M. Khazin, “Relevant notes on Greece”

Source: http://worldcrisis.ru/crisis/1819611

Translated by Mikhael

A brief overview of post-election situation in Greece. This is a translation of the Russian version, there is also a published Greek translation

There is a new government in Greece. A left-wing government that has a rather complicated relationship with the “sacred right of private ownership”, particularly when it comes to Greek sovereign debt. In other words, it is leaning towards triggering a full blown debt crisis in the EU (and possibly impacting the entire world). But, as we have been taught back in 2008, a crisis doesn’t just bring problems, it also unveils new opportunities. That’s why it is important to have a more in-depth understanding of Greek politics, in particular to be able to recognize who will benefit from these new opportunities. To be able to analyze the situation correctly, it is necessary to explain one very important point crucial to understanding the events that are unfolding in the EU today.

Debt accumulation was a “reaganomics” instrument used to stimulate consumer demand, first in the USA and then, starting in 1981, across the entire world. In particular, by year 2008, the average household debt in the USA increased more than twofold when compared to 1980 (from 60-65% of available income to over 130%). The situation is a little better in the EU, but in Europe state budgets were used to stimulate consumer demand, resulting in higher national debts. The USA is quickly catching up in that department.

These debts were serviced using refinancing, supported by gradual decrease in borrowing costs (the minimum interest rate set by the Federal Reserve has gone from 19% in 1980 to just about 0% in 2008). Today it is impossible to repay these debts even with zero percent interest rate on refinancing without sharply declining the standard of living for general population. A twofold decline in the EU and the USA would be necessary. But that is unacceptable, which means that these debts need to be somehow liquidated. Either written off or dealt with at the cost of high inflation rates.

I will say this once again: it is impossible to pay off the debt that has been accumulated within the world economy, it simply does not generate financial flows on a scale required for this task. For example, the real average wage in the USA has not changed since 1950’s. All the increased spending happens at the cost of increased household and national debt, and declining savings. This problem must be solved, or it will resolve on its own – through a major economic crisis.

And this problem is already being dealt with. The first experiment was the restructuring of banks in Cyprus. It tested depositors’ reaction to the banks’ refusal to return their funds (or, rather, part of the funds). The experiment was a success – disgruntled depositors have not been able to win a single court case so far. It is possible that some of them were able to settle their claims informally, but such information is not openly available.

However, there is also the problem of national debt, which, in many ways, is a lot more complex as it is no longer about disgruntled ordinary households who can’t really hold the banks responsible, but instead it is going to affect major banks and financial institutions. For this very reason, any actions related to national debt need to be thoroughly planned and tested to avoid any risk. And this is where it would be fitting to recall a phrase from an old comedy: “the most dangerous experiments involve the least valuable members of the crew”.

Note this – when Haider got into Austrian government, Austria was ostracized in EU. A similar reaction could be observed when Jean-Marie Le Pen took part in the final round of presidential elections in France. These were classic right-wing politicians who would be considered mainstream in 1950’s. What about now? Left-wing party wins elections in Greece (with right-wing joining the ruling coalition), but we see no reaction from the EU political establishment, they are silent.

There is also another interesting circumstance. World debt accumulation was made possible by US dollar emission. This emission was supposed to be backed up by new assets, but, since 1990’s, when all former Soviet assets were finally “digested”, nothing new of any considerable value emerged in the world. Therefore, the usual mechanisms of redistribution of the emitted currency no longer work – this is another aspect of falling household incomes in most countries across the world. This brings us to an important question: how can the US be forced to share with the rest of the world?

“Old” elites, who benefited from emission income redistribution for many years, cannot do it – this must be done by new political figures who are currently part of opposition elites. There are minor exceptions such as Hungary. This small (for now?) country in Eastern Europe openly used blackmail when it gave its government control over the central bank. This decision was later revoked, but it is nearly impossible to get the full details of the deal through media resources. Greece has now become the second country in the EU where opposition elites came to power.

I suspect that this particular country will be “the least valuable member of the crew” which will be used to test mechanisms for writing off national debt. Hungary would not be a good choice for this – the government has too much support and its position looks pretty solid. It would be very hard for the EU to force its policies in Hungary.

Let’s reiterate the main point: there is a very high probability that EU leadership wants to use Greece as a “guinea pig” to test national debt write off mechanisms. Greece will get all the “cuts and bruises”, while the rest of the EU will get invaluable experience in minimizing negative consequences of an operation that will eventually have to take place in every country across the world. The main objective of the new Greek government is to get the highest possible compensation for participating in this “experiment”.

I will not be giving advices to the new Greek government – forewarned is forearmed. Especially considering that I do not specialize in politics, I am an economist. But it is necessary to take into account certain developments which might end up being very important. First of all – since opposition elites in the EU will be gaining more and more strength, there is no need to be worried about serious, on the edge of blackmail, confrontation scenarios. They will find their way into world politics one way or another, if not tomorrow, then the day after tomorrow.

Secondly, it is important to understand that the EU (and the world) does not care about Greek national debt, it just needs to test new mechanisms. And after this task is accomplished, the reaction to future attempts to write off or restructure national debt might be a lot tougher. That’s why the solution must be found on the largest possible scale, no need to run small-scale experiments.

Thirdly, EU leadership will try to control the situation by applying pressure on the government “from below”. In other words – various social protests will be organized whenever it will appear that the new Greek government is not “behaving”. And it must be ready for such developments.

Fourthly, there is just not that much time left. Various market indicators are suggesting that US markets have reached critical points in terms of overheating and a considerable correction is imminent. And if it begins, mostly likely there will no longer be enough time for complex operations.

In conclusion, it can be noted that the new Greek government has some very interesting political tools that doubtfulness should be used to improve the economic situation in the country. But they should be used with utmost caution to get maximum benefits and avoid potential dangers.
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The article was translated into Greek: http://gr.rbth.com/international/2015/02/11/symboyli_pro_ellada_poyliste_to_tomari_sa_akriba_35303.html
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Who Stands to Benefit From Terrorist Attacks in France?

by Mikail Khazin

translation by: Mikhael (thanks a lot Mikhael!! The Saker)

The scale of the events in France and the intensity of the ensuing panic turned out to be so massive that even the most politically unprepared people realized that the stability of EU is facing an enormous threat. And it doesn’t even matter if the French authorities are successful in neutralizing the current situation – it may repeat on a much larger scale. It is impossible to stop this process within the framework of the modern “tolerant democracy” – placing well armed professional security units in front of every building in every city is simply not an option and everything else would be ineffective. An honest assessment of risks associated with similar events, even just in terms of insurance claims, will show that the entire economy is at risk of going down the drain. And I am talking about world-wide economy. Since I have written here a forecast that, among other things, contains some information about year 2015, I am obliged to add some commentary. The first question that begs an answer is: who stands to profit?

