Post Soviet countries are held artificially poor by the Federal Reserve
Levan Vasadze from Georgia, Chairman of the Georgian Demographic Society XXI, was one of the speakers at the anti-globalist conference in Chisinau, Moldova, December 15th, 2017. He spoke about the power of the Federal Reserve over national banks and why the post Soviet republics descended into poverty, although – or because – they blindly followed the advice from western advisors. The speech is published with the authors consent. It is transcribed from the spoken version, and may differ slightly from the printed versions published elsewhere.
Published: January 11, 2018, 11:59 am
It is my honor and pleasure to be back in Chisinau for the second time during this year. What a Moldovan year for me thanks to President Dodon and my dear friend Iurie Rosca!
We gather here today, to talk about one of the most boring subjects in the world, which are economics and finance. I too join this unfortunate crowd of ours, but I think it is necessary. We prefer to talk about theology, philosophy, ideology, and we tend to lay the way to what needs to be done. Because we are by now a quarter of a century into the monopoly of liberalism and I think by today, we have already said what we do not like, what we do not want, and the time has come to try to articulate what we do want.
This can not be done without paying special attention to what is the alternative economic model to the liberal paradigm. Clearly, this is better done by the professional economists and scientists, who by now realize that the liberal economic science is largely false. Of course that is still a rare breed of economists, although I expect that with the growing evidence of an artificial global crisis, more and more such scientists will be joining our discourse. In the meantime, though, all of us should participate.
Not being an economist, but being a professional businessman in corporate finance and strategy, with a master’s degree from the US and almost a quarter of a century of practical business experience, perhaps I can contribute today from the doer’s point of view. As I try to do so, I beg your forgiveness, for my non-scientific vocabulary and ammunition.
Perhaps the most intriguing question, when beginning our quest, that we should ask ourselves, is when and where did each one of us realize that something was fundamentally false in the proposed liberal economic paradigm. Coming from the era of failed economic Marxism and shining economic liberalism, this was not the easiest of the revelations to achieve.
For me personally the last bell, the most convincing bell, started to ring somewhere in the middle of 2000’s when I realized that there was just too much evidence that our poverty and slow economic development of the countries of former Soviet Union were artificial.
The traditional school of thought presented this to us as a natural process of transformation from Marxism into capitalism. However, China’s example suggests the opposite: you do not have to surrender completely to the liberal paradigm and still have a tremendously successful economic model with an economy which has grown ten times over the past 30 years.
Another component of the suggested propaganda of why we remain poor is corruption. However, corruption is rampant everywhere. Washington’s multibillion-dollar official lobbying industry and Brussels’ beaurocratic machine being perhaps its greatest manifestations. The aforementioned China publicly executes thousands of corruptioners every year, hence admitting the problem of corruption, but still does not fail to be tremendously successful economically.
A third, albeit less commonly used, argument of why we remain poor in Russia, Moldova, Georgia, Ukraine and everywhere, is the notorious human rights issue. However, I believe cats and dogs enjoy more human rights in the countries of former Soviet Union, than humans do in some of the countries, which are the west’s allies worldwide, but this does not prevent them from being wealthy and economically supported by the west.
Hence, as a result of these observations I came to the conclusion of a harsh reality, as the territories of the defeated geopolitical camp we were made poor intentionally by the victors. This school of thought of mine is regarded as the derogatory “conspiracy theory” and is ridiculed. We are told, nobody wants us to be poor. The richer we are, the more goods and services can be sold to us. True, if the task of geopolitical dominance and submission was completed. But I believe that up until – God forbid – Russia is destroyed, or Russia itself is dissolved, this task remains largely unachieved, and therefore our artificial poverty is a great instrument for our submission and manipulation.
How is this artificial poverty achieved?
Let us start with the constitutions, written by the western advisors for all of the former Soviet countries.
The most stunning feature of our constitutions – and this is true for at least Russia, Ukraine, Georgia, Moldova and the Baltic States – is the fact that their respective central banks are not accountable to their governments or any other state structures of these countries.
We know in fact that all of them are indeed informal satellites of the US Federal Reserve Bank, which in turn is not accountable to the American state, but rather to its private owners and has a monopoly over printing of the dollar.
These national central banks, although being proclaimed to be different, despite the proclaimed animosity among some of these states, conduct twin strategies, which can be briefly described in two features:
- sky-high lending rates
- abysmally low monetary masses
Both of these dogmas are proclaimed to be based on monetary theories and the works of Milton Friedman. However, even this is a lie, because if we take a closer look at Friedman’s work, we see that he admits the dependency between the level of central bank’s lending rate and the inflation rate. But this dependency is much smaller than we are told. Friedman believes that in developed economies, this correlation may manifest in four to five months. And he writes that this time lag is even longer in countries such as ours.
