Restoration of meanings. What is money? part 3

2024 Author: Seth Attwood | [email protected]. Last modified: 2023-12-16 15:55

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In this part, I want to show in detail how the modern colonial system of robbery of the so-called "developing" states, built on the international financial system with the so-called "reserve" currencies, operates today. Now there are quite a few people who talk about this, but so far, unfortunately, none of them have I seen an explanation of this mechanism that is understandable to most people. And sometimes even erroneous versions of explanations come across, which further confuse people in understanding this topic.

Let's start by looking at a simple model of international trade between two states. As an example, let us take, for example, the sale of oil by Russia abroad, if this were taking place in a fair exchange system.

At the first stage, we sell our oil to a certain country X for a certain currency of this country X. But inside Russia, only the Russian ruble can be used as money. Therefore, the currency of country X is exchanged by the Central Bank for rubles at a certain exchange rate. Further, these rubles enter the Russian economy in the form of salaries to employees of oil companies, payments for services or goods that oil companies have received from other organizations, as well as through the payment of taxes on this amount in the form of certain payments from the budget (again, salaries or payments for goods or services).

But we have an imbalance in the country's economy, since rubles entered the economy, but there are no corresponding goods and services corresponding to this amount of money, since goods in the form of oil went to country X. If everything is left this way, inflation will begin in the country, that is, a fall in the purchasing power of money.

Therefore, in order to restore the balance, it is imperative that stage 2 occurs, during which Russia receives goods or services for the same amount in the currency of country X from country X, which received our oil.

Trading firms, in order to bring goods from country X to Russia for sale, exchange the rubles they have (their own funds or borrowed money) at the Central Bank for the currency of country X. Then they buy goods in country X, bring them to Russia, where they sell them again for rubles that were previously paid for oil sold abroad.

The economy has recovered the balance of money issued into circulation and goods that can be purchased with it, since goods from country X appeared in the same amount that was received for the sale of oil. There are no reasons for inflation.

By the way, note that in this scheme it does not matter at all for what currency to sell oil abroad, for rubles or for the currency of country X. If we decide that oil will be sold only for rubles, then in this case the exchange of the currency of country X for rubles will be produced not by a Russian company that sells oil from Russia, but by a foreign company from country X, which buys this oil.

Also, a very important point is that the currency received during the exchange from country X between the first and second stages is kept in the Central Bank all the time.

The most interesting thing is that the scheme described above is not some kind of abstract, fictional model. According to a very similar scheme, the USSR traded with the socialist countries from 1950 to 1964. An agreement on commodity exchange was concluded between the two countries, according to which authorized banks were selected, which were instructed to keep records of these operations. This accounting was carried out in the so-called "clearing rubles", when, when some goods were delivered from the USSR to a given country for a certain amount, it was recorded in "clearing rubles" on special accounts in authorized banks. In case of return delivery of goods from a given country to the USSR, the corresponding amount of “clearing rubles” was debited from this account. The only difference with our scheme is that a special accounting unit was used for accounting - the “clearing ruble”, and not the currency of one of the two countries participating in the exchange. After 1964, a special “transferable ruble” was introduced for exchange between the CMEA countries. National currencies were exchanged for clearing or transferable rubles at the official fixed rate.

But today's international trading system does not work exactly like that.

Firstly, the owners of companies that sell anything abroad, including oil, have no point in bringing all the foreign currency proceeds from the sale to Russia. It is much easier to immediately withdraw part of this proceeds through offshore companies to accounts in foreign banks. For example, with a market value of $ 60 per barrel, oil is sold from Russia to its own offshore company at a price, for example, $ 30 per barrel (the values are taken conditionally, for example). Accordingly, the difference in the amount of $ 30 per barrel, in principle, does not go to Russia, but immediately remains abroad.

Of the currency that nevertheless goes to Russia, some more is paid as dividends to foreign shareholders, which today are practically all oil companies, including state-owned ones. This part of the dollars also ends up not in Russia, but abroad, that is, it is poured into the economies of other states.

Further, the central bank does not buy out all of the currency, but only part of it. The law on foreign exchange regulation provides for the right of the Central Bank of the Russian Federation to establish a standard for the mandatory sale of foreign exchange earnings. In different periods, it was set from 50% to 75% (after the 1998 crisis). Then there was a period when the standard was lowered to 25%, and now the Central Bank has generally set it equal to 0%, since it is pursuing a policy of liberalizing the foreign exchange market.

The essence of this standard was that when it was in effect, all participants in foreign exchange transactions were obliged to sell the part of the currency established by the standard at the fixed rate set by the Central Bank of the Russian Federation, and they could sell only the rest of the currency on the currency exchange at commercial rates.

But the fact that the Central Bank of the Russian Federation has established a mandatory sale standard of 0% does not mean at all that the Central Bank has stopped selling or buying currency in the foreign exchange market altogether. This only means that the Central Bank has refused to use its right, given to it by law, to buy currency at the rate it has set itself. That is, in fact, it turned into another currency speculator on the stock exchange, buying and selling currency, like all other market participants, at a rate that is determined during trading by a specific currency seller.

The most interesting thing is that the Central Bank continues to regularly buy foreign currency, since it is the agent of the Ministry of Finance of the Russian Federation for foreign exchange transactions in the implementation of the so-called “budget rule”. This thing is very interesting, but we will look at it a little later. Now the main thing is that the Central Bank of the Russian Federation does not exchange currency from its own reserves to the government, but buys currency on behalf of the Ministry of Finance of the Russian Federation at the market rate on the currency exchange.