Here I will simply list possible beneficiaries. First choice – the US. The authorities in that country realized that the influence of opposition elites (the ones I wrote about in my forecast) is increasing so much that it is not only jeopardizing the agreements around the Trans Atlantic Free Trade Area (TAFTA), but also becoming a threat to the pro-American elites’ hold on power in Europe. Orban in Hungary, Zeman in Czech Republic, Marin Le Pen in France… All of these represent very negative processes for the US. Therefore, the situation must be blown up, “democracy” must be tucked away and a strict dictatorship must be established. A pro-American dictatorship that is, which will thoughtlessly follow orders from Washington without the need to engage in any kind of “democratic” procedures. In other words, install “pinochets” in every EU country complete with all the “bells and whistles” that always accompany these types of regimes: “death squadrons”, rollback of all social security standards, removal of state regulations – that is total liberalization. And, of course, along with these developments a free trade area with the US will be established. By the way, the refusal by French authorities to allow “Front populaire” to participate in the “unity march” fits the above scenario very neatly – what kind of “democracy” and “unity” is this when a quarter of the native French (!) population is being rudely shoved aside.

I also would like to note that within the US elite there are several groups each of them having their own channels which could be used to stimulate and organize terrorist attacks that will fit their agenda. Each group has their own partners (British Windsors, world financial elites, China and many others), as well as their own interests, and all of this requires a very detailed and thorough analysis.

Second possibility – Britain (or, to be more specific, the House of Windsor). They might be worried about a scenario where Merkel will completely give in to US pressure and push Brussels to sign the TAFTA agreement, which will put an end to the idea of creating alternative non-dollar currency zones and will force the British financial system (“rothschilds”) to lose control over interzonal transactions. Which basically means that a more or less independent British financial system will cease to exist, just as London will lose its status as a world financial center.

Third possibility – continental European elites (“black internationale”, or the Vatican - in conspirological terms). For them, TAFTA is a catastrophe, and they have already gained enough influence to try and bring nationally oriented opposition elites to power. Once the number of EU countries where this handover of power happens passes a critical threshold, pro-American elites in Brussels would be forced out and the EU as we know it will be finished. It is possible that the ideas of Franco-German-Russian domination in Europe play a certain role in this scenario. Within imperial, and not liberal-democratic framework, of course.

Fourth possibility – Germany. They could have gotten anxious that Hollande will back out (of plans previously coordinated with Merkel) under the threat of losing power and they created a situation that allows to “tighten the screws” and substantially limit the influence and capabilities of the anti-American group led by Le Pen.

Fifth possibility is the one that is currently being “fed” to the masses, which is what makes it the least probable. This version implies that islamists are behind the attack - ISIS, “Al Qaeda”, etc. It has its own intricacies because wherever we see a mention of “Al Qaeda”, we must also look for traces of CIA and British intelligence involvement. “Al Qaeda” does not have enough power and resources to carry out such an attack independently, without outside help.

Sixth possibility – Saudi Arabia. Today it is taking a serious hit and it must find a way to survive. A number of scenarios which are being developed by US imply liquidation of the Saudi state with the ultimate goal of creating a Sunni caliphate, which would subsequently be used in an attack on Israel and Iran. These scenarios must be prevented. The easiest way is to tie up US resources on as many fronts as possible, forcing them to abandon the plans to remove Saudis from power. Israel is helping Saudis in this situation, but keeping a low profile.

Seventh possibility – us (Russia). Having failed to persuade Merkel to drop sanctions and realizing that she is firmly under US control, we decided to “blow up” EU. And started with France as it appears to be the first major European country ready to leave the US confrontation scheme against Russia. This gives Hollande an alibi and support for his anti-American actions (“What can we do, - he will tell Obama, - you didn’t help, while Russia is supporting us”), and so on. It is also possible that we already have agreements with some of the parties mentioned above.

And the eights possibility, as we are moving further East – is China. This would mean that the attack was a “blowback” for Ukraine and other actions directed against the new Silk Road. In other words, it would imply China’s entry into the big political “game” on a world-wide scale.

Theoretically all of the above mentioned possibilities are still not out of the question. As time goes by, more and more information will become available and the picture will become clearer, but we need to pay close attention. Many of the mentioned parties have their own ideological agendas, which were symbolically presented to the public during the last two days. The symbols included candles (for some reason no one in EU lighted candles to commemorate victims in Donbass, Odessa or Mariupol even though all of these places are also located in Europe and there are more people dying there every day, than in France), flowers, staged “unity marches” that reeked of fakeness so badly that one must wonder why it was impossible to prepare better!

Here is Russia things are starting to move as well – just look at the bickering between Venediktov and Kadyrov! However, I still don’t see any constructive course of action being undertaken, but it is possible that it will never happen – because there is no one to implement such a course of action. By the way, I found Khodorkovsky’s statement very indicative of what is happening here right now. He was clearly used to provoke the public and this distinctly showed that he is not an independent political figure. Furthermore, those who are using him are obviously no longer considering him a valuable asset.

Why America Can't Stop

by Mikhail Khazin

Translated by Roobit

Or an attempt to describe how US problems correlate with international security.

On several past occasions I have written that the United States is deliberately destroying the entire system of international security, the same system that they had built together with the USSR. Why did they start dismantling the international security system is also understandable, in the 1990s the generation of “victors” came to power in that country, these people are convinced that they had “defeated” the USSR (as our theory explains it is obviously not so, please refer to http://worldcrisis.ru/crisis/188291 ) and because they are “victors” they may do anything they please. They decided that collective security arrangements are onerous, and that they need their own security system, the one that only they will have control over.

If we were to evaluate rhetoric of individuals who were in charge of the states that were admitted as new NATO members in the last 20 years, then we can figure out the logic that stands behind the expansion (and perhaps a bit even farther still). “We are being threatened and the USA is our only possible protection, therefore we must all be integrated within a US-centered security structure.” This was all going on while Russia, as a matter of principle, was not participating in affairs of those countries (not even in those of the Ukraine, which was abandoned to its own devices, something that has to a great extent caused the recent events in that country), Russia was not a threat to anyone (and of course it is not a threat to anyone now), the point of this all was deliberate destruction of the old global security system, in which Russia used to play a key role.

Obviously constructing a new security system from scratch is an endeavor that is both expensive and slow, and that is the prime reason why on some issues (such as nuclear disarmament) the United States continued to talk with Russia although the background of those communications can be best expressed through a formula: we only talk about questions which we consider to be of interest to us, and the rest is not really your business. The trouble is that all those plans, which were developed in the 90s and which they began to implement during 2000s (quite possibly, the events of September 11, 2001 http://worldcrisis.ru/crisis/86502 were organized to launch the execution of those plans, same way as the Pearl Harbor was staged to extract the United States from its “embrace of isolationism”), so those plans had been based on the premise of continuous economic growth, itself founded upon the primacy of America's resources. Instead they ended up with a crisis, which has significantly reduced those available “resources.”

