Russia itself can solve all economic problems - Frederick William Engdahl

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

Frederick William Engdahl is an American economist, writer, and political scientist. His first works on oil policy were written at the beginning of the "first oil shock" of the 1970s. Since then, for more than 30 years, the author has been dealing with the problems of geopolitics and economics.

Currently, W. Engdahl is one of the most cited experts in the analysis of the current global economic situation. His articles and analytics can be found in numerous newspapers, magazines and well-known international Internet resources. In his work, William Engdahl uses a wide range of sources. These are documents from the US National Archives, the US Department of State and the Central Intelligence Agency, documents on British foreign policy, open documents of the Interim Coalition Administration of Iraq, documents of the US Congress and materials of its Committees, releases of the World Monetary Fund, tables of world debt of the World Bank, releases of the North American Congress Latin America, Council on Foreign Relations, Paris Club, Population Council, quarterly reports of oil and biotech corporations, published releases of the Ford, Rockefeller and Carnegie Foundations, etc. As well as the works of Sir Mackinder, Zbigniew Brzezinski, Ray Goldberg, Henry Kissinger, Todman and many other lesser known authors.

See also: Seeds of Destruction. The secret background of genetic manipulation

Since Washington and the EU imposed hostile and unsubstantiated financial and economic sanctions on Russia in the spring of 2014, President Putin and the Russian government have taken many commendable and sometimes ingenious steps in response to the de facto financial war. However, they did not take into account the instability and vulnerability of the Russian economy and the monetary system. If this issue is not resolved in the near future, in the future it will become an “Achilles' heel” for Russia. Fortunately, Russia can take some steps in this direction even before there is an alternative currency to the dollar. It is only necessary to logically rethink the situation

The key question for the Russian, and indeed for any economy, for that matter, is the question of who controls the issue and circulation of borrowed funds or money, and whether they do it by supporting large private corporations, or is it done for the national good.

After the fall of the Berlin Wall in November 1989, the Union of Soviet Socialist Republics was thrown into chaos. In July 1990, one of the first "democrats", the newly elected President of the Russian SSR and the hero of the Western media - Boris Yeltsin, a month after the declaration of independence from the USSR, amended the Russian Constitution, adding Article 75, establishing the Central Bank of the Russian Federation.

During this time, hedge fund speculator Joj Soros put Jeffrey Sachs and Swede Anders Aaslund over Yeltsin's shock therapy advisors Yegor Gaidar and Anatoly Chubais. Together, along with pressure from the IMF, they plunged the country into incredible chaos and economic collapse that continued throughout the 90s. Pensions turned to dust when the State Bank of Russia, led by Viktor Gerashchenko, printed an infinite number of worthless rubles, thus creating colossal hyperinflation. A handful of Russian oligarch favorites close to the Yeltsin family, such as Mikhail Khodorkovsky or Boris Berezovsky, became incredibly wealthy, while most of the country's population struggled to make ends meet. This became a kind of social Petri dish for the adoption of Article 75, which gives the right to create the Central Bank of the Russian Federation.

According to the Constitution, the Russian Central Bank, which is one of the shareholders (0.57% of shares) of the West-controlled Bank for International Settlements in Basel, exists as an independent body, the main function of which is to protect the stability of the national currency - the ruble. He also has the exclusive right to issue ruble banknotes and coins. This is, in fact, the backbone of the Russian economy.

By adopting Article 75, the Russian Federation has de facto given up its financial sovereignty, its most essential authority - the right to issue funds and loans.

Today, it worries President Putin, his government and the Russian people, as the financial war unleashed by the United States and targeted sanctions forced the central bank to triple key interest rates in December 2014 to 17% in an attempt to stem the free fall of the ruble. Today, despite the significant stabilization of the ruble, official discount rates reach 11%.

The Russian Central Bank, no matter how patriotic the person running it, is a monetary institution, not part of the policy pursued by a sovereign state. A “stable” ruble means stability against the US dollar or euro. This means that the independent Central Bank is de facto hostage to the dollar, which is hardly a desirable circumstance in the context of an actual war waged by other NATO methods, Obama's Treasury, the CIA, the Pentagon and the neo-conservative circles of the US war hawks.

During the International Economic Forum, which was held in St. Petersburg in June 2015, a rather high-ranking politician told me that there was intense internal debate in the government and among Putin's advisers about the re-establishment of the state national bank, as opposed to the independent, founded at the International Bank of Settlements, the Central Bank, imposed on Russia by the West in 1990

National Development Bonds

Although this very positive and necessary step of transferring control over the money supply and loans to the state has not yet taken place, Russia can still take some action. They are elegant in their simplicity and do not require a direct alternative to the dollar system to raise the capital needed for the critical task of rebuilding Russia's economic infrastructure from Magadan to Sevastopol. Monetary capital will come from Russia itself, as a result of the creation of government-guaranteed bonds of the National Development Fund of Russia and personal savings of Russian citizens. The name of the Foundation is not yet official, and this is not so important. The essence is extremely important. How will it work?

It is assumed that the Duma will approve the creation of a special fund, 100% owned by the state, within the framework of the Federal Treasury of Russia. It is clear that the Fund within the Treasury is of a special nature and was created for government spending on special large infrastructure projects of state importance, and its funds should not be spent on numerous needs of the state budget. If a separate body in the treasury is needed to provide trust funds, with a board of directors different from the current cabinet of ministers, it can also be created. The aim is to ensure the use of funds from trust funds for the previously indicated infrastructure needs identified in the process of state planning, with a minimum number of new bureaucratic levels.

