The independence of Banking System from any control.. (1) Bankers' copnspiracy: 'independent" central Banks controlled by BIS - Carroll Quigley (2) Paul Krugman: Oligarchs ran up debt in foreign currency, to buy real estate in London (3) Key Russian mistake: allowing domestic industry to be financed by $-denominated debt (4) Petras: 6 million Russians died post-1991; Putin must nationalize Banks and substitute for imports (5) Putin lets 'independent' Central Bank create recession to stem Ruble fall (6) US instructs Russian Central Bank to strangle Russian economy (7) Russia's central bankers are Western-trained (8) Merkel offers Free Trade in return for Subservience (9) Russia defiant after more threats from West over Ukraine (1) Bankers' copnspiracy: 'independent" central Banks controlled by BIS - Carroll Quigley The Public Bank Solution: From Austerity To Prosperity By Ellen Hodgson Brown, J.D. Third Millennium Press, Baton Rouge, Louisiana, 2013 {p. 191} Carroll Quigley and the BIS Dr. Quigley was a professor of history at Georgetown University, where he was President Bill Clinton's mentor. Quigley identified himself as an insider groomed by the powerful clique he called "the international bankers." His credibility is heightened by the fact that {p. 192} he actually espoused their goals. In Tragedy and Hope: A History of the World in Our Time (1966), he wrote: I know of the operations of this network because I have studied it for twenty years and was permitted for two years, in the early 1960's, to examine its papers and secret records. I have no aversion to it or to most of its aims and have, for much of my life, been close to it and to many of its instruments.... In general my chief difference of opinion is that it wishes to remain unknown, and I believe its role in history is significant enough to be known. He wrote of this international banking network: [T]he powers of financial capitalism had another far-reaching aim, nothing less than to create a world system of financial control in private hands able to dominate the political system of each country and the economy of the world as a whole. This system was to be controlled in a feudalist fashion by the central banks of the world acting in concert, by secret agreements arrived at in frequent private meetings and conferences. The apex of the system was to be the Bank for International Settlements in Basel, Switzerland, a private bank owned and controlled by the world's central banks which were themselves private corporations. The key to their success, said Quigley, was that the international bankers would control and manipulate the money system of a nation while letting it appear to be controlled by the government. The economic and political systems of nations would be controlled not by citizens but by bankers, for the benefit of bankers. The goal was to establish an "independent" central bank in every country-meaning one that was independent of government and subject to the control of private banking interests. Today, this goal has largely been achieved. Central banks have the authority to issue the national currency in their respective countries, and it is from these banks that governments must borrow money to pay their debts and fund their operations. The result is a global economy in which not only industry but government itself runs on credit (or debt) created by a banking monopoly headed by a network of central banks that are {p. 193} independent of the dictates of government; and the top of this network is located at the BIS, the "central bank of central banks" in Basel. Behind the Mask of an International Clearing House The BIS was set up in 1929 to handle German war reparations, after Germany defaulted on its war debts under the Treaty of Versailles in 1923. The Dawes Plan was then set up to allow Germany to borrow money from America, so that Germany could repay its war debts to England and France. In 1929, the Young Committee restructured the Dawes loans and created the BIS to act as trustee for the loans. Germany made installment payments to America, giving American bankers a vested interest in German industry so hat Germany could repay the loans. The plan for the BIS was agreed to at a conference at the Hague in August 1929, just two months before the Wall Street stock market crash of that year. A charter for the bank was drafted at the International Bankers Conference at Baden Baden in November and was adopted at a second Hague Conference on January 20,1930. Although the stated purpose of the BIS was to handle reparations, Quigley said that its primary purpose was to allow central bankers to maintain collective control over world finance without London remaining the sole dominating financial power, Britain having ceded much of that power to America with the economic burdens of World War 1. Quigley wrote: The BIS is generally regarded as the apex of the structure of financial capitalism whose remote origins go back to the creation of the Bank of England in 1694 and the Bank of France in 1803. As a matter of fact its establishment in 1929 was rather an indication that the centralized financial system of 1914 was in decline. It was set up rather to remedy the decline of London as the world's financial center by providing a mechanism by which a world with three chief financial centers in London, New York, and Paris could still operate as one.... It was intended to be the.world cartel of ever-growing national financial powers by assembling the nominal heads of these national financial centers. (2) Paul Krugman: Oligarchs ran up debt in foreign currency, to buy real estate in London Comment (Peter M.): It should not be allowed. Capital controls would stop it. Dec 18 2:29 pm 18 2:29 pm Notes on Russian Debt I have to admit that the Russian crisis has me feeling young again — it’s back to all the old issues from the Asian debt crisis of 1997-1998, when bad things mainly happened to other countries and the discussion here was relatively technocratic; also, I was a lot younger (did I mention that?). And although it’s very serious stuff — I keep pulling myself up short when I want to use standard metaphors like an economic meltdown, because I suddenly remember that Putin has nukes — I am getting some satisfaction in trying to puzzle out the underlying issues. Which brings me to the interesting question of Russian debt. Obviously plunging oil prices are bad for petroeconomies. But what is making the Russian experience so dire is the linkage oil-> ruble-> balance sheets, because of all the dollar- and euro-denominated debt. This, however, raises several questions. First, how did they get that debt? Here’s the Russian current account balance over the past couple of decades: It has been in consistent large surplus, with a cumulative surplus of more than $900 billion. Russia should not be a debtor country. It has managed this nonetheless, presumably because corporations and banks have borrowed abroad, and somehow that money has ended up invested in luxury London real estate and other things. It would be nice to have a good picture of how the flow of funds worked. [...] (3) Key Russian mistake: allowing domestic industry to be financed by $-denominated debt From: Paul de Burgh-Day <pdeburgh@lorinna.net> Date: Sat, 3 Jan 2015 14:35:29 +1100 Subject: Pepe Escobar: 2015 Will Be All About Iran, China and Russia 2015 Will Be All About Iran, China and Russia By Pepe Escobar January 02, 2015 BEIJING, December 31 (Sputnik) — 2015 Will Be All About Iran, China and Russia By Pepe Escobar January 02, 