I must note that the period of capture of former Socialist Commonwealth's markets has indeed become “the golden age” of American economy, even their budget scored a surplus. But our work in 2001 in which we evaluated the balance between different branches of American economy in the 1998 showed that ( http://worldcrisis.ru/crisis/73174 ) already then the US economy was standing on the brink of abyss comparable to where it found itself in the early 1930s. Today's picture is far more frightening and what can be done about it unclear as well. The old security model has been destroyed. Trust cannot be restored, a new model does not exist, there are some elements of it here and there, but they function only if the US directly intervenes into the process. Intervention factually consists of allocating large sums of money to all participants in the process, and it is faulty: Palestine, ISIS, etc.

This is happening while the situation inside the US worsens. The problem is that for a long time they have a barrier in place that has separated the elite from the rest of the society, the barrier of the kind that's only being built here (in Russia). American educational system, and I mean educational system that prepares societal leaders, has been destroyed already back in the 1960s, an average citizen (the sheep in the parlance of the elite) has actually no chances of advancement to an upper “elite” level, the one from which the society is being governed. A successful marriage could serve as a theoretical exception, but this social advancement mechanism cannot be employed in a systemic fashion. However for those few who are born active, unless the punitive psychiatry destroys them at a tender age or they fall victim to juvenile justice, something that now gets written a lot about, for them there are still mechanisms for upward social mobility which could bring them up to the level of technocratic elite.

The trouble is that in the course of this half of a century they've had accumulated lots of people who are absolutely unprepared to tolerate a sharp decline in their standards of living. But along with the worsening of the economic crisis, in order to maintain their grip on power and their status the “actual” elites must most definitely reduce the living standard of these population strata of the American society. And that can push the system up onto the critical level of mutual contradictions. Because internal resources necessary for maintenance of the quality of life of this so called upper middle class are depleted, they need to find some substitute external resources. To phrase it differently: the United States can only preserve domestic social stability at the expense of someone else.

Here we stumble upon remnants of the old security system. The Bretton Woods system was based upon a premise that all assets of participating member states will be dollar denominated. So fresh dollars were printed along with introduction of new assets into the system, and the US elites could then work out how those dollars are to be shared with the elites of those new countries (or regions) that were about to be incorporated within this dollar zone. How those regional elites were going to split those dollars with their own population was their own concern. But there are no more assets to be brought into the system, consequently no new dollars are being printed, and worse than that, existing dollars are being redistributed for America's benefit through US controlled world dollar system. This makes internal conflicts in many of the world's countries all but unavoidable.

Some of those conflicts are at their beginning stage while others are already burning hot, but their essence is all he same, counter-elites, the ones who were not let into the proverbial dollar cookie jar now make claims upon existing elites demanding either to restore the scale of support they get (that means that the old elites must commence financing of the economy from their own pockets) or yield power and get out of the way. Most obvious that because those existing elites are all pro-American, the scenario is developing under accompaniment of increasingly anti-American rhetoric.

We would like to remind you that similar processes already took place in Latin America after the investment flows from the United States changed their direction in aftermath of the Second World War. There the finale was either a breakdown of the economy or emergence of new forces at the helm of the state, frequently personified by brutal dictators, and sometimes, like in Chile, both a combination of both developments. What is going to happen to the world's regions is an open question, but the choice of means to control the situation which remains at America’s disposal is shrinking dramatically.

The United States are obviously witnessing these processes and are impotent to do anything about them. From that standpoints, Obama's officials are no different from Putin, he might not like Nabiullina's policies but he cannot just fire her because giving her the boot would destroy the consensus of the elites (and he's too hesitant as doesn't venture to reign in the elites), likewise the administration team in the US is unable to go against their elites, which adamantly refuse considering anything that might somehow threaten their status. And that in turn means that rocking the boat is forbidden!

That can be defined as: sudden moves that can be interpreted as a game changer which in turn might alter the very rules that the United States has introduced in the decade of 2000 and such moves are not allowed. For example, you cannot just change borders. Possibly, if the United States could turn the clock back, then they might have left the Pandora's box safely closed and would not have amputated Kosovo from Serbia, but what's done is done, besides that all happened during prosperous 90s. But to permit the phenomenon of Crimea (or anything similar) is just impermissible. Because if we allow to change borders on a regional level, then entire Eastern Europe, the Middle East and many other areas will turn into serious war theaters.

Essentially we are the ones who understand that this is unavoidable, but American elites will never come to grips with that (and that's why our economic theory is something they would never agree with), this why they will do whatever it takes to postpone their own end, they'll drag it until the whole structure collapses upon them on its own. In that sense, it is implausible to expect that they would remove sanctions or that they will somehow agree to us acting independently. Perhaps they would be happy to but they are prisoners of their own system.

Khazin on schizophrenic Government Polices

Khazin on Putin's message - 05 Dec 2014

English Transcription & Translation by: VineyardSaker Video Team
Translations: S Editing: Bernie, Alex
French Translation: Stéphane
Production: Marina & Augmented Ether

Khazin To Putin’s Address

(please press the 'cc' button to see the English subtitles)

Mikhail Khazin Q&A with the Saker Community

Dear friends,

It is a huge pleasure, and honor, for me to present you today with the Q&A between Mikhail Khazin and the Saker Community.  For those who might have missed it, here it is (including a biography of Mr Khazin):

http://vineyardsaker.blogspot.com/2014/10/exclusive-mikhail-khazin-q-with-saker.html

This was truly a massive effort, not only on the part of Mr. Khazin to whom I am immensely grateful for taking the time to reply in detail to so many questions, but also on the part of a lot of volunteers from our community.  In the words of the Russian Saker Team Leader, Marina,

I just wanted to say couple words about the project and our team.

I believe this was first truly communal project. It was done entirely by the fantastic members of our international Saker community. We received over 500 questions from our readership. A group of volunteers helped to sort them through, reformat and edit in a way that allowed us to keep as many original questions as possible while at a same time keep them short and manageable both by M. Khazin and the translators. The volunteer response was overwhelming and very professional.

As Russian I cannot overstate my gratitude to all these wonderful people around the world who time and time again demonstrate their compassion and solidarity with Russia. My Motherland once again goes through trying times and so does the rest of the world. We are in it together. We need to stay strong and united in the face of evil who has no nationality and no borders. To fight evil we need to erase borders in our hearts and extend hands to each other and especially to those of our brothers and sisters who are in most need of our love, compassion and support.

Thanks Saker for giving us the platform to do it,

Marina

I personally share exactly the same feelings of gratitude as Marina and want to join in her expression of thanks.

Furthermore, my thanks also go to you, members of our community and readers, because 500 questions is truly a fantastic proof of the vibrancy and involvement.  I am sure that we must have beaten some kind of "interview record" with that kind of questions.

