Stop losing $ 100 billion annually

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

The article published on August 7 by the Minister of Economy of Russia A. Ulyukaev pleases with the author's bold position in relation to the "sacred cow" of the Russian monetary authorities - the "budget rule" prohibiting the free use of oil and gas budget revenues. While no sane economist supported the introduction of this Rule, it came to be taken for granted after years of unrequited criticism. Some conspiracy-minded experts have even come to the conclusion that in the form of a budget rule, Russia is paying an indemnity to the victors of the Cold War in the United States.

Indeed, in its meaning, the "budget rule" means that excess profits from oil exports should be reserved in American bonds, that is, directed not to the needs of the Russian state, but to lending to the United States. It is curious that even after the US decisions on the imposition of sanctions against Russia and the actual deployment by the Americans of the war against Russia in Ukraine, the Russian Ministry of Finance invested another billion dollars of budget money in lending to government, including military, enemy spending. This is reminiscent of the discipline of Soviet suppliers, who in June 1941, after the German attack on the USSR, continued to ship the resources needed by the German military-industrial complex.

We must thank A. Ulyukaev for publicly questioning the policy of exporting oil and gas revenues abroad with an insignificant yield of about 1%. After all, they could be placed inside the country with many times higher profitability and benefit. Or refuse borrowing to finance the artificially created budget deficit at 6-7% per annum. The Russian budget loses about a hundred billion rubles annually on the basis of the difference in interest rates between borrowed and provided loans. And if the budget funds frozen in American bonds were invested in the construction of infrastructure facilities, subsidies for innovative projects, housing construction, the economic effect would be many times greater.

Wartime circumstances force us to return to the obvious truths, which for two decades have been rejected by the Russian monetary authorities in favor of the dogmas imposed by Washington. Moreover, the notorious “budget rule” is not the main one among the latter. This "dead cat" was planted by the Americans after the Russian monetary authorities swallowed the more fundamental dogmas of the Washington Consensus, invented to facilitate the colonization of underdeveloped countries by American capital. The key ones are dogmas about the liberalization of cross-border capital movements, quantitative restrictions on the money supply and total privatization. Following the first dogma guarantees freedom of action for foreign investors, the bulk of which are financial speculators associated with the US Federal Reserve. Implementation of the second - provides the latter with strategic advantages, depriving the country's economy of internal sources of credit. Compliance with the third - gives the opportunity to extract super-profits on the appropriation of the assets of the colonized country.

It is easy to calculate that the American speculators invited in the early 90s to participate in the Russian privatization by 1998 on the financial pyramids promoted by them with the help of the Russian government received more than 1000% of the profit. Having come out of these pyramids in advance, they collapsed the financial market and then returned to buy up ten times cheaper assets. Having “welded” about 100% more, they again left the Russian market in 2008, bringing it down threefold.

In general, the pursuit of the dogmatic policy of the Washington Consensus cost Russia, according to various estimates, from one to two trillion. dollars of exported capital, the loss of more than 10 trillion. rub. budget revenues and turned into a degradation of the economy, the investment sector of which (mechanical engineering and construction) decreased several times with the extinction of most science-intensive industries, deprived of sources of funding. At least half of the capital exported from Russia settled in the American financial system, and the market freed from domestic producers was captured by Western campaigns. The titles of "best finance ministers" and central bankers, which the Americans have favorably endowed with their agents of influence in the Russian leadership, have cost Russia very dearly.

Entering the discussion started by A. Ulyukaev, I will start with the main thing in a market economy - money. The founder of the Rothschild clan is credited with the words: "Give me the right to print money, and I don't care who makes the laws in this country." Since the mid-90s, the Russian monetary authorities, under pressure from the United States and the IMF, have limited the emission of money to the growth of foreign exchange reserves formed in dollars. Thus, they abandoned share income in favor of the United States and deprived the country of a domestic source of credit, making it prohibitively expensive and subjecting the economy to external demand for commodities. And, although the monetary authorities abandoned this model as part of the anti-crisis program in 2008, the volume of the monetary base in Russia is still one and a half times lower than the value of foreign exchange reserves, long-term loans remain inaccessible to internally oriented industries, and the level of monetization of the economy is half the minimum required for simple reproduction.

Domestic banks and corporations are trying to compensate for the lack of internal sources of credit with external loans, which makes Russia extremely vulnerable to financial sanctions. The cessation of foreign loans from Western banks could paralyze the reproduction of the Russian economy overnight. And this despite the fact that Russia is a major donor to the world financial system, annually providing it with more than $ 100 billion in capital. With a stable and significant positive trade balance, not we, but the Western partners subsidized by us, should have been afraid of sanctions limiting Russia's access to the world financial market. After all, if a country sells more than it buys, it does not need foreign loans. Moreover, their attraction entails crowding out internal sources of credit at the expense of national interests.

The first thing that needs to be done to bring the economy on a trajectory of sustainable growth and ensure its security is to restore the emission of money in the public interest, providing enterprises with the amount of long-term credit necessary for their development and growth of production. As in other sovereign countries, the Central Bank should not issue money against the purchase of foreign currency, but against the obligations of the state and private business by refinancing commercial banks in accordance with the needs of economic development.

In accordance with the recommendations of the classic of the theory of money Tobin, the goal of the Bank of Russia should be to create the most favorable conditions for investment growth. This means that the refinancing of commercial banks should be carried out at a percentage available to industrial enterprises and for a period corresponding to the duration of the research and production cycle in the investment complex. For example, for 3-5 years at 4% per annum for commercial banks and for 10-15 years at 2% per annum for development institutions lending to state-significant investment projects.