2015 "ICH" - "Sputnik" - - BEIJING, December 31 (Sputnik) — Fasten your seatbelts; 2015 will be a whirlwind pitting China, Russia and Iran against what I have described as the Empire of Chaos. So yes – it will be all about further moves towards the integration of Eurasia as the US is progressively squeezed out of Eurasia. We will see a complex geostrategic interplay progressively undermining the hegemony of the US dollar as a reserve currency and, most of all, the petrodollar. For all the immense challenges the Chinese face, all over Beijing it's easy to detect unmistakable signs of a self-assured, self-confident, fully emerged commercial superpower. President Xi Jinping and the current leadership will keep investing heavily in the urbanization drive and the fight against corruption, including at the highest levels of the Chinese Communist Party (CCP). Internationally, the Chinese will accelerate their overwhelming push for new 'Silk Roads' – both overland and maritime – which will underpin the long-term Chinese master strategy of unifying Eurasia with trade and commerce. Global oil prices are bound to remain low. All bets are off on whether a nuclear deal will be reached by this summer between Iran and the P5+1. If sanctions (actually economic war) against Iran remain and continue to seriously hurt its economy, Tehran’s reaction will be firm, and will include even more integration with Asia, not the West. No matter how it was engineered, the fact that stands is that the current financial/strategic oil price collapse is a direct attack against (who else?) Iran and Russia. Washington is well-aware that a comprehensive deal with Iran cannot be reached without Russia’s help. That would be the Obama administration’s sole – and I repeat – sole foreign policy success. A return to the “Bomb Iran” hysteria would only suit the proverbial usual (neo-con) suspects. Still, by no accident, both Iran and Russia are now subject to Western sanctions. No matter how it was engineered, the fact that stands is that the current financial/strategic oil price collapse is a direct attack against (who else?) Iran and Russia. That derivative war Now let’s take a look at Russian fundamentals. Russia’s government debt totals only 13.4% of its GDP. Its budget deficit in relation to GDP is only 0.5%. If we assume a US GDP of $16.8 trillion (the figure for 2013), the US budget deficit totals 4% of GDP, versus 0.5% for Russia. The Fed is essentially a private corporation owned by regional US private banks, although it passes itself off as a state institution. US publicly held debt is equal to a whopping 74% of GDP in fiscal year 2014. Russia’s is only 13.4%. The declaration of economic war by the US and EU on Russia – via the run on the ruble and the oil derivative attack – was essentially a derivatives racket. Derivatives – in theory – may be multiplied to infinity. Derivative operators attacked both the ruble and oil prices in order to destroy the Russian economy. The problem is, the Russian economy is more soundly financed than America's. Considering that this swift move was conceived as a checkmate, Moscow’s defensive strategy was not that bad. On the key energy front, the problem remains the West’s – not Russia’s. If the EU does not buy what Gazprom has to offer, it will collapse. Moscow’s key mistake was to allow Russia's domestic industry to be financed by external, dollar-denominated debt. Talk about a monster debt trap which can be easily manipulated by the West. The first step for Moscow should be to closely supervise its banks. Russian companies should borrow domestically and move to sell their assets abroad. Moscow should also consider implementing a system of currency controls so the basic interest rate can be brought down quickly. And don’t forget that Russia can always deploy a moratorium on debt and interest, affecting over $600 billion. That would shake the entire world's banking system to the core. Talk about an undisguised “message” forcing the US/EU economic warfare to dissolve. Russia does not need to import any raw materials. Russia can easily reverse-engineer virtually any imported technology if it needs to. Most of all, Russia can generate — from the sale of raw materials – enough credit in US dollars or euros. Russia's sale of its energy wealth — or sophisticated military gear — may decline. However, they will bring in the same amount of rubles — as the ruble has also declined. Replacing imports with domestic Russian manufacturing makes total sense. There will be an inevitable “adjustment” phase – but that won’t take long. German car manufacturers, for instance, can no longer sell their cars in Russia due to the ruble's decline. This means they will have to relocate their factories to Russia. If they don’t, Asia – from South Korea to China — will blow them out of the market. Bear and dragon on the prowl The EU's declaration of economic war against Russia makes no sense whatsoever. Russia controls, directly or indirectly, most of the oil and natural gas between Russia and China: roughly 25% of the world's supply. The Middle East is bound to remain a mess. Africa is unstable. The EU is doing everything it can to cut itself off from its most stable supply of hydrocarbons, prompting Moscow to redirect energy to China and the rest of Asia. What a gift for Beijing – as it minimizes the alarm about the US Navy playing with "containment" across the high seas. Still, an unspoken axiom in Beijing is that the Chinese remain extremely worried about an Empire of Chaos losing more and more control, and dictating the stormy terms of the relationship between the EU and Russia. The bottom line is that Beijing would never allow itself to be in a position where the US could interfere with China's energy imports – as was the case with Japan in July 1941 when the US declared war by imposing an oil embargo, cutting off 92% of Japanese oil imports. Everyone knows a key plank of China’s spectacular surge in industrial power was the requirement for manufacturers to produce in China. If Russia did the same, its economy would be growing at a rate of over 5% per year in no time. It could grow even more if bank credit was tied only to productive investment. Now imagine Russia and China jointly investing in a new gold, oil and natural resource-backed monetary union as a crucial alternative to the failed debt "democracy" model pushed by the Masters of the Universe on Wall Street, the Western central bank cartel, and neoliberal politicians. They would be showing the Global South that financing prosperity and improved standards of living by saddling future generations with debt was never meant to work in the first place. Until then, a storm will be threatening our very lives – today and tomorrow. The Masters of the Universe/Washington combo won’t give up their strategy to make Russia a pariah state cut off from trade, the transfer of funds, banking and Western credit markets and thus prone to regime change. Further on down the road, if all goes according to plan, their target will be (who else) China. And Beijing knows it. Meanwhile, expect a few bombshells to shake the EU to its foundations. Time may be running out – but for the EU, not Russia. Still, the overall trend won’t be altered; the Empire of Chaos is slowly but surely being squeezed out of Eurasia. (4) Petras: 6 million Russians died post-1991; Putin must nationalize Banks and substitute for imports Global Research, November 09, 2014 Region: Russia and FSU The US-EU sponsored coup in the Ukraine and its conversion from a