Finally, here are the names of those who did the really hard work: 

Editing

Heather, Kristin, Michael, Paul, Patricia, Hugh, Joe

Translation

Yulia, Gideon, S, Marina

Considering the importance of this document, I have decided to try to make it as easy to access, copy and distribute as possible.  First, I have made it available in 4 formats: ODT, PDF, HTML and DOCX.  Second, I have uploaded it to both the Internet Archive and Mediafire.  Here are the links:

https://archive.org/details/KhazinQAENFinal

https://www.mediafire.com/#t713dfdpadk0z

Third, you will find below the text pasted in from the HTML file.

I hope that you will find this Q&A interesting and, if you do, please let us know because we are considering doing something similar with another well-known Russian personality.  If you want this to happen you can do the following: circulate this Q&A and post it wherever you want (I licensed it as "public domain"), link to this post and post your comments and reactions in the comments section below.  Please let Mr Khazin and all those volunteers who worked to make this Q&A in English possible know that you appreciate their dedication.  After all, how often do you get to directly ask a question to a top level expert who truly knows not only Russia, but also all the "behind the scenes"  Kremlin politics?

Kind regards to all,

The Saker

PS: if you repost this Q&A elsewhere, especially if you translate it (which I encourage you to do) please let me know!  

*******Mikhail Khazin Q&A with the Saker Community*******

Central Bank, Banking

Questions

Pertaining to the Russian Central Bank. Who owns it and who controls it and who profits from it?  Do foreign interests have a role to play within it and the bank's ability to inject liquidity into the Russian economy? Can the Russian government instruct the Russian central bank in policy decisions? Can they create an alternative to western based financial institutions like SWIFT, Visa etc. to a system based on rubles?

How is Russia’s national money supply structured presently and Why is the Russian Central Bank still depending on accumulation of US dollars before issuing Ruble’s and if this policy will change in the future, how will that affect financing of the Russian national economy from domestic sources like from Sberbank instead of relying on foreign investment?

T1, Princeton NJ

Malcolm Donald

James, Canada

Vic, Northern Ireland

Roxz, Sweden

Colin McKay Australia

Answer

There is a law that states that the Central Bank is independent of the government. Theoretically, the Central Bank has the right to set its own monetary and money creation policy. However, there are two limitations. The first is the IMF policy. Since the Russian Federation signed an agreement with this organization, the Central Bank sees itself as the main instrument for the implementation of the agreement. Of course, it is largely determined by personalities - while the head of the Central Bank, Gerashchenko, was indeed a distinguished banker and statesman, the Central Bank's policy was relatively independent of external sources; with Ignatiev and Nabiullina the situation has changed and the latter leaders try not to argue with the IMF.

The second limitation is the National Banking Council, which includes several representatives from the President Office, government and Parliament. A longstanding Russian Finance Minister, Alexei Kudrin, who is not only a personal friend of President Putin but is also close to the IMF Russian expert, played a key role on the Council until recently.

Today, the situation is gradually beginning to change. It is already clear that the old policy of the Central Bank (that reflects the vision of the IMF in its most orthodox form) does not produce the desired effect and there is a growing criticism in the country of the policy of the Central Bank and the government. However, so far, the leadership of the Central Bank is withstanding this public criticism and does not intend to change its policy. At the same time, the government keeps pressure on the Central Bank to achieve specific results for itself. In particular, the devaluation of the ruble in the last two months is largely due to the fact that the government has too optimistically promised economic growth, which is clearly not there. An attempt was made to stimulate it with the Central Bank agreeing to go against its core mandate, which requires ensuring stability of the national currency’

The Central Bank’s investment policy is similarly pulled by the opposing forces of IMF rules and the country’s economic needs. During Gerashchenko’s tenure, the Central Bank was actively increasing domestic capital (from late 1998 until 2003, the money stock M2 increased approximately 10-fold relative to GDP, from 4% to 40%, and about 15 times in absolute terms). The post-Gerashchenko Central Bank has been pursuing a strict policy of keeping the ruble from becoming an independent investment vehicle (in compliance with the principles of the Bretton Woods system, in which the dollar should be the only investment source). It has become clear today that there won’t be foreign investment in Russia at a significant scale and therefore it is necessary to stimulate the ruble investment process. However, the current leadership of the Central Bank refuses to take any steps in this direction. Thus there is a reason to believe that the management of the Central Bank will change in the medium term.

Gold, Gold currency

Questions

Distinguished Western economists have pointed out that for years naked gold short selling through manipulation of paper contracts have been used to prop up the United States Dollar and Western allied-currencies against the threat of greater depreciation versus gold. Can Russia and China break the West's gold shorting scam?

Would this be an effective way for Russia to retaliate against the Western-Saudi economic warfare that is driving down the ruble and oil price?

In particular, is there any serious likelihood Russia and China could coordinate to take delivery of large quantities of physical gold at the newly opened Shanghai Gold Exchange in order to create an arbitrage between the fake, naked short created paper gold price on the COMEX London market and in Shanghai, resulting in the end of the COMEX as a serious vehicle for gold price discovery that the central bankers can manipulate? (In other words, breaking the West's quasi-monopoly on 'price discovery' in the precious metals market, of which Russia and China are the world-leading producers).

For many years gold analysts like Dr. Jim Willie and 'King World News' have suggested Russia and China have been willing to tolerate the Western manipulation of gold because this has created a fantastic buying opportunity for Russia and China to stockpile the strategic metals at a huge discount. But with the COMEX price being below the Russian if not Chinese mining cost of production at what point do Moscow and Beijing defend their long term gold mining interests (e.g., Magadan miners in Russian Far East) and corporations from predatory undercutting?

Does the Moscow economic elite see the gold price as an Anglo-American weak spot, to hit back at the West for trying to drag down the ruble and the oil price?

What chances are there of the BRICS nations using a debt-free or gold-backed money system?

Will gold replace the USD as the world reserve asset and unit of settlement for international trade?

James, USA

Corto, Netherlands

Mcbuffalo, Arizona

NotRelevant, The Netherlands

James Bond, Australia

bob kay

Answer

It had been clear to many economists for a long time that the role of gold in the world will grow and, most likely, will return to its position as a single measure of value. In particular, we wrote about the current crisis back in 2004 in our book "The decline of the dollar Empire and the end of the ‘Pax Americana’.” There's a whole Chapter devoted to the role of gold and its manipulation. However, Russian economic leaders close to the IMF ignored this position at the time. This only began to change in the last couple of years. China has been serious about gold for almost the entire last decade and is now actively preparing for a potential transition to a "gold standard," at least in economic relations between the so-called "currency zones," which, in our opinion, will emerge after the single world dollar system falls apart.

But Russia and China cannot stop these manipulations, because the price of paper gold is determined on the speculative dollar markets. They can’t provide "leverage" that would be comparable to that of major U.S. banks that have access to an unlimited issuing resource. The only thing they can do is increase the gap between the price of "paper" and "physical" gold by constantly buying the latter on the world markets. Of course, this increases the instability in the global gold market and creates potential losses for the main "gold dealers" who work with the Federal Reserve on leasing programs, but the degree of imbalances has not reached a critical value yet. It seems to me that the sharp rise in gold prices will start after the burst of the next "bubble" in the US stock market.