Now let us look at our reality. Some of our western friends may have noticed, that while you have enjoyed for the past ten or 15 years record low lending rates, unprecedented in the world – most lending rates have been 0-1 percent – we have to suffer sky high lending rates of 7-10 percent, killing our business and killing the purchasing power of our population.
When the inflation myth is insufficient, the liberal propaganda takes refuge in another argument: they tell us the central bank rates need to be sky-high to attract foreign investment to our countries. Also a lie. If you look at the dynamics of capital flight, capital export, for example from a country like Russia, you will see astronomic figures of around two trillion dollars, which has been shifted away from Russia since the collapse of USSR, multitudes more than has been attracted to Russia. So this argument is also a lie.
Now let us – to be really boring – look at the monetary mass, measured by boring economic coefficients, such as M1, M2, or M3. It doesn’t matter. Depending on the parameter and on the country, you will see a shocking difference. In the developed countries these coefficients have ranged between 100 percent to 200 percent of GDP, whereas in the countries of former Soviet Union, they have very low numbers, the mass is 20-40 percent range.
So not only is the money in our cardio vascular system extremely expensive, but it is also very scarce. Leaving our economy without blood. Also an artificial situation masked by the pseudo-concerns over inflation.
Not to mention the fact that even despite these measures, inflation in the countries of former Soviet Union has by far exceeded its western peers all along.
Nobody denies the theoretical correlation between these factors, but the lie is in the details.
Looking back at our post-Soviet history all of our countries; Russia, Georgia, Moldova, Ukraine went through terrible shocking periods of hyper inflation. This was done to us when the Soviet Union had already collapsed and under the management of western advisors. I believe this was the first act of the two-stage manipulation, to scare us to death in the 90s with the inflation, to prepare the public opinion to be against inflation at all costs. To withstand the following harmful tight monetary policy to artificially hold back the development of our economy.
So every time someone wants to increase the monetary mass, we are scared and we remember the 90s and we say: don’t touch it, let’s continue being poor.
Based on the above, when thinking about the alternative, post liberal paradigm, we should be asking ourselves the following first question: maybe, if left truly free, the liberal economic paradigm is actually productive and we should not concern ourselves with anything but freeing it up from the hegemony of the Federal Reserve System. Maybe this is all we have to do and the rest will arrange it self. I personally am against this school of thought, because in principle the idea of hijacking liberal economic paradigm from its authors and using it efficiently without them seems absurd.
In my view, we need to rethink what is the Post Liberal Economic Harmony, which by the way spells as “PLEH”, which ironically spells as the opposite of HELP.
My time frame does not allow lengthy pros and cons discussion along all of them. Hence, I will give my preliminary views on the subjects at hand, admitting that I did not come here with too many preconceived notions and that I, just like anyone of us should remain open and flexible in this new discussion.
Q1. Should there be a private ownership in PLEH?
A1. Absolutely yes, anything else would mean repeating the tragedy of Marxism.
Q2. Should there be a private ownership in every industry in PLEH?
A2. Each country should be free to decide itself. Any standardization would mean repeating the insidious dual standards of liberalism. For one country, water is a strategic resource, for the other – education. Every state should be free in its choice and independent from the pseudo-universal standards.
Q3. Should there be an institute of central banks and if so, should they be independent of their states?
A3. If we remove their function of subordination to foreign FRS, they can be easily amalgamated into the local treasuries or even ministries of finance.
Q4. Should the economic policy be free of ideology?
A4. To begin with, there is no such thing as freedom from ideology. Current liberal economic paradigm has the ideology of profit at its center, hence it is not free from ideology by definition. The PLEH paradigm should serve whatever is central to each state: family values, nation, etc.
Q5. What should be the basic form of credit allowed in PLEH, usury or participation?
A5. Participation preferred.
Q6. Should there be regulation on trans-border mobility of Capital?
A6. Yes, as deemed appropriate by each state.
Q7. Fiat currency or secured currency?
A7. In principle, up to each state, but fiat currency more realistic.
Q8. Labor law regulations?
A8. Present and based upon each countries priorities.
To summarize, the fundamental conservative revolution of PLEH as seen from today’s viewpoint lies in the proposal for the abolition of usury and the detachment of the states’ monetary policies from FRS.
Needless to say, all of the above is very raw and preliminary, but we have to start somewhere. Inventing the PLEH is equivalent to writing music by the deaf, and if Beethoven had a chance, it was due to perhaps his phenomenal memory, memory, which we must search for the answers in our respective pre-modern era societies.
Thank you for your attention!
Note: The text is a transcript of Levan Vasadzes’s speech and my differ from the printed version published elsewhere.
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