This National Development Fund of Russia - which is extremely important - will issue government infrastructure construction bonds directly from the government through the Russian Federal Treasury, and not through the independent Central Bank of Russia or other banks. Infrastructure bonds will not be sold to private banks that charge interest and lend to partial reserves, but directly to the population, these will be, so to speak, “civil bonds”.

The National Development Fund of Russia, placed in the Treasury, will be authorized to issue long-term bonds for a period of 20 and 30 years, according to which an annual percentage of the amount will be paid to attract savings of ordinary Russian citizens, somewhere at the level of 15% annually, provided that inflation stabilizes at a lower level.

It is important that the new bonds will be issued for at least 20 years in order to ensure the continuity of work on large projects. The very creation of the fund will have a significant impact on the current inflation rate, since productive investment in economic infrastructure is a measure to counteract inflation, this will lead to an increase in the turnover of industrial goods and create production jobs, which directly depends on the attracted funds allocated by the authorized administration. The annual interest on the bonds, as well as the principal amount, will also be tax-free, which will be another incentive for investment.

The principal will be paid back to the bondholders when the debt is due.

The original holder of the bond does not have to hold it himself for the full 20 years before maturity. There are some forms of the secondary market, such as the repurchase of bonds, for example, through the established bank of the Russian Post, subject to a number of conditions and their subsequent resale to a new investor.

In addition, as noted, bonds will not be sold through private banks, but through the national Russian postal system, eliminating the costly and risky private trading in secondary bonds that private banks engage in. For this to work, control of the mail must remain in the hands of the state. The bonds will not be a digital computer record, but real paper bonds issued on security paper.

If the decision is made to create a separate state fund for infrastructure development within the treasury, but separated from it for the above reasons, it will be necessary to create a board of directors consisting of respected and impartial citizens, which will increase the level of people's confidence in the new organization.

The progress of funded projects can be regularly shown to the public as “progress reports” in the form of documentaries or videos on the foundation's website. This will increase investor loyalty when they see what is being generated from their savings.

As exchange markets around the world lose trillions of dollars in asset and foreign exchange par value, and world commodity prices jump wildly, Russian government-guaranteed infrastructure bonds will become an island of stability in these foreign vortices, and an engine for real and vital economic growth of the nation. The government is using the money invested to build public infrastructure, which in turn will increase the usual tax revenues by several times, far in excess of the cost of servicing bond interest. This eliminates the need to introduce new burdensome taxes to finance it.

During these 20 years, the government has been issuing private applications for critical public infrastructure projects such as the modernization of power grids, the construction of a state-owned high-speed rail network that is compatible with that of China's high-speed rail network. These projects will provide well-paid jobs for hundreds of thousands of Russian citizens. In turn, these new jobs will pay standard income taxes on income from the construction of a new Russia. This will allow the Russian government to finance public needs regardless of financial sanctions and the termination of lending by the West.

Little known fact

There is a secret about investing in economic infrastructure. Unlike various projects subsidized by the EU or US governments, which are essentially "building windmills", creating the necessary economic infrastructure, such as high-speed rail and other projects that make the economy run faster and more efficiently, brings numerous benefits to the economy as a whole. This is the long-forgotten "secret" of infrastructure investment, discovered in America during the Great Depression, when the government issued bonds for the construction of a huge hydropower complex in the Tennessee Basin Authority and other major infrastructure projects.

Various studies of the United States in the 1960s, when America invested in public infrastructure, show that spending on such critical economic infrastructure returns the government in tax revenues of about $ 11, or in this case, rubles, for every dollar or ruble initially invested. This is the secret to well-thought-out infrastructure spending

Count Sergei Witte, the Russian Minister of Railways who became Minister of Finance and then Chairman of the Council of Ministers under Emperor Nicholas II, understood the vital role of state transport infrastructure in building and modernizing the Russian state. He was the founder of the Trans-Siberian Railway, the largest project at the time, a project that made England uneasy by challenging Britain's world domination of the seas.

Britain, and later the United States, fought two world wars in the previous century to prevent the further development of such trans-Eurasian railways in what Mackinder called the heart of Eurasia. (More details about these events can be found in the book by W. Engdahl "A Century of War".) Now China and Russia are joining forces to do this.

The creation of the Russian National Development Committee allows the Russian Federation to strengthen its participation in this revolution in the world economy, world geopolitical relations and cultural ties, using its internal resources, and not foreign borrowed money.

If citizens buy bonds directly, the Russian government will avoid having to turn to foreign capital markets, even as friendly as China, to raise funds. This will help avoid burdensome external debt.

Depending on how the purchase of government infrastructure bonds is presented to the public, in today's crisis, they can easily become a symbol of state patriotism and personal contribution to the prosperous future of Russia. In subsequent articles, we will discuss the most important advantage of creating a state owned National Bank over an independent central bank.

Russia has in abundance everything that a state may need in order to build a new world of stability and prosperity for its people and become a role model for other states, and not for as long as it might seem. She has a character and strong-willed determination, which manifested itself against the backdrop of dirty sanctions and attacks over the past months. It is in Russia, perhaps, that the most educated scientific personnel in the world and the most qualified labor force are located. All resources are abundant. The only question is in shaping the flow of resources and people working in the right direction.

With a nation more reliable and united than ever, against a backdrop of hostile Western sanctions and attacks, with a president in whom more than 85% of the population are confident, now is the perfect time to introduce such an infrastructure fund. It offers every Russian the opportunity to support nation building while making money for the future.