With regard to the potential price of gold, as I wrote back in the early 2000's, it is determined by a “fork,” the lower limit of which is the gold price in 1980, when it had its local peak after the dollar was decoupled from gold (USA default) in August 1971, and the upper limit of which is the purchasing power of the dollar in the early twentieth century, when gold was actual money. Today this “fork” (in current dollars) is seen somewhere at the level of $ 4,500 - $ 15,000 per Troy ounce.

Industry

Questions

American industry is currently oriented chiefly towards weapons production. What danger do you see for Russian industrialization to take the same precipitous path?

It will be interesting to see if Russia can solve this modern riddle of the Sphinx: how to fold the economic surplus back into the economy, while the oligarchs are doing everything in their power to prevent such a thing. What safeguards Russia may have against the aggrandizement of power corporate entities, especially militarily oriented ones, as has been achieved in the USA?

Who are the groups participating in the discussions to promote the development of Russia industrially and culturally, is it the RAS, Valdai Club, think-tanks, etc? What are the main elements being considered for the proposal? Are foreigners somewhat allowed to participate at some point in the proposal?

Canada shares important features of Russia’s new economy such as growing dependence on resource extraction. Both countries are becoming petro-states, more or less rapidly. My question concerns the extent of de-industrialization in Russia. Is it fair to say that industrial development is now geared to servicing the extraction industries and to what extent is this a trend or not?

After the savage destruction of Novorossiya by the ATO an investment in the hundreds of millions, if not billions, will be required just to get the region back to where they were before they were attacked. On top of the money required for infrastructure, when separation occurs, Novorossiya will be billed, with some justification, their portion of the national debt. Where will the money come from? What role do you think Russia should play in the financing of the rebuild?

juliania New Mexico, USA

12 chair fan

from Patagonia

Da Ric Edmonton, Alberta, Canada

rrell Rankin Canada Winnipeg, Manitoba

Answer

The situation with industry in the US in the past couple of years has somewhat improved. There are two reasons: changing energy prices in the US (and here we must say good words for the Obama administration), and the rising cost of production in China. However, the main factor for long-term growth - private demand – is in decline. This suggests that growth in the US does not even have a medium-term prospect. The drop in private demand is the main impact of the economic crisis, which has continued since 2008. Nothing can be done here, because the main mechanism of its stimulation - the refinancing of private debt in an environment of a decline in the cost of credit - is no longer working. Recall that the discount rate of the US Federal Reserve, which was 19% at the beginning of the “Reaganomics” policy (the main tool of which was increasing lending to households), declined almost to zero by December 2008. It’s impossible to raise the rate now, because it will bring down the whole pyramid of debt around the world. 

Today US households consume every year about $3 trillion more than they earn. The situation in the EU is not much better. This means that aggregate demand in the world will be sharply decreasing. In other words, continuing to keep the trading and financial infrastructure of a global system of division of labor won’t be cost-effective. The world will most likely return to regional systems of division of labor. Each such system will have to provide domestic production of basic consumer and investment goods. The territory of their self-sufficiency will be regional, with high enough inter-zonal trade barriers. In this scenario the WTO has no prospects.

An investment source for creating (or restoring) the relevant industry will be the issue of regional currencies (in our 2004 book these regional systems of division of labour are called “currency zones”). In this sense, Canada is very different from Russia. Russia, most likely, will be one of the leaders of the “Eurasian” currency zone and will actively participate in the development strategy of the division of labor and emissions in the zone. Canada will be a part of the “dollar” zone with its strategy prescribed by Washington. So if our description of the development strategy in the short-term is true, then Russia and the US will restore their industrial production. In the US, due to a significant fall in demand and the loss of many foreign markets, it will be much easier to do this. Canada, however, will remain a “resource extraction” economy.

In general, how the “currency zones” will be configured after a sharp reduction in the global aggregate demand is a very interesting question. In particular, I did not believe the independence referendum in Scotland would result in separation from the UK. However, if the elite of Britain decided to enter the dollar currency zone, then Scotland would almost certainly separate because it is obviously attracted to continental Europe. Canada can see the intrigue with the separation of Quebec revived and its subsequent accession to the renewed EU. But I repeat, all these issues will become relevant only after the sharp fall in aggregate demand.

It seems to me that Novorossiya (and Ukraine, like many other countries in Eastern Europe, after the configuration change of the European Union), will be restored using the ruble as the issuing resource. The ruble may remain the national currency of Russia or become, perhaps under a slightly different name, the Eurasian Economic Union currency, which theoretically can include (out of major countries) Turkey, Japan, and United Korea. The last two countries, which are highly oriented towards external markets, will have no other options for regional economic cooperation after the U.S. returns to a policy of isolationism, without which they will not be able to recover their economies.

The Russian expert institutions are divided into three large groups. The first comprises the fragments of the ex-Soviet system of the Academy of Sciences. They partly have lost their quality, but until recently were able to maintain a relative independence. It is this independence, especially in the economic sphere that has infuriated the liberal crowd, which tried to completely destroy the Academy of Sciences as an independent public and expert institute. It is possible to work effectively with some institutions within the group; in particular, some of its representatives were among the Russian participants at the recent XVIII Dartmouth Russian-American conference in Dayton.

The second group is created and funded, either directly or indirectly, by Western grants (the most famous in the economic sphere is the Higher School of Economics, in Russia known as the “Russian Economic School”). Organizations within this group represent the interests of the grantors, and their authority has lately fallen rapidly.

The third group comprises people who try to address the real problems with the money that they can find, bypassing the State. I, for example, am among these people. Among the members of this group are independent (from the international heavyweights) consulting companies and research institutes that were created by real producers, and so on. They have done quite a lot in recent years (in the early 2000s we, for example, created a theory that describes the current crisis), but their “weight” within the framework of the State is quite limited. These institutions or individuals can be very interesting from the point of view of purely informational and even non- monetary interaction. Their influence in Russia will grow strongly.

Ruble, Currency

Questions 

In contrast to the US Dollar, how is the Russian Ruble supported by the Russian economy? and its flexibility in working together with the basket of other currencies forming the next world trade mechanism outside of the US Dollar.

There has been some talk about giving the Russian state the right to issue currency to fund public infrastructure development and to give low interest loans for business in the productive sectors.  What are the chances of such a thing happening and in a timely manner in the near future?

Why don’t Russia revise contracts from countries that sanctioned Russia – so that all future transactions for Russian Gas & Oil have to be made in either Gold Bullion and/or Russian Ruble’s?