stable Russian trading partner, to a devastated EU economic client and NATO launch pad, as well as the subsequent economic sanctions against Russia for supporting the Russian ethnic majority in the Donbas region and Crimea, illustrate the dangerous vulnerability of the Russian economy and state. The current effort to increase Russia’s national security and economic viability in the face of these challenges requires a critical analysis of the policies and structures emerging in the post-Soviet era. Pillage as Privatization Over the past quarter century, several trillion dollars worth of public property in every sector of the Russian economy was illegally transferred or violently seized by gangster-oligarchs acting through armed gangs, especially during its ‘transition to capitalism’. From 1990 to 1999, over 6 million Russian citizens died prematurely as a result of the catastrophic collapse of the economy; life expectancy for males declined from 67 years during the Soviet era to 55 year during the Yeltsin period. Russia’s GNP declined sixty percent – a historic first for a country not at war. Following Yeltsin’s violent seizure of power and his bombing of the Russian parliament, the regime proceeded to ‘prioritize’ the privatization of the economy, selling off the energy, natural resources, banking, transport and communication sectors at one-tenth or less of their real value to well-connected cronies and foreign entities. Armed thugs, organized by emerging oligarchs “completed” the program of privatization by assaulting, murdering and threatening rivals. Hundreds of thousands of elderly pensioners were tossed out of their homes and apartments in a vicious land-grab by violent property speculators. US and European academic financial consultants “advised” rival oligarchs and government ministers on the most “efficient” market techniques for pillaging the economy, while skimming off lucrative fees and commissions –fortunes were made for the well-connected. Meanwhile, living standards collapsed, impoverishing two thirds of Russian households, suicides quadrupled and deaths from alcoholism, drug addiction, HIV and venereal diseases became rampant. Syphilis and tuberculosis reached epidemic proportions – diseases fully controlled during the Soviet era remerged with the closure of clinics and hospitals. Of course, the respectable western media celebrated the pillage of Russia as the transition to “free elections and a free market economy”. They wrote glowing articles describing the political power and dominance of gangster oligarchs as the reflection of a rising “liberal democracy”. The Russian state was thus converted from a global superpower into an abject client regime penetrated by western intelligence agencies and unable to govern and enforce its treaties and agreements with Western powers. The US and EU rapidly displaced Russian influence in Eastern Europe and quickly snapped up former state-owned industries, the mass media and financial institutions. Communist and leftist and even nationalist officials were ousted and replaced by pliant and subservient ‘free market’ pro-NATO politicians. The US and EU violated every single agreement signed by Gorbachev and the West: Eastern European regimes became NATO members; West Germany annexed the East and military bases were expanded right up to Russia’s borders. Pro-NATO “think tanks” were established and supplied intelligence and anti-Russian propaganda. Hundreds of NGOs, funded by the US, operated within Russia as propaganda and organizing instruments for “subservient” neo-liberal politicians. In the former Soviet Caucuses and Far East, the West fomented separatist sectarian movements and armed uprisings, especially in Chechnya; the US sponsored dictators in the Caucuses and corrupt neo-liberal puppets in Georgia. The Russian state was colonized and its putative ruler, Boris Yeltsin, often in a drunken stupor, was propped up and manipulated to scratch out executive fiats . . . further disintegrating the state and society. The Yeltsin decade is observed and remembered by the Russian people as a disaster and by the US-EU, the Russian oligarchs and their followers as a ‘Golden Age’… of pillage. For the immense majority of Russians it was the Dark Ages when Russian science and culture were ravaged; world-class scientists, artists and engineers were starved of incomes and driven to despair, flight and poverty. For the US, the EU and the oligarchs it was the era of ‘easy pickings’: economic, cultural and intellectual pillage, billion dollar fortunes, political impunity, unbridled criminality and subservience to Western dictates. Agreements with the Russian state were violated even before the ink was dry. It was the era of the unipolar US-centered world, the ‘New World Order’ where Washington could influence and invade nationalist adversaries and Russian allies with impunity. The Golden Era of unchallenged world domination became the Western ‘standard’ for judging Russia after Yeltsin. Every domestic and foreign policy, adopted during the Putin years 2000 – 2014, has been judged by Washington according to whether it conformed or deviated from the Yeltsin decade of unchallenged pillage and manipulation. The Putin Era: State and Economic Reconstruction and EU-US Belligerence President Putin’s first and foremost task was to end Russia’s collapse into nothingness. Over time, the state and economy recovered some semblance of order and legality. The economy began to recover and grow; employment, wages and living standards, and mortality rates improved. Trade, investment and financial transactions with the West were normalized – unadulterated pillage was prosecuted. Russia’s recovery was viewed by the West with ambiguity: Many legitimate business people and MNCs welcomed the re-establishment of law and order and the end of gangsterism; in contrast, policymakers in Washington and Brussels as well as the vulture capitalists of Wall Street and the City of London quickly condemned what they termed Putin’s ‘rising authoritarianism’ and ‘statism’, as Russian authorities began to investigate the oligarchs for tax evasion, large-scale money laundering, the corruption of public officials and even murder. Putin’s rise to power coincided with the world-wide commodity boom. The spectacular rise in the price of Russian oil and gas and metals (2003-2013) allowed the Russian economy to grow at a rapid rate while the Russian state increased its regulation of the economy and began to restore its military. Putin’s success in ending the most egregious forms of pillage of the Russian economy and re-establishing Russian sovereignty made him popular with the electorate: he was repeatedly re-elected by a robust majority. As Russia distanced itself from the quasi-satellite policies, personnel and practices of the Yeltsin years, the US and EU launched a multi-prong hostile political strategy designed to undermine President Putin and restore pliant Yeltsin-like neo-liberal clones to power. Russian NGOs funded by US foundations and acting as CIA fronts, organized mass protests targeting the elected officials. Western-backed ultra-liberal political parties competed unsuccessfully for national and local offices. The US-funded Carnegie Center, a notorious propaganda mill, churned out virulent tracts purporting to describe Putin’s demonic ‘authoritarian’ policies, his ‘persecution’ of dissident oligarchs and his ‘return’ to a ‘Soviet style command economy’. While the West sought to restore the ‘Golden Age of Pillage’ via internal political