At the same time, currency speculators on this operation are welded twice, since, according to the current legislation, all payments in the Russian Federation, including the payment of taxes, are made in rubles. That is, oil companies, in order to pay taxes on the sale of oil, first sell the dollars they receive to commercial banks on the currency exchange. Then they pay taxes in rubles, which go to the budget of the Russian Federation, after which the Ministry of Finance of the Russian Federation transfers part of this money to the Central Bank, so that it again buys dollars on the currency exchange. That is, commercial banks receive an appropriate commission first when the oil companies exchange dollars for rubles, and then when the Central Bank exchanges rubles back for dollars for the Ministry of Finance.

It is also interesting that since February 2017, the Central Bank of the Russian Federation and the Ministry of Finance have classified data on purchases of foreign currency in the domestic market, which in itself is already suggestive.

In addition, the Central Bank of the Russian Federation continues to regularly buy foreign currency on the exchange to replenish the so-called gold and foreign exchange reserves. And this is where the fun begins. The fact is that most of both the gold and foreign exchange reserves of the Central Bank of the Russian Federation and the "reserve fund" and "national welfare fund" are not stored in dollars at all! "Loans from the US federal government" are sent to the US budget, and instead of them, the Central Bank and the Treasury receive "debt obligations", the rate at which currently ranges from 1.2% to 2.8%, depending on the borrowing period from 1 month to 30 years. But, if you think that this is annual interest, as in the case of loans in commercial banks, then you are greatly mistaken. This is exactly the profit that you can get from buying this bond. That is, initially the bond is sold below its par value, and is redeemed at the end at the specified par value. That is, with a 10-year bond yield of 2.48%, a bond with a par value of $ 1000 will be sold to you for $ 975.2. Therefore, if we recalculate the income received in annual terms, we will get only 0, 248% per annum!

Now compare the 0.248% yield on US bonds with the rates on loans from commercial banks. For example, recently one of the banks insistently offered me to take out a loan “on favorable terms” for 5 years at a rate of 29.5% per annum (for which I was immediately sent to the appropriate address).

All this I mean is that in fact the money is given to the US federal government almost free of charge.

But in the scheme of international trade we are considering, the most important thing is that the amounts that are invested in the debt obligations of the US federal government under the pretext of forming reserve funds and all kinds of "reserves" are in fact withdrawn from the Russian economy. For this amount, as well as not all other amounts that were withdrawn as dividends or through offshore companies, we had to purchase a huge amount of goods, equipment, technologies abroad. And if all this is added together, then we will get more than a trillion dollars, since the gold and foreign exchange reserves of the Central Bank of the Russian Federation and the amounts in the reserve funds of the Russian government today exceed 500 billion dollars.

Moreover, this scheme is being implemented by Western countries not only in Russia, but practically in all countries of the world, whose currencies are not included in the list of so-called "reserve currencies". Let me remind you that today the list of "reserve currencies" includes the US dollar, pound sterling, Swiss franc, Japanese yen and Euro. In fact, these are the countries that are allowed to collect tribute from other countries under the guise of "gold and foreign exchange reserves." At the same time, the distribution of tribute between countries corresponds to the share that this or that currency occupies in the gold and foreign exchange reserves of this or that country. That is, if the countries of the Pacific-Asian region in their reserves have a large percentage of the reserve in the Japanese yen, then, consequently, it is Japan that receives more income from these countries in its favor. In general, the process, using the dollar as an example, looks like the following diagram.

Commercial banks provide US companies with dollar-denominated loans to purchase goods and services in the colonial countries. If commercial banks do not have enough dollars, then the Federal Reserve System prints as many new dollars as necessary, since today no real collateral is required for the money issued, and there is no control over the Fed by American society or the state.

Commercial companies use this money to purchase goods and services in the colonial countries, which through them enter the US market. But so far they cannot sell them, since the US economy does not have the required amount of dollars to buy them.

The central banks of the colonial countries exchange part of the dollars coming into the country and use them to buy debt obligations of the US federal government. The received debt liabilities form the very "foreign exchange reserves" and other "reserve funds".

The US federal government, having received real dollars from the central banks of the colonial countries, directs them to pay the expenses of the US state budget, that is, to pay salaries to civil servants and the military, to pay various social benefits, as well as to other expenses.

Thus, after passing through this chain, real dollars end up with US citizens, who can use this money to purchase goods and services from American companies that were purchased in the colonial countries. Accordingly, American companies, by reselling goods and services, are able to give back loans taken earlier to commercial banks.

Of course, not all dollars that participate in the described processes pass along this chain, since the central banks of the colonial countries buy out by no means all the amount of currency that enters the country. This is only the portion that constitutes the colonial tax collected through the international financial system. There is also a general turnover of money and goods, which is necessary to ensure the actual process of extracting resources or producing goods. But those amounts that are withdrawn from the economies of the colonial countries under the pretext of forming various reserves, ultimately increase the welfare of citizens of precisely those countries whose currency is used as a reserve. If there was a fair exchange, as shown above in the very first diagram, then the second party had to provide back goods, resources or services for the entire amount that was paid for the goods or resources of the colony country.

But the withdrawal of real money through central banks under the guise of "reserves" is not the only mechanism for collecting tribute from the colonial countries. There are other ways that we will look at in the next part.

Continuation