Christian Witting Mandal, Norway

Blue Northern Illinois, US

Catrafuse, Timisoara Romania

zerone Germany

André Montreal Canada

Ricardo Valdivia Chile

JH Québec

Julian, Melbourne

Answer

As I have written elsewhere, today’s economic leadership of Russia - the Government and the Central Bank - consider the ruble exclusively within the framework of the Bretton Woods system; as secondary to the US dollar. Accordingly, they hold the economy of Russia open to the world financial system, constrain investment opportunities for the ruble (by overstating the value of dollar-denominated loans) and rely on foreign investment.

In this situation, the stability of the ruble is determined by purely speculative factors of global markets: a price of crude oil, capital outflows, foreign investments, and a foreign capitalization of major Russian exporters. However, the situation can change if we establish a domestic ruble investment system, create development institutions that will provide cheap ruble credit to the real sector of the economy, change the tax system from pure raw materials (with high value-added tax) to industrial, and begin to stimulate small and medium businesses engaged in innovation and production.

While the ruble is seen as secondary to the US dollar, all the above-mentioned suggestions are highly controversial. As long as a main objective of any business in Russia is to increase its dollar capitalization, get a large dollar loan, place shares on the New York or London stock exchanges or sell something for export, the idea of selling oil for rubles will not be greeted with enthusiasm. First, it is necessary to create a ruble-denominated financial infrastructure, then build a business that is oriented on this infrastructure, and only then start a strict policy for its separation from the dollar system. This in any case will require a major change of personnel of the Russian political elite.

Oil

Questions

Will the oil-price war currently being waged seriously damage the Russian economy, or is the Russian economy sufficiently diverse to “weather the storm”? Do the falling price of oil AND the falling value of the Ruble effectively offset each other? Is Russia able and/or willing to take retaliatory measures and what might they be? Is the Russian oil industry dependent on Western technology for its operation?

Michael Schaefer Schwerin, Germany

teranam13 from N. California

Ric Edmonton, Alberta, Canada

Dick Lenning Canada

jc Southern California

Answer

The oil topic is always very complex. There is a huge number of factors, comprising the short-term (increasing the oil production from Libya and partial lifting of sanctions against Iran), medium-term (development of new, more expensive oilfields, and shale “revolution”, etc.) and long-term (change in economic structure and in energy technology). No concurrent view about this problem exists, so it is needless to talk about long-term trends, which, undoubtedly are present, but barely known. The short-term trends, including the recent downturn in prices, will cost the “organizers” quite a lot if they develop against medium- and long-term trends. 

From the macroeconomic prognosis (it has been revised many times within the past 10 years, but the core components were set at the beginning of 2000s, that is why we trust it) the main macroeconomic trend of the next decade will be the division of the world into currency zones. Each zone will have its own price formation mechanism (as was the case in the 70-80s in “Western” and Soviet economic zones). Therefore the drop in oil prices prepares Russia’s economy for different day-to-day realities rather than merely damaging it. 

I’d like to point out that Russia invested surplus profit from the sale of oil into assets in the West. Therefore the decrease in profits will rather bring problems to the US, in whose treasuries the oil money was being allocated. Our budget, even accounting for capital outflow, is in surplus. There are problems with investment resources, but they could be overcome if the economic policies are changed. Retaliatory measures are rather political. By the counter sanctions Russia shows that this is not the way to treat allies. And if they are not allies, then are they enemies? In other words, does the US push Russia into an anti-American union with China? Certainly, the union with China is a disputable matter, but if there is nobody to talk to in the European Union (where the situation can change, just look at Marine le Pen in France and Viktor Orbán in Hungary), if the political elites of the EU are subservient to Washington, and if the U.S. behaves inappropriately, then what are the options?

Sanctions have shown that the US these days is impossible to negotiate with. It means that the matter is not whether Russia can do without American technologies or not; in fact, it is about how it needs to proceed without them. If the economy were healthy, then while Russia would resolve all her current problems, the US would go forward, but amid sagging demand… The US will likely go backwards; this is a standard expectation amid long crises. Sure, the problems of Russia won’t be resolved on their own, it is necessary to update the economic policy. On the whole, sanctions do not constitute a critical matter for the time being. They even can be increased, but there is no guarantee that it will not precipitate a crisis in the US. 

Sanctions

David Northern Californi

Tom Mysiewicz Reedsport, OR

Rhysaxiel Bordeaux, France

Paul from Tokyo

R-27 ER/ET Santiago, Chile

Question

What effect will sanctions have on the Russian economy over the next few years? Will they lead to better integration with the BRICS economies and other non-Western countries and how could this help Russia to deal with the sanctions regime? Will the sanctions ultimately provide the catalyst for the development of an alternative reserve currency?

Answer

I’ve already addressed part of this question so I’ll take the opportunity to refine what I’ve said before. Regarding the use of a different currency, this is already decided – There will be one, probably more than one. There is no other way to support investment, apart from by issuing regional currency and it should go without saying that ‘Whoever pays the piper calls the tune’ To put it another way, If and when regional these regional currency issuing centres appear it will quickly become clear who are ‘patriots’ and who are ‘collborators’. It’s all quite straightforward: If you export capital, the destination country will receive the investment. It will become clear quite quickly

It’s a completely different matter why the United States chops off the branch on which it is sitting (ie. stimulating the creation of alternative reserve currencies). The answer is similarly straightforward. They simply can’t conceive of their own collapse. However this belief is not simply a matter of idealistic ‘American Exceptionalism’ (We are the dominant, thus we shape history, not the otherway round), but it is also a belief held by the elite, as it forms a critical tool of social governance. Furthermore, if we admit that the official economic doctrine simply doesn’t acknowledge the crisis (To be more exact, it is impossible for the theory to recognise the crisis as the theory lacks the terms of reference to describe the cause) then the crisis actually becomes inevitable, if not inescapable: The economics are themselves founded on axioms which themselves are impelling the economy to catastrophe. There is nothing more to say here. ‘Those whom the gods want to destroy, they first make mad’

The BRICS, moreover is a pretty artificial phenomemon, dreamt up by Goldman Sachs, the famous investment bank for purely commercial reasons. (In fact to issue new securities onto the market). From our side the BRICS countries look like the leaders of regional economic zones (Brazil and South Africa in one (‘Southern’). Russia (‘Eurasian’), China with its own Chinese and India with its own national zone, given its huge population. It looks likely that the Indian zone will most closely follow the Eurasian Zone. In these zones co-oporation will increase as will the attempts of the United States to solve their internal problems by forcing other countries to pay their debts, using the institutions and frameworks set up under the Bretton Woods which established the dollar as the sole reserve currency. These efforts of the United States are only likely to speed up the process of regional integration.

Question

In the absence of exchange controls, has consideration been given to creating a split domestic-foreign ruble to support the currency and minimise the impact of sanctions and of commodity and currency speculators?

Answer

Russia has a whole collection of legislation to regulate its currently which are simply not ative at the moment because their activation would contradict the ideology which drives the financial elites. There is the mechanism of enforced conversion of foreign revenues (Set at zero percent at the moment). There are limits on declared FX positions and other FX regulations which are similarly not active. I am not at all sure that new legislation is required, those which exist are wholly sufficient should the will be therr to activate them.