surrogates, it pursued an aggressive foreign policy designed to eliminate Russian allies and trading partners, especially in the Middle East. The US invaded Iraq, murdered Saddam Hussein and the Baath Party leadership, and established a sectarian puppet regime, eliminating Moscow’s key secular-nationalist ally in the region. The US decreed sanctions on Iran, a major lucrative trading partner with Russia. The US and the EU backed a large-scale armed insurgency to overthrow President Bashaar Assad in Syria, another Russian ally, and to deprive the Russian Navy of a friendly port on the Mediterranean. The US and the EU bombed Libya, a major oil and trade partner of Russia (and China) hoping to install a pro-Western client regime. Goading Russia in the Caucasus and on the Black Sea, the US backed-Georgian regime invaded a Russian protectorate, South Ossetia, in 2008, killing scores of Russian peace keepers and hundreds of civilians, but was repelled by a furious Russian counter-attack. In 2014, the Western offensive to isolate, encircle and eventually undermine any possibility of an independent Russian state went into high gear. The US financed a civil-military coup ousting the elected regime of President Viktor Yanukovytch, who had opposed EU annexation and NATO affiliation. Washington imposed a puppet regime deeply hostile to Russia and ethnic Russian-Ukrainian citizens in the southeast and Crimea. Russian opposition to the coup and support for pro-democracy federalists in the south-east and Crimea served as a pretext for Western sanctions in an effort to undermine Russia’s oil, banking and manufacturing sectors and to cripple its economy. Imperial strategists in Washington and Brussels broke all previous agreements with the Putin Administration and tried to turn Putin’s oligarch allies against the Russian president by threatening their holdings in the West (especially laundered bank accounts and properties). Russian state oil companies, engaged in joint ventures with Chevron, Exxon, and Total, were suddenly cut off from Western capital markets. The cumulative impact of this decade-long Western offensive culminating in the current wave of severe sanctions was to provoke a recession in Russia, to undermine the currency (the ruble declined 23% in 2014), drive up the cost of imports and hurt local consumers. Russian industries, dependent on foreign equipment and parts, as well as oil companies dependent on imported technology for exploiting the Arctic reserves were made to feel the pain of ‘Putin’s intransigence’. Despite the short-term successes of the US-EU war against the Russian economy, the Putin Administration has remained extremely popular among the Russian electorate, with approval ratings exceeding 80%. This has relegated Putin’s pro-Western opposition to the dust bin of history. Nevertheless the Western sanctions policy and the aggressive political – NATO military encirclement of Russia, has exposed the vulnerabilities of Moscow. Russian Vulnerabilities: The Limits of Putin’s Restoration of Russian Sovereignty In the aftermath of the Western and Russian oligarch’s pillage of the Russian economy and the savage degradation of Russian society, President Putin pursued a complex strategy. [...] Western Sanctions, Russian Weakness: Rethinking Putin’s Strategic Approach Western aggressive militarism and the sanctions against Russia exposed several critical vulnerabilities of Putin’s economic and political strategy. These include (1) his dependence on Western-oriented ‘economic oligarchs’ to promote his strategy for Russian economic growth; (2) his acceptance of most of the privatizations of the Yeltsin era; (3) his decision to focus on trade with the West, ignoring the China market, (4) his embrace of a gas and oil export strategy instead of developing a diversified economy; (5) his dependence on his allied robber-baron oligarchs – with no real experience in developing industry, no true financial skills, scant technological expertise and no concept of marketing – to restore and run the peak manufacturing sector. In contrast to the Chinese, the Russian oligarchs have been totally dependent on Western markets, finance and technology and have done little to develop domestic markets, implement self-financing by re-investing their profits or upgrade productivity via Russian technology and research. In the face of Western sanctions Putin’s leading oligarch-allies are his weakest link in formulating an effective response. They press Putin to give in to Washington as they plead with Western banks to have their properties and accounts exempt from the sanctions. They are desperate to protect their assets in London and New York. In a word, they are desperate for President Putin to abandon the freedom fighters in southeast Ukraine and cut a deal with the Kiev junta. [...] The so-called Russian “capitalist” rentiers stand in sharp contrast to the dynamic Chinese public and private entrepreneurs – who borrowed overseas technology from the US, Japan, Taiwan and Germany, adapted and improved on the technology and are producing advanced highly competitive products. When the US-EU sanctions came into force, Russian industry found itself unprepared to substitute local production and President Putin had to arrange trade and import agreements with China and other sources for inputs. [...] Though Russia is vulnerable, it is not without resources and capacity to resist, defend its national security and advance its economy. Conclusion: What is to be Done? First and foremost Russia must diversify its economy; it must industrialize its raw materials and invest heavily in substituting local production for Western imports. While shifting its trade to China is a positive step, it must not replicate the previous commodities (oil and gas) for manufactured goods trading pattern of the past. Secondly, Russia must re-nationalize its banking, foreign trade and strategic industries, ending the dubious political and economic loyalties and rentier behavior of the current dysfunctional private ‘capitalist’ class. The Putin Administration must shift from oligarchs to technocrats, from rentiers to entrepreneurs, from speculators who earn in Russia and invest in the West to workers co-participation– in a word it must deepen the national, public, and productive character of the economy. It is not enough to claim that oligarchs who remain in Russia and declare loyalty to the Putin Administration are legitimate economic agents. They have generally disinvested from Russia, transferred their wealth abroad and have questioned legitimate state authority under pressure from Western sanctions. Russia needs a new economic and political revolution - in which the government recognizes the West as an imperial threat and in which it counts on the organized Russian working class and not on dubious oligarchs. The Putin Administration has pulled Russia from the abyss and has instilled dignity and self-respect among Russians at home and abroad by standing up to Western aggression in the Ukraine. From this point on, President Putin needs to move forward and dismantle the entire Yeltsin klepto-state and economy and re-industrialize, diversify and develop its own high technology for a diversified economy. And above all Russia needs to create new democratic, popular forms of democracy to sustain the transition to a secure, anti-imperialist and sovereign state. President Putin has the backing of the vast majority of Russian people; he has the scientific and professional cadre; he has allies in China and among the