of public sector organisations, private or mixed (public-private). The form of ownership has absolutely no effect on their ‘independence’. The US Federal Reserve System, for example, is a closed corporation. The Bank of England and the Bank of France used to be privately owned, but were later nationalised. The central banks of Japan and Italy are organisations with mixed ownership. Every year, the central banks expand their range of functions and powers. Many of them are becoming ‘financial mega-regulators’ that are usurping control over the economy. 

Some of the events taking place in the world can only be understood in light of the fact that central banks have immunity that protects them from any attempts by the state to encroach upon their ‘special’ status.

Slov

inflation india gupta

The pseudo Economists will kill Indian economy by Prof R K Gupta-India (View MyPage) on May 12, 2007 05:50 PM  | Hide replies Several theories are put forth by fraudulent experts who normally hide when there is bad time and emerge to explain growth , when it starts to happens. It is same way in stock markets when , the share markets boom, every TV channel and newspaper has suddenly several experts and investment advisors shouting to explain why this is happening. But when opposite happens they simply disappear and hide. The theories of trying to control Inflation, by RBI and GOI are outdated and foolish attempts and based on economics theory of regulating money markets and State intervention whichbhave little crdibility. These can only work in a disciplined market and stable matured economic conditions like in USA or UK. India is Far far away from it. A corrupt society, with severely unequal distribution of money, black money almost equal to official GDP generated every year, easy money flow form abroad, delicensing and speculations without any control, property prices soaring up without any logic, idiotic encouragemenmt ot retailing sector that has little to add value but contribued to fire in real estate markets, bullion prices are going up and share scrips have also gone up suddenly never seen in past except for brief period of harshad Mehta scam , but that was nothing as now. The government figures are fraudulent. I challenge GOI and all State governments to produce actual retail prices of 100 household items of daily consumption,semi durables and durable goods as on 2000 April and now ( except for electronic based items).The real inflation to consumer has been 15-20% per year range in most goods in last 5 years including drugs and property inflation 30-60% per year over last 5 years. It is now out of reach of common man whose salry has increased only at rate of 5% per year.High property rates result in panic and higher rents and cost of business which in turn fuel up prices. There is too much of liberalization with directors and senior executives of corporatuons fixing for themselves lacs of rupees of salaries per month or year in false euphoria created of India shining and in name of liberalisation of company laws.The money coming from abroad is mostly laundered money that is fueling property and bullion prices. Also share prices. Uncontrolled loot is going on in country with high speculation, land mafias busy , SEZs being set up with no future benefits, shamelesds and exhorbitant rate property auctions , etc with little or no control of government. The funny Institutes like RBI,SEBI etc and Our PM and FM who are pseudo experts ( in fact novices) in economics and Public administration are merely trying sketchy methods without any base and effectiveness just to show action knowing that what they are doing is an eternal run of the mill cut and edit exercise which is half hearted trial and error attempt with not much results. The situation in India has become pretty bad at cost of average consumer whose life has become hellish now. The promised dream shown when LPG was stared in 1991 has gone just the opposite. Instead of expansion of goods and quality improvements, and consequent price decreases, prices have increased severely and quality standards have gone down. Yes , a few lac people have become millionaires suddenly in few years. That is net gain of 15 years LPG and leadership of fraudulent economic experts like ManMohan Singh and Chidambram. The fall of congress is certain as this party no longer deserves to exist as it has lost relevance with most of its leaders boneless, corrupt and dividing society centered around one family projecting it as opoor substitute for Queen of Enmgland and a mascot of virtues and capabilty , in attempt to woo voters forgetting that their competitive parties will do the same quickly. Indian scenario looks pretty bad. It is actually shameful that after 60 years of independence , we have so high price rise rate, out of proportion real estate prices, rampant corruption, virtually non functioning judiciary,corrupt police organisations and general state of affairs which we can call laissez faire, safely. RBI will have to learn some new lessons and stop unnecessarily try to play with money markets as nothing is going to happen with 1% CRR or interest up or down,.In fact Indian governments are suffering from illusion that Government has duty to run business and manipulate markets. What government has to do is ban exports of fruit vegetable and cereals, release at least 10 million sq meters of land in all cities and metros in next 6 months, stop foolish auctioning of commercial sites, stop foolish SEZ policy that will be mere wastage of resources and will uproot farmers without an y long term benefits but will create social problems and see that Indian manufacturing sectors speeds up and goes higher than China. There should be control on salaries given to public servants and Private sector as this loot ultimately comes from pocket of consumer and tax payers and bound to create inflation as easy money is spent easily. Will our planners and senior bureaucrats try to understand above scenario and mechanism and take action before a civil war like situation emerges in the country?The inequality is actually increasing in all terms including earning power. This will rock the society soon.      