To prevent money from being spent on speculation against the ruble and abroad, as happened in 2008-2009 with hundreds of billions of rubles issued to save banks, banks should receive refinancing only against loans already issued to industrial enterprises or on the security of already acquired obligations of the state and development institutions … At the same time, the norms of currency and banking control should block the use of credit resources for the purpose of currency speculation. To suppress them and stop illegal capital flight, the tax on financial speculation proposed by the same Tobin should be introduced. At least on their foreign exchange part in the amount of VAT charged on all foreign exchange transactions and included in VAT payments when importing goods and services.

The measures proposed above will give the economy the credit resources necessary for its modernization and development. After all, the credit created by the state in its meaning is an advance payment for economic growth. The available production facilities allow the Russian economy to grow at an annual GDP growth rate of 8%, investments - by 15%. This requires a corresponding expansion of credit and a remonetization of the economy. Under the threat of financial sanctions, it is appropriate to start it with the immediate replacement of external loans of state corporations with loans from Russian state banks at the same interest rates and on the same conditions. Then gradually expand and lengthen the refinancing of commercial banks on universal uniform terms. Only the Bank of Russia should not raise the key interest rate, strengthening anti-Russian sanctions from the US and the EU, but, on the contrary, reduce it to the level of profitability of enterprises in the investment sector.

I can imagine how the apologists for the dollarization of the Russian economy will start shouting that the implementation of these proposals will turn into a disaster. By intimidating the country's leadership with hyperinflation, the proponents of the Washington Consensus with a policy of quantitative restrictions on the money supply have already brought the Russian economy to the miserable state of a raw-materials colony of American-European capital, exploited by an offshore oligarchy. They are unaware that the main anti-inflationary medicine is NTP, which provides cost reduction, increased efficiency, increased volumes and improved product quality, which gives a constant decrease in the price per unit of consumer properties of goods in advanced and successfully developing countries. The most striking example is China, whose economy is growing at 8% per year, the money supply is increasing by 30-45% with declining prices. Indeed, without credit, there is no innovation and investment. And inflation is possible with zero or even negative credit. This is exactly what the Russian economy has been demonstrating for two decades, in which the monetary authorities condone the export of capital and artificially restrict the growth of the money supply, while the monopolies constantly inflate prices to compensate for the contraction in production.

No one doubts that excess emission leads to inflation. Just like over-irrigation leads to waterlogging. But the art of monetary policy, like the skill of the gardener, is to select the optimal level of emission, taking care that cash flows do not leave the production sphere and do not create turbulence in the financial market. In order to avoid inflationary risks, it is necessary to tighten banking and financial controls in order to prevent the formation of financial bubbles. The money issued for the refinancing of commercial banks should be used exclusively for lending to production activities, which requires the application, along with control instruments, of the principles of project financing. At the same time, it is important to deploy mechanisms for strategic planning and stimulation of scientific and technological progress, which would help business to choose the right promising areas of development.

In the context of the structural crisis of the world economy, caused by the change in the dominant technological order, it is extremely important to choose the right priority areas of development. It is during such periods that a window of opportunity opens up for lagging countries for a technological leap into the ranks of world leaders. The concentration of investments in the development of key technologies of the new technological order allows them to ride a new long wave of economic growth earlier than others, to obtain technological advantages, to raise the efficiency and competitiveness of the national economy, and to radically improve their position in the world division of labor. The world experience of technological breakthroughs indicates the necessary parameters of such a policy: an increase in the accumulation rate from the current 22 to 35%, for this - a doubling of the economy's credit capacity and a corresponding increase in its monetization; concentration of resources on promising areas of growth of the new technological order.

The world has entered an era of serious changes that will last for several more years and will end with a new long-wave economic recovery based on a new technological order with a new composition of leaders. Russia still has a chance to be among them in the transition to a policy of advanced development based on the all-round stimulation of the growth of a new technological order. Despite the catastrophic consequences of the macroeconomic policy pursued for two decades for most branches of the knowledge-intensive industry, the country still has the scientific and technical potential necessary for making a technological breakthrough. If it is not destroyed by privatization and bureaucratization of the Academy of Sciences, but revived with cheap long-term loans.

With the transition to a policy of priority development, the question of the "budgetary rule" acquires the correct formulation. The opportunistic budget revenues generated by the rise in oil prices should be invested in lending not to someone else's, but to their own economy. Due to them, a development budget should be formed, the funds of which should be used to finance R&D and innovative projects for the development of production of a new technological order, as well as to invest in the creation of the necessary infrastructure for this. Instead of building up foreign exchange reserves in US Treasuries, surplus foreign exchange earnings should be spent on imports of advanced technology. The goal of macroeconomic policy should be to increase credit for the modernization and development of the economy based on a new technological order, and not to limit the money supply in order to reduce inflation. The latter will decline as costs decrease, quality improves and the volume of production of goods and services increases.

The logic of the world crisis naturally leads to an aggravation of international competition. In an effort to maintain its leadership in the rivalry with the rising China, the United States is fomenting a world war in order to maintain its financial hegemony and scientific and technological superiority. Applying economic sanctions in parallel with the buildup of anti-Russian aggression in Ukraine, the United States is seeking to defeat Russia and subordinate it, like the EU, to its interests. Continuing the policy of the Washington Consensus and holding back credit expansion, the monetary authorities exacerbate the negative effects of external sanctions, plunging the economy into depression and depriving it of chances for development.

The war of the United States and its NATO allies against Russia is gaining momentum. There is less and less time to maneuver. In order not to lose this war, macroeconomic policy should be immediately subordinated to the goals of modernization and development based on a new technological order.