BRICs; and he has the will and the power to “do the right thing”. The question remains whether Putin will succeed in this historical mission or whether, out of fear and indecision, he will capitulate before the threats of a dangerous and decaying West. (5) Putin lets 'independent' Central Bank create recession to stem Ruble fall Putin has been Hands-Off on the Russian Central Bank's Recession-Inducing Policies NOV 24, 2014, 11:30 AM LIDIA KELLY, OKSANA KOBZEVA MOSCOW (Reuters) – With Russia’s economy battered by economic sanctions and plunging oil prices, President Vladimir Putin has allowed the central bank to administer strong medicine, sharply raising interest rates even as it freed the rouble to float. Such tough measures may well help push the country deeper into recession next year, but have so far staved off financial panic, runaway inflation or a currency meltdown like the one that helped catapult Putin into power in the 1990s. Those who follow the central bank say the hawkish moves are a result of Putin, known for closely managing Russia’s machinery of power, giving the bank’s technocrats free rein. “There is ongoing criticism of the central bank and of the whole government being Putin’s lap dog,” said a high-ranked government source. “But all things considered, the central bank is now much more autonomous than it is broadly perceived.” The high interest rates will hurt. The European Bank for Reconstruction and Development says recession is certain, predicting 0.2 per cent contraction for the full year of 2015. Politicians have grumbled. Economy Minister Alexei Ulyukayev sent a letter to the Kremlin in the summer urging greater “cooperation” between the bank and the government, viewed as a plea for looser policy. “There is a tension between the government and the central bank as regards growth. The effect of these stabilisation policies is going to be to deepen the recession,” said Christopher Granville, managing director of London-based consultancy Trusted Sources. Putin himself has complained about high borrowing costs. But so far, he seems to trust the hawkish instincts at the bank. “What the central bank is doing is in line with what the leadership wants, in a strategic way,” said Granville. “Stability is the absolute top priority, rather than avoiding negative growth at all costs.” Still, there is always a chance that Putin can change his approach. Remarks he made on Tuesday hinted as much. Speaking to Finance Minister Anton Siluanov, he called for “teamwork between the central bank and the government”. OBSESSION Exchange rates are an obsession for Russians since the 1990s, when hyperinflation after the fall of the Soviet Union wiped out the financial system, destroyed savings and brought the economy to its knees. A second currency collapse and default in 1998 propelled Putin into power the following year, and a stable rouble has been one of the most prized achievements of his rule ever since. Putin himself makes much of the central bank’s independence. “We – from the executive power level – do not meddle in the policy of the central bank,” he said this month when meeting IMF head Christine Lagarde. “The central bank, in accordance with the law, conducts an independent policy. But of course we look carefully at what is happening.” In an emailed comment, the bank said its independence, “one of the fundamental principles in understanding of monetary policy”, was enshrined in the constitution. Some of Putin’s critics say he keeps out of monetary policy because he feels insecure about an area outside his expertise. “The central bank of Russia is the most independent institution in modern Russia,” said Sergei Aleksashenko, a former deputy central bank governor and critic of the president. “That originates from Mr Putin’s inability to understand how monetary authorities operate. He understands the importance and influence of the central bank but is afraid to influence it in a strong manner.” GEEKS IN GLASSES Unlike at some ministries and top companies, the bank’s management does not include any of Putin’s powerful old friends. “It’s just a bunch of glasses-wearing geeks; you can argue more or less competent, but geeks,” said the high-ranked government source. Putin has put his trust in the bank’s governor Elvira Nabiullina, 51, at the bank’s helm for 17 months after serving Putin for years as economic advisor and cabinet minister. “She has turned out to be stronger than expected as the central bank governor,” said Anders Aslund, senior fellow at the Peterson Institute for International Economics in Washington. Nabiullina, in turn, has put monetary policy in the hands of Ksenia Yudayeva, a U.S. trained economist regarded as one of the brightest in the country. The rouble stability of the Putin years has been underwritten by vast currency reserves earned from selling oil and gas. But when oil prices fell and sanctions were imposed over the Ukraine crisis this year, even Russia’s $US420 billion war chest showed its limits. After spending $US30 billion supporting the currency in a single month, Nabiullina brought forward long-awaited plans to float the rouble, abandoning efforts to keep the exchange rate within an official band. On the morning of Nov. 10, when it was announced, even the heads of the bank’s departments were taken by surprise, sources said, emphasising Nabiullina’s ability to prevent leaks. Before she cut the rouble loose, Nabiullina sharply hiked interest rates to ensure that savers would hold rubles and prevent a panicked flight, like the one that hit in 1998. The rouble is still some 29 per cent down against the dollar, but has rallied in recent days. Earlier this week, Nabiullina stoically defended the decision to float the currency. “It is absolutely impossible to control the exchange rate … in the current economic conditions that the Russian economy is now in, by keeping its dependency on the price of oil,” she told lawmakers in parliament. (Addtional reporting by Alexei Anishchuk, Elena Fabrichnaya and Jason Bush, Writing by Lidia Kelly; Editing by Jason Bush, Timothy Heritage and Peter Graff) (6) US instructs Russian Central Bank to strangle Russian economy USA instructs Russian Central Bank how to strangle Russian economy 30.12.2014 Russia is a dollar country The Central Bank of the Russian Federation does not have to support the Russian economy. There is no paragraph in the Constitution of the Russian Federation (written during the 1990s) that would tell the Central Bank to act so. For what purpose did the Central Bank set the Russian ruble free? Pravda.Ru asked expert opinion from State Duma deputy Yevgeny Fyodorov. "All countries of the world are divided into two large groups. One group is called developed countries, and the other group - developing, or underdeveloped countries, better to say. In the past, underdeveloped countries were called colonies. Economies of all developed countries have one common feature - low interest rates. This is a key point. All underdeveloped countries - there are 90 percent of such countries in the world - have very high interest rates. The essence of high interest rates, including in Russia, is not to allow national currency onto national market. In order to let the Central Bank issue rubles in Russia, so that we could go to stores to spend them, the Central Bank needs to buy US dollars first. This rule is common for underdeveloped countries. "The Russian Constitution says that the ruble should keep up rates. To this end, the Central Bank should keep up rates too, and the Central