Forward  |  Report abuse Business » How to tackle inflation How to tackle inflation ShareComment To get such articles in your inbox Text size:  A   A   A February 08, 2007 11:36 IST Is the government getting needlessly hysterical about inflation? Many people think it is okay to tolerate some inflation if, in return, it is possible to sustain higher growth rates. Nothing matters as much for peace, prosperity and poverty alleviation as high GDP growth, so I would always advocate any policy which delivers higher sustained GDP growth. However, the link between inflation and growth is complex. High inflation does not give high growth. The growth miracles of Asia, where above 7% growth was sustained over a 25-year period, were not associated with high inflation. In fact, countries with high inflation have tended to have low growth. In the business cycle, an acceleration of inflation can support a temporary acceleration of growth. In India, expected inflation has gone up from roughly 3% in 2004 to roughly 7% today--a rise of 4 percentage points. Interest rates have risen by less than 4 percentage points. As a consequence, real interest rates have actually gone down. Borrowing has become cheaper; we have a credit boom; and this is giving heightened GDP growth. If inflation now stands still at 7%, this boost to GDP growth will fade away. Episodes where inflation went up are associated with a brief acceleration of GDP growth. A government can jolt an economy by raising the inflation rate. This heightened growth is not sustained. Conversely, achieving high sustained GDP growth is about fundamental issues of economic reform, and does not concomitantly require high inflation. One of the great strengths of India is that the political system just does not accept high inflation. This is one area where politicians have been ahead of the intellectuals. Inflation of 3% is politically acceptable, and inflation above 5% sets off alarm bells. The government that can jolt an economy by raising the inflation rate then has to go through the costly process of wringing out the inflation, to get back to 3%. Since there is no tradeoff between inflation and GDP growth, Parliament is right in demanding low inflation and high GDP growth. Currently, in India, we go through boom-and-bust cycles; sometimes GDP growth rates are very high and sometimes GDP growth rates drop sharply. This boom-and-bust cycle is unpleasant for every household. There is a powerful international consensus that stabilising inflation reduces this boom-and-bust cycle of GDP growth. The ideal combination, which has been achieved in all mature market economies, is one involving low inflation, which is also predictable and non-volatile. Low inflation volatility induces low volatility of GDP growth. Low and predictable inflation also reduces the number of mistakes made by entrepreneurs in formulating investment plans. What India does not have is an institutional capacity for delivering predictable, non-volatile inflation of 3%. In socialist India, the way to deal with an outbreak of inflation was to do government interference in commodity markets. A few commodities that "cause" inflation are identified, and the government swings into action: banning exports, giving out import licences, banning futures trading, sending the police to unearth "hoarding", etc. This is deeply distortionary. Milk exports were banned, and milk prices fell. But why should milk farmers pay for a macroeconomic problem of inflation? The cost of bringing down inflation needs to be dispersed all across the economy. If milk prices had been allowed to rise, then more labour and capital would shift from unproductive cereals to high-value milk production. India has the potential to be the world's biggest exporter of milk. But this requires a sophisticated web of producers, supply chain, exporters, factories, etc. This sophisticated ecosystem will not flourish when the government meddles in the milk industry. A meddlesome government will go through the whiplash of doing an MSP one day because milk prices are low and banning exports another day because milk prices are high. There is something profoundly wrong about a government that interferes in what can be imported and what can be exported. If the export of ball bearings were sometimes banned by the government, you can be sure there would be fewer factories to build ball bearings. India is evolving from a socialist past into a mature market economy. How can predictable, non-volatile inflation of 3% be achieved? The recipe that has been developed worldwide is to devote the entire power of monetary policy to this one task. In India, the RBI has a complex mandate spanning over many contradictory roles. This has led to failures on inflation control. In a mature market economy, a modern central bank watches expected inflation with great interest. Active trading takes place on the spot and derivatives markets, for both ordinary bonds and inflation-indexed bonds. Using these prices, a modern central bank is able to infer expected inflation. When the short-term interest rate is raised or lowered, in order to respond to changes in expected inflation, there is a slow impact on the economy, possibly spread over two to three years. A modern central bank has the economic knowledge required to watch out for expected inflation deep in the future, and respond to it ahead of time, so as to deliver inflation that is on target. In India's case, the RBI Act of 1934 predates modern monetary economics. In other countries, fundamental reforms have been undertaken in order to refashion monetary institutions in the light of modern knowledge. As an example, in the late 1990s, when Tony Blair and Gordon Brown won the election, they refashioned the Bank of England as a focused central bank which has three core values: Independence: the Bank of England sets the short rate without involvement from the Ministry of Finance. Transparency: the entire process through which interest rate setting is done is fully transparent so that the financial markets always know exactly what is being done and why. Accountability: the Bank of England is accountable for hitting an inflation target. All tasks other than the inflation target were removed from the Bank of England. The bad drafting of the RBI Act of 1934 is the ultimate cause of the distress of milk producers today. These linkages are not immediately visible, but they are very real. It is because India does not have a proper institutional foundation for monetary policy that we are reduced to distortionary mechanisms for inflation control. Ajay Shah Source:

KING

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http://www.realhistorychannel.org/Q1_2015.pdf

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Western Interests Aim To Flummox Russia - PaulCraigRoberts.org

Western Interests Aim To Flummox Russia - PaulCraigRoberts.org

Western Interests Aim To Flummox Russia

February 14, 2017 | Categories: Articles & Columns | Tags: |  Print This Article

Western Interests Aim To Flummox Russia

Paul Craig Roberts and Michael Hudson

An article by Robert Berke in oilprice.com, which describes itself as “The No. 1 Source for Oil & Energy News,” illustrates how interest groups control outcomes by how they shape policy choices.