I have a suspicion that the government and the Central Bank (and this refers a united ideological, commercial and political ‘team’ which are labelled by the media as ‘Liberals’, although the term potentially misleading), who promised the national political leadership economic growth although were unable to maintain it, have decided to resolve the situation by devaluation. However they simply don’t understand economics, rather they do not understand that devaluation will only benefit GDP in teo specific cases: Either there is a large amunt of idle capacity (like in 1998), or there is a large amount of freely available credit. At the moment there is neither. FX investments are not profitable and no one will invest. As for the ruble the central bank has simply refused to open up the credit market. This means that there can be no positive consequences from devaluation only negative ones. The most obvious will be a collapse in living standards amongst the normal population as the majority of consumer goods are imported. This brings us to the hypothesis that the governance of the central bank is in cahoots with Washington with the shared aim of subverting Putin. The hypothesis is already mainstream in the Russian Media.

Question

Is there enough political will and influence inside the Kremlin and the Russian Government to launch agricultural modernisation and improvement projects given that sanctions have been imposed on agricultural imports?

Answer

At the moment the Kremlin is making demands regarding the state-led modernisation of agriculture which contradict the Governments ideology. Naturally this leads to open sabotage. This is absolutely clear both in the investment environment (The government directly is responsible for the flow of investment but actually plays the opposite role at the moment) and in the implementation of the Russian payments system as just one example of many. If the kremlin has the political will to change the government then the situation will improve and with that, agriculture. If not the situation will continue to deteriorate.

Question

In your recent appearance on TV with Sergei Glazyev, you suggested that the use of sanctions by the US was a sign that the current system was breaking down. Can you elaborate on what you mean?

Answer

I have shown above that the current political situation in the United States will lead to the intensification of problems for the United States itseld, most obviously in the destruction of the dollar as the global currency. If you see that in order to sustain one of the ‘rules of the game’ that this can only be done at the expense of other rules then it is abundantly clear that the rules are no longer relevant and that they need to be changed.

Question

It appears that the economies of some countries that have followed the US lead in sanctions are being affected. Do you believe the US has promised to subsidize the losses of its allies? Why do you believe these countries have been willing to risk their economies?

Answer

No, the US will be giving money to no-one. Those countries that have acted against their own interests have done so as their elites have been effectively captured by the US. It’s no secret and in fact many write in the independent European media that it is impossible to make a career in politics with support from the US. The only ones therefore who can have a career are those frimly ‘on the hook’. Often the United States will create that hook themselves (Profitable contracts, grants, sometimes bribes and even blackmail). It’s not surprising that they control the entire extent of the EU, eavesdrop on all telephone call etc etc. It just needs the exposure of an affair, a few hundred euros of income hidden from the tax authorities or a recording of an indiscrete telephone call (maybe criticising the Gay Parade) – they would all be enough to, when exposed to the national press, to deprive an individual of his social status or a significant part of his income. Who would go against that?

There were a lot of scare stories in the 90s about the ‘Stasi’, who allegedly held records of every citizen of the German Democratic Republic. We now understand that, in comparison with the practices of the United States now that this period was actually an unexpected utopia of personal freedom. To give examples, The Stasi may have known who slept with whom, but it did not have recordings of discussions held during these intimate rendezvous. Ask yourself: Is it pleasant to think that there are people who can, without oversight, scrutinise recordings directly relating to your personal life? Furthermore are their many people on this earth who would not be vulnerable to blackmail in their personal life? And how many people are there really who would refuse to the the bidding of the United States knowing that such information is not only in their hands but ready to be used against them?

Question

What could be the response of Russia if the situation with the oil prices, sanctions, economic warfare and military pressure becomes critical? How will it mobilize its allies and how could it strengthen its economy and military, especially the air force and missile defense?

Answer

Well Russian has practically no allies, if we think of them in the sense like there were in 1939. Belarus, Kazakhstan and maybe a couple of other small countries. However there a lot of countries that understand that the United States is single handedly destroying the world order and with it global security (This is exactly what Putin said in his ‘Valdai’ speech in Sochi). There are also people in the United States who understand this. Morover the recent mid-term election results, a week ago, in the United States clearly showed that there are people, especially in the older generation, who without having a depe knowledge of the particulars feel that the current elites in the US are leading the world to catastrophe. We would simply hope that the world will not be led to catastrophe.

Trade

Vic, Northern Ireland

Song, Canada

Gagarin Thespaceman Cape Town, South Africa

Question: Eurasian Union

What do you foresee in terms of the evolution of the Eurasian Union, both in terms of internal economic/political dynamics and its relations with other states (and in particular the US/NATO/EU bloc)? Does it have the possibility to expand outside of the former Soviet Union? Are other regional cooperation organizations such as the CIS and CSTO still relevant?

Answer

As I have already said, according to our theory the world could split into several monetary zones – more or less independent systems of divisions of labor. The Eurasian Union is one such zone. In a long-term outlook it may include such prominent countries as Turkey, Japan and United Korea. The last two have no choice: the U.S. and the EU won’t purchase their produce, and they don’t want to be friends with China. So, the Eurasian Economic Union has a promising future, but it also means that we need to work hard to achieve positive results.

Questions: European Trade

In the past much has been made of a “Lisbon to Vladivostok” trade zone. What do the parameters of such a zone look like, and given the current hostility of the EU towards Russia, is there any realistic prospect of making it a reality in the near- to mid-term? What circumstances could make this more viable in the future?

Answer

I think there is no such prospect as of today. The situation in Ukraine has shown that the current EU leadership will not take Russia’s interests into consideration. Any attempt to discuss these interests causes a torrent of statements blaming Russia for “imperial politics”, “restoration of the USSR” and so on. We can argue about Germany and France being outright blackmailed by the Baltic states and Poland, the role of Washington etc., but the fact is that in its current configuration the EU and Russia cannot be “friends” (in the broad sense of the word). We can resume such discussions if a reconfiguration of the EU takes place and the Eastern European countries leave the EU.

Question: Payments/SWIFT

One of the purportedly heaviest weapons in the US/EU sanctions arsenal would be to cut Russia off from the SWIFT payments settlement system. Much has been made of efforts to create an internal system or to link with China’s system. What are the challenges facing Russia as it seeks to end its reliance on this particular Western system, and what is a realistic timeline for implementation?

Answer

This could have been implemented promptly, but the Central Bank has sabotaged all the efforts. As of today, nothing has been done, so we will have to return to this topic when the Central Bank has new leadership. The current leadership won’t do anything in this direction.

Geopolitics & Foreign Relations

Question: Russia and relations with BRICs/Emerging Markets

Russia has been very clear that in light of the West’s aggression that it would redouble its efforts to form an alternative geopolitical grouping, both among emerging markets generally and China specifically. Can you comment on:

Which countries (particularly among the BRICs) are likely to support Russia going forward?