Bank has foreign exchange reserves for the purpose - $450 billion to date. This amount exceeds cash ruble assets 2,5 times. "In other words, Russia is not even a ruble country de jure. Russia is a dollar country. The Russian ruble takes a small share in the country. The whole segment of investment is based on dollars and euros. The Constitution protects that, and the Central Bank of the country should keep the rate. Now, we have the situation when the Central Bank does not abide by the Constitution, because it raised the key rate and reduced the ruble rate. From the point of view of the Constitution, the Central Bank is obliged to keep the rate. The Central Bank violated the Constitution and Putin's numerous instructions, but it was an absolutely logical move. The charter of the Central Bank does not contain a word about the Russian economy. It should not support the Russian economy. The law says that the Central Bank is governed by international agreements. The bank signs agreements that the Ministry of Justice does not even register. The administration of the Russian Central Bank is based outside Russia. "There is no other central bank in the world that would not be allowed to support the national economy. The Russian Central Bank is the only exception. This is a specific peculiarity of the Russian Central Bank. The law even says that the bank is a branch of foreign companies in Russia. For example, the Russian Central Bank is a depositary of the IMF. The law of the Central Bank does not have a word about the Russian economy. Yet, it contains detailed instructions on how to follow and execute instructions from abroad. The law was made during the 1990s. Putin tried to amend it in the 2000s, but it did not work out. As a result, the Central Bank of the Russian Federation works for a foreign country under the Russian Constitution. This state imposes sanctions on Russia. The Russian Central Bank is obliged to execute instructions from the USA - the Americans set an official task to weaken the Russian economy. "All of us - the people, the government, the Central Bank, the government, MPs - we all work on the basis of the Constitution and laws. Our laws say that we have no sovereignty. The Central Bank works for a foreign country - this is an official norm of the Constitution. "If you have low interest rates in developed countries, free rate works for you. If you have high interest rates, as in underdeveloped countries, free rate works against you. The free rate is good when you have a free country. When a country is a colony with high stakes, then the free rate, on the contrary, is pumping money out of the country. "All our factories were built on foreign loans. If you want to build something, you have to raise a loan in a bank. Tractors, processing, refrigerators, logistics - everything is on loan. "Naturally, all of this is connected to the ruble exchange rate, which the Central Bank refused to keep. The mechanism of price growth works through the credit system. The government, no matter how good or bad it could be, can show five or ten percent of its influence on economy. Ninety percent of influence on economy of any country is about the fiscal policy that state banks determine. A government is a regulator and a little bit a budget. The changing rate of the Central Bank stops financial flows that move economic life." Interview conducted by Inna Novikova (7) Russia's central bankers are Western-trained Vladislav Krasnov 19 December 2014 at 11:09 · Russians must break ties with Dollar before the Dollar breaks Russia by James "Russia" Analyst A Eurasian Bretton Woods-Style Peg of the Ruble to the Yuan is Now a Matter of Political Survival for Putin Many Rogue Money.net readers are probably wondering what the Russia Analyst has been doing since the ruble crisis hit the Russian Central Bank's breaking point on Monday. Like the rest of the Rogue Money team of contributors, we've been closely following events and looking at the views of some very smart people on what happens next after the Russian Central Bank radically hiked interest rates -- and apparently failed -- to stop the panic over the ruble. When confronted with an onslaught of both negative news for friends still living in Russia, and Orwellian, gloating propaganda designed to make any notion of resisting King Dollar (by which the media really means King private Federal Reserve)'s full spectrum dominance seem absurd, it's easy to get angry. We are only human, as is everyone now making critical decisions with the economic survival of Russia and Europe at stake, in the growing shadow of a Third World War. Yet what is needed now more than ever is dispassionate analysis, or coolness under fire. As Michael Corleone said in The Godfather III, "Never hate your enemies. It clouds your judgement". In other words, Putin isn't getting mad, he's getting ready to get even. Or at least to remind the West that all-out currency wars can become painful for Western markets and currencies. Like a massive minefield or ammo dump, all it takes is one small sapper's spark and the West's financial "weapons of mass destruction" known as derivatives can blow sky high. The Russian James Dean who died far too young, Sergey Bodrov Jr. said in the 2000 crime film "Brat 2" known to every Russian over 15 and under 45, "American, what's your power? Is it really money? My brother says it's money. You have a lot of money -- so what? Truth is real power. Whoever is in the right is strong. You cheated a man and took his money. Did it make you stronger? No, it didn't. Because you are not right. And the person you cheated is. That means he's stronger." Today our duty is to speak the truth, however unpleasant it may be for all of us regardless of nationality who long for a just system of weights and measures to replace the dying fiat order -- which includes the dying fiat currencies of the former Soviet Union. In short, the currency war just went from a conventional fight to the nuclear level -- and it will be very difficult to prevent the monetary hostilities from becoming an actual shooting war. - James "Russia" Analyst In surveying the wreckage of the Russian Central Bank's weak attempts to save the ruble from all out assault by Western governments and the Anglo-American Atlanticist banking cartel, one is tempted to despair. Modern monetary theories, learned during the 1980s perestroika era from Western academics by Russia's Western-trained central bankers such as CBRF chairwoman Elvira Nabiullina, have proven grossly inadequate for conditions since 2008. As some 'patriot' or 'Eurasian sovereigntist' economists like Vladimir Putin's informal advisor Sergey Glazyev says, conventional monetarism is stupid to the point of being suicidal in an all-out currency war with the West. According to a trained economist source who writes anonymously for the Vineyard of the Saker blog, the Russian Central Bank's hiking rates to 17% to stop overnight bets on the dollar continuing to appreciate against the ruble was a textbook move straight out of Fed Chairman Paul Volcker's early 1980s playbook to stop rampant US inflation.This was the observation of the Guerrilla Economist's friend Michael Rosecliff who tweeted it @ArcLightInst even before I replied with a link to the blog post by 'Diogenes' about Russians copying American strategies for a radically different situation, namely one of peacetime versus wartime. Make no mistake about it, Russia is at war, just not yet in a hot one. In the early 1980s, as many RogueMoney.net readers over 45 