Berke’s article reveals how the US intends to maintain and extend its hegemony by breaking up the alliance between Russia, Iran, and China, and by oil privatizations that result in countries losing control over their sovereignty to private oil companies that work closely with the US government. As Trump has neutered his presidency by gratuitously accepting Gen. Flynn’s resignation as National Security Advisor, this scheme is likely to be Trump’s approach to “better relations” with Russia.

Berke reports that Henry Kissinger has sold President Trump on a scheme to use the removal of Russian sanctions to pry President Putin away from the Russian alliance with Iran and China. Should Putin fall for such a scheme, it would be a fatal strategic blunder from which Russia could not recover. Yet, Putin will be pressured to make this blunder.

One pressure on Putin comes from the Atlanticist Integrationists who have a material stake in their connections to the West and who want Russia to be integrated into the Western world. Another pressure comes from the affront that sanctions represent to Russians. Removing this insult has become important to Russians even though the sanctions do Russia no material harm.

We agree with President Putin that the sanctions are in fact a benefit to Russia as they have moved Russia in self-sufficient directions and toward developing relationships with China and Asia. Moreover, the West with its hegemonic impulses uses economic relationships for control purposes. Trade with China and Asia does not pose the same threat to Russian independence.

Berke says that part of the deal being offered to Putin is “increased access to the huge European energy market, restored western financial credit, access to Western technology, and a seat at the global decision-making table, all of which Russia badly needs and wants.” Sweetening the honey trap is official recognition of “Crimea as part of Russia.”

Russia might want all of this, but it is nonsense that Russia needs any of it.

Crimea is part of Russia, as it has been for 300 years, and no one can do anything about it. What would it mean if Mexico did not recognize that Texas and California were part of the US? Nothing.

Europe has scant alternatives to Russian energy.

Russia does not need Western technology. Indeed, its military technology is superior to that in the West.

And Russia most certainly does not need Western loans. Indeed, it would be an act of insanity to accept them.

It is a self-serving Western myth that Russia needs foreign loans. This myth is enshrined in neoliberal economics, which is a device for Western exploitation and control of other countries. Russia’s most dangerous threat is the country’s neoliberal economists.

The Russian central bank has convinced the Russian government that it would be inflationary to finance Russian development projects with the issuance of central bank credit. Foreign loans are essential, claims the central bank.

Someone needs to teach the Russian central bank basic economics before Russia is turned into another Western vassal. Here is the lesson: When central bank credit is used to finance development projects, the supply of rubles increases but so does output from the projects. Thus, goods and services rise with the supply of rubles. When Russia borrows foreign currencies from abroad, the money supply also increases, but so does the foreign debt. Russia does not spend the foreign currencies on the project but puts them into its foreign exchange reserves. The central bank issues the same amount of rubles to pay the project’s bills as it would in the absence of the foreign loan. All the foreign loan does is to present Russia with an interest payment to a foreign creditor.

Foreign capital is not important to countries such as Russia and China. Both countries are perfectly capable of financing their own development. Indeed, China is the world’s largest creditor nation. Foreign loans are only important to countries that lack the internal resources for development and have to purchase the business know-how, technology, and resources abroad with foreign currencies that their exports are insufficient to bring in.

This is not the case with Russia, which has large endowments of resources and a trade surplus. China’s development was given a boost by US corporations that moved their production for the US market offshore in order to pocket the difference in labor and regulatory costs.

Neoliberals argue that Russia needs privatization in order to cover its budget deficit. Russia’s government debt is only 17 percent of Russian GDP. According to official measures, US federal debt is 104 percent of GDP, 6.1 times higher than in Russia. If US federal debt is measured in real corrected terms, US federal debt is 185 percent of US GDP.http://www.paulcraigroberts.org/2014/07/08/deteriorating-economic-outlook/

Clearly, if the massive debt of the US government is not a problem, the tiny debt of Russia is not a problem.

Berke’s article is part of the effort to scam Russia by convincing the Russian government that its prosperity depends on unfavorable deals with the West. As Russia’s neoliberal economists believe this, the scam has a chance of success.

Another delusion affecting the Russian government is the belief that privatization brings in capital. This delusion caused the Russian government to turn over 20 percent of its oil company to foreign ownership. The only thing Russia achieved by this strategic blunder was to deliver 20 percent of its oil profits into foreign hands. For a one-time payment, Russia gave away 20 percent of its oil profits in perpetuity.

To repeat ourselves, the greatest threat that Russia faces is not sanctions but the incompetence of its neoliberal economists who have been thoroughly brainwashed to serve US interests.

 

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