China is probably the most critical relationship for Russia going forward – however given the often strained relationship between the two, many are skeptical of the ability to form a true partnership. Why is today different?

Russia has been actively seeking to expand its trade links with Emerging Markets generally and the BRIC nations specifically. Where do you see the best opportunities for Russia in terms of expanding trade links with these nations or even creating more formal/multinational trade structures? Along these lines, do other EM nations share Russia’s interest in potentially de-dollarizing global trade? Is there any chance Russia and/or others actually de-dollarize and, if so, what are the potential benefits and risks to Russia?

Emmanuel from Ames, Iowa. USA

Anand from India

NotSoFast from Luxembourg

Answer

I’ve already said something about it. All the questions above imply the preservation of the present Bretton Woods system and describe possible (or hardly possible, if not impossible) scenarios for developments in the world. However, according to our concept Russia and China won’t form a single alliance, they will be leaders of two different regional alliances – one is the more centralized (China) while the other more democratic. Today’s convergence between China and Russia is not due to the fact that they foresee their common future, but for the reason that they consider existing model unsustainable. The U.S. tries to describe the Russian and Chinese policies from the perspective of sustaining of the current order. This results in a fairly contradictory picture. Once seen from the right point of view, the picture becomes clear. By the way, according to this worldview the U.S. becomes a regional leader just like Russia and China or, let’s say, Brazil.

Question: Europe

Even if Russia turns towards Asia and the Emerging Markets, Europe will remain a critical part of Russian geopolitical strategy. In light of Europe’s current stance, is there anything Russia can do to improve relations (short of unacceptable concessions)? How does Russia manage around the virulently anti-Russian bloc led by Poland, the Baltics and (Western) Ukraine?

David Vienna, Austria

Corto Netherlands, Serb origin

123abc Germany

Answer

I’ve already explained that friendship between Russia and today’s European Union is impossible as long as the U.S. likes it, but this is just for a while, because as soon as safety considerations become the forefront concerns, the U.S. will most likely change its position. What happens to the current elites of the main anti-Russian countries seems to be interest to no one; they [elites] will have to go away, because they won’t be able to change their rhetoric, which will make it impossible for Russia to deal with them. For the time being Russia has nothing to talk about with the European Union for various reasons. The first one is rather obvious: trying to find a consensus whithin the framework of the European Union, the general position of this organization will always be strongly anti-Russian. The second one is that Brussels doesn’t have an independant position; it pursues the Washington’s policy. The third reason is that the current European Union has no future. We need to discuss this issue in detail.

If we place the current European Union on the USSR’s timescale, it can be compared with the period of 1989-1990. The problems are the same. Certain rules were adopted in the context of certain historical, financial and economic situation, and then later codified. Today economic and historic conditions have changed, but it’s nearly impossible to amend legislative policies. Each specific issue might be settled, although it’s unclear when, but there are tens of thousands of those issues and the time is extremely limited. The only chance to accomplish something is to abolish all them at once or, in other words, to dissolve the European Union. It can be assembled again, but the re-assembling will be done according to new regulations.

In particular, it can be said that Eastern Europe won’t be part of the “new” European Union. That’s for sure. It has no industry and thus presents no value. There was a political need to “tear them off” from the USSR/Russia and then feed them (to smooth the negative effect from renouncing socialism). Today’s youth doesn’t remember socialism, it means that it is okay to just dump those people and let them survive on their own. They are not of any interest. As we know from the European history of the nineteenth century, they will sink into extreme poverty. But, I repeat, those are their problems.

Coming back to the original question… It’s foolish to make arrangements with the European Union in such environment. That’s why it’s necessary to build our own system of labour division without taking into account the interests of the European Union. If Russia has decided to start building import substitutions, it is simply needs to introduce counter sanctions to a relevant commodity group, since the EU and the U.S., by pursuing sanctions policy, have burried all the norms of the World Trade Organization.

Question: Russia

Given the lack of popular support domestically for the liberal/Atlantacist agenda, how do they continue to retain a power bloc within Russian politics? On the other hand, how do the Eurasian Sovereigntists envision ensuring economic growth, with so many autarkist/state capitalist models having shown severe weakness in recent years? What factor are Great Russian nationalists likely to play going forward, in particular the more radical/national socialist types?

Kermit Heartsong San Francisco Bay Area, Author, Ukraine:

ZBig's Grandchessboard & How The West Was Checkmated

Answer

First of all, these people (“liberals”) control a considerable part of Russia’s property; second, they are under the protection of the USA; and third, from the point of view of the political elite, they undertook important tasks such as making agreements with the world’s financial system, investments, and economic growth. Today it has become clear that there is no economic growth, there will be no investments, and the USA are not treating us as partners. It means that the “liberals” have lost the political support and will be forced out of the political arena. The main question is: how fast this process is going to be.

As for the USA, they have already realized that they did something wrong. The problem is that the Russian “liberal” team has emerged from the privatization that was a grand theft. Today in Russia the words “liberal” and a “thief” are synonyms. In this sense, for instance, a European court ruling on “Yukos” to exact $50 bln is a grave political mistake on the part of the West because everyone in Russia knows beyond doubt that “Yukos” was stolen. The people, who bought it, were fully aware that it was a stolen property and thus no one owes them anything. In other words, for the vast majority of the Russian public the court decision is the clear evidence that the only interest of the West in relation to Russia is to take away (to loot) the assets that belong to the people (the government). That is, the western elite, including its legal system, deliberately make decisions that favor “their own”, even though those people are professed thieves. This is a hard blow to the trust towards the USA and EU; the blow is even harder than the sanctions.

As far as the nationalists are concerned, there is a colossal difference among them. There are three large nationalist groups in Russia: Russian nationalists (in a way, they are similar to Ukrainian Galician nationalists, although, of course, they are more decent so far as methods and slogans are concerned); the national and religious nationalists (including Muslim nationalists in the ISIS style), and imperial nationalists (the ones who want to revive the great state and who don’t care about national differences among its citizens). The latter are divided into monarchists, communists and “neoliberal” capitalists who want to build a “true” capitalism that is independent of the west.

It is impossible to understand who will win considering the complex processes that are going on in the country. Some of them can form local alliances, but they all have different objectives. That means that a separate set of relationships need to be build with each of these groups. At the same time, there is no point in counting on liberals, in spite of their current power – they have no electoral potential, they will at most receive 3-5 % of votes. They had illusions that a new generation would grow up not remembering the privatization. But the new generation faced the situation when all the “upward paths of vertical growth” are chock-full of children of those liberals and of “siloviki” (national security) they have raised. This is why it is inevitable that new political powers in Russia will be anti-liberal, or anti-West. “Navalnys” have no chance – they defend wrong positions. The West, if they want to have relations with Russia, has to become aware of this situation and correct it. Right now they don’t want to do that, which means that there are no positive prospects.