may recall, oil prices were high and this along with Fed money printing to fund the Vietnam War and the Great Society government spending had left the dollar severely devalued. Volcker's rate hikes triggered a severe recession that peaked in 1982, with most Americans unable to purchase homes at 15 to 20% interest rates. The Russia Analyst's sources in Moscow, incidentally, told him early Wednesday morning that many Russians are suddenly facing interest rate hikes on their home mortgages. Meaning that much like the US victims of so-called ARM's or adjustable rate mortgages that blew up in 2007-2008, Russian borrowers face sudden unaffordable spikes in their monthly payments even as their purchasing power is being hurt badly or their salaries are being cut (wage cuts have already been in effect across Russia since 2009). Presumably the same meltdown is also occurring in auto loans, with Russian repo men likely to be busy in Moscow and St. Petersburg's more affluent neighborhoods in the next few months. How this can fail to impact Europe's largest car market, principally German automobiles and Germany's estimated 400,000 jobs linked to trade with Russia, is beyond us. For now all that matters is waging Cold War 2.0 -- Washington can cope with angry jobless Germans joining PEGIDA and other anti-Brussels movements of the 'Right' and 'Left' among its Euro-vassals later. The arrest and expulsion of an Italian politician for being 'too pro-Russian' by Washington's vassals in Estonia is a precedent quietly set this week that may be cited later. It also speaks volumes about Washington's own paranoia that 'Colored Revolutions' may not remain a one-way street for long as Moscow decides to fight back with full-spectrum ideological and economic warfare in places like Greece or the Balkans (more on that later). Washington's National Endowment for Democracy, International Republican Institute, Open Society and State Department paper pushers are about to find out Colored Revolutions aren't a one way street... Washington's National Endowment for Democracy, International Republican Institute, Open Society and State Department paper pushers are about to find out Colored Revolutions aren't a one way street... On Wednesday Zerohedge reported that Russian food suppliers had temporarily interrupted deliveries to some stores due to uncertainty about currency risk, and that imported alcoholic beverage shippers were paralyzed by the surge of currency risk. While recent Reuters and Business Insider reports about a shortage of Russia's basic staple buckwheat or gretchka were likely US government-produced disinformation designed to create panic, this problem is very real. As are the layoffs Gazprom has announced this week of up to 25% of its work force, representing the largest single corporation in the country by employment. Whether he wants to act or not, Putin is being forced to institute capital controls to stop the panic. Malaysian-style capital controls are what the smart money guys in Moscow expect Putin to announce in today's press conference. With ruble devaluations reaching levels as high as 10% overnight into Tuesday, Western mainstream media editorials can scarcely contain their schadenfreude. It seem as if several journalists, or even entire publications such as The Washington Post (known among Russia watchers as Pravda on the Potomac) took Russia's return of Crimea to the fold as personal humiliation, and not just a shock to Washington, Brussels, and their client state in Kiev. This week they proclaim that they have their revenge -- Russia, as a notorious May 1, 2001 Atlantic Monthly cover boldly proclaimed, is finished. At least economically. Just in case you had any doubts that the current economic breakdown of Russia doesn't constitute wish fulfillment or that Western dreams about a breakup of the Russian Federation only began as the result of Putin's 'aggressive foreign policies' or 'anti-LGBT' posture. In 1997, if you recall, former US National Security Advisor Zgniew Brzezinski wrote in his book The Grand Chessboard that Russia must never again be allowed to rise as a great power in Eurasia and that without Ukraine, Russia could never be an empire. The Z. Big line ended up being regurgitated by numerous politicians including then Secretary of State Hillary Clinton, showing Council on Foreign Relations emeritus and Trilateral Commission co-founder Brzezinski is far from just a harmless old man with a daughter who hosts a soon to be cancelled program on MSNBC. In the autumn of 2001, shortly after the Atlantic cover story proclaiming Russia's demographic and geopolitical demise was published, Putin was America's friend and the first world leader to offer President George W. Bush overflight rights to bomb Afghanistan after 9/11. Putin was repaid for his help against the Taliban with Colored Revolutions, American bases popping up all over central Eurasia and a massive expansion of US military aid to the Republic of Georgia that culminated in the 08/08/08 war between Moscow and Tblisi. [...] Beijing's leaders are probably thanking their lucky 'Mandate of Heaven' stars that the yuan, unlike the ruble, is not yet a fully, freely convertible currency. However the very nonconvertible nature of the yuan also means that Russians cannot go obtain 'redbacks' rather than 'greenbacks' or 'bluebacks' if they wish to protect their savings. Thus Washington gets to gloat about many Russians turning to dollars as they or their parents did during the 1990s, when the dollar was far more solid than it is today. [...] What about the oil price collapse? Is it adequate to explain the rout of the ruble? Not according to Goldman Sachs, which ZeroHedge reports said the ruble had been oversold compared to the likely floor crude will settle at of $45-$50 a barrel this winter. Not only did the ruble not experience such losses in 2008-2009 when oil briefly reached $35 a barrel (though Russia's foreign currency reserves suffered substantially then as now), but the share of the Russian economy made up by oil and gas, according to Finnish attorney and economic researcher Jon Hellevig, has been highly exaggerated. Even with substantial military spending, civil servant salaries and pension obligations, the Russian State has almost no sovereign debt. All of the former debts dating back to the Soviet era, were wiped out by the last major ruble crisis of 1998-99. Russia has probably one of the lowest government debt to GDP ratios of any industrialized nation,while her adversaries -- what V likes to call 'the insolvent Seven' of the G7 -- are drowning in government debt that they're all desperately trying to monetize into oblivion. The kamikazes at the Bank of Japan are leading the way as all Western fiat currencies circle the toilet bowl together. By the way, isn't it interesting how Russia's ruble meltdown distracts Westerners from the fact that the currency of the world's 3rd largest economy and 2nd largest bond market has been devalued with far greater consequences to the global economy than trouble over the ruble? [...] China is sitting on $1 trillion in US Treasuries and is looking for any worthwhile way to unload them without crashing the dollar just yet. A Chinese-led BRICS bailout of the Russian corporate debt led by Gazprom, Gazpromneft and Rosneft with China acquiring major equity stakes and yuan-denominated bonds Russia will repay to Beijing, thus recycling Chinese yuan payments for energy appears to be a win-win. The only downside for Putin is having to face Western and Russian 5th columnist propaganda about 'Putin made us a Chinese colony' or 'Putin sold our patrimony out to Beijing'. This propaganda is already anticipated in Walter Russell Mead's warning to fellow Washingtonians that Putin will turn East rather than surrender to the sanctions regime, knowing surrender means the end of his political career if not life. In reality, Russia will be no more enslaved to China by using yuan Chinese pay for oil and gas to pay down debts as it is to Washington today using dollars to settle debts and fund drilling and exploration. Converting $50 billion of Chinese US Treasuries into payments to Russian dollar and euro-denominated lenders also has the virtuous upshot of not screwing over the biggest lenders to Russia in Europe, which are the French, Austrian and Italian banks -- the very EU states Russia hopes can sabotage further European Union sanctions against Moscow. These are also, along with the Serbs, the European countries China is wooing with its announcement this week of a multi-billion dollar infrastructure fund to expand freight railways between Budapest and Athens' Piraeus, the busiest port on the Mediterranean. Highly recommended reading: "The Bankster International" by Mark Hackard For Mother Russia, It's Better to Pay Tribute to the East than to Lose Her Sovereignty and Soul to the West Russia has faced an 'East versus West, to be or not to be' existential choice before -- and the historical lesson cannot be lost on Vladimir Putin or his reported Orthodox Christian priest confessor, Abbot Tikhon Shekhunov. Under the Grand Prince Alexander Nevsky, now regarded as a saint in the Russian Orthodox Church, the Rus confederation of cities were faced with military invasions from both the Catholic crusader Teutonic Knights, serving the Pope, Swedish invaders from the northwest, and Mongols overrunning Russia from the vast Eurasian steppe. Knowing that if Russia tried to resist all comers she would be crushed, Nevsky prayed to God for wisdom according to the Russian Church's teaching. Remembering Jesus Christ's commandment, "Render unto Caesar the things that are Caesar's, and the things that are God's unto God" the Grand Prince of Novgorod decided that he must resist the Western invaders first, as they sought the conversion of Russian Orthodox Christians by the sword, over the Mongols, who merely desired tribute. The result was the famous Battle of the Ice where the Russians massacred the Teutonic knight invaders and their Estonian allies, many of whom sank beneath the broken ice of Lake Peipus. The medieval battle was a metaphor that the Russian director Sergey Eisenstein used in his masterpiece film Alexander Nevsky, commissioned by Stalin to warn the Russian people about the looming threat of a Nazi invason in the late 1930s. Scenes from Alexander Nevsky were included in the 1943 WWII propaganda film by Frank Capra -- director of "Its a Wonderful Life" starring Jimmy Stewart which is played on NBC every Christmas -- shown to millions of Americans when the USA and USSR were allies against Hitler. What the film's narrator said about conquerors coveting Russian natural resources is as true today as it was then. Why We Fight: The Battle for Russia 1943 In many respects, Putin this week faces a choice not that different from what Alexander Nevsky faced -- submit to financial subjugation and slavery to the globalists, or take the risks associated with heavy dependence on Chinese financing to get Russia through this crisis. However difficult it may prove for Putin, from where the Russia Analyst sits here in the USA, it's a no-brainer. Historically Russia Can Retreat a Long Way, But Russian Counterattacks Can Destroy the Attacker [...] (8) Merkel offers Free Trade in return for Subservience Merkel as Soft Cop in False Flag Offensive on Russia Finian CUNNINGHAM | 26.01.2015 | 10:12 At the World Economic Forum last week, German Chancellor Angela Merkel let the cat out of the bag with her sly offer, or rather bribe, to Russia. The German leader told delegates in Davos that European Union sanctions on Russia would be lifted in exchange for a «peace deal» in Ukraine. She promised a «free trade pact from Lisbon to Vladivostok». That’s a bit rich coming from the bankrupt EU, but nevertheless let’s accept the assumption that Frau Merkel is offering something very juicy. Why would she do that, and right at this time when civilians are being massacred in eastern Ukraine? In other words, Merkel is saying if Moscow capitulates to Western objectives of ceding Ukraine to its full political, economic and military control, then Russia will be «paid off» with respite from Western sanctions and can look forward to a tantalising free trade «happy ending» with the EU. How generous of Frau Merkel! The Russian-speaking population of Ukraine’s eastern Donbas regions will then be abandoned to their fate of accepting the legitimacy of the Western-installed Kiev regime. [...] (9) Russia defiant after more threats from West over Ukraine By VLADIMIR ISACHENKOV January 26, 2015 MOSCOW (AP) — A defiant President Vladimir Putin on Monday called the Ukrainian army a "NATO foreign legion," reflecting his readiness to stand up to the West regardless of rising economic costs, as Standard & Poor's rating agency downgraded Russia's credit rating to junk. While the Russian ruble tumbled further on the news of the downgrade, Putin's spokesman shrugged off the Western threat of more sanctions as "short-sighted." The Kremlin's uncompromising stance is rooted in its desire to prevent Ukraine from ever joining NATO by securing a broad autonomy for the rebellious provinces in the east. To avoid being called a party to the conflict, as Ukraine and the West see it, Russia is pushing the Ukrainian government to speak directly to the rebels. The latest rebel offensive, which involved the deadly shelling of a strategic port city of Mariupol over the weekend, appeared aimed at pressuring Kiev into such talks. Speaking to students in St. Petersburg, Putin said the Ukrainian leadership was to blame for the upsurge in violence and accused it of using civilians as "cannon fodder" in the conflict. "(Ukraine's army) is not even an army, it's a foreign legion, in this case a NATO foreign legion," Putin said, adding that it's serving the goal of "the geopolitical containment of Russia, which absolutely don't coincide with the national interests of the Ukrainian people." NATO Secretary General Jens Stoltenberg dismissed the claim and accused Russia of sending large numbers of heavy weapons to the rebels. "We have seen a substantial increase in the flow of equipment from Russia to the separatists in Ukraine," he said. A Russian envoy at the 57-nation Organization for Security and Cooperation in Europe rejected those claims, arguing that the rebels are using old Soviet-era weapons they seized from the Ukrainian arsenals. Andrey Kelin, who spoke after the OSCE called a special session on the uptick in fighting, said the rebels are using "very old Soviet equipment" dating back to the mid-1960s. Ever since the separatist rebellion in eastern Ukraine flared up in April following Moscow's annexation of Crimea, Russia has denied Western accusations that it has backed the insurgents with troops and weapons. But even though Ukrainian troops and the rebels use the same types of Soviet-built arms, the sheer number of heavy weapons in the rebels' possession has been seen in the West as a proof of Moscow's involvement in the conflict. [...] |
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