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It does all look decent though. The Federal Reserve banks establish the governing body of the Fed, called the Board of Governors, and delegate one member each.[24] Each member of the Board of Governors is appointed for a term of 14 years.[25] These Governors then elect the Chairman of the Fed. He is appointed for four years and the US President confirms him at the position.
What do we see? This is an imitation of subordination. This is what you will find in the book written by the Fed Chairman, Alan Greenspan: 'Federal Reserve System, formally independent from the White House'.[26] What is informal dependence then? In a world where the whole management structure is strictly vertical, such dependence simply does not exist. No structure has one. There are always superiors and subordinates, ordered according to the staffing establishment, law or criminal practices.
We are dealing with an imitation. An imitation of formal subordination. Going back to the Coca-cola example, its shareholders can write in the corporate charter that every CEO has to be confirmed by the President of the United States. The head of the White House does not own any shares and therefore cannot vote. But he is granted the honourable right to sign the confirmation of the head of the company. The situation with the Fed is exactly the same because the appointment of the Fed Chairman is the most important appointment in today's world economy and hierarchy. Far more important than that of the US President.
You will also read that the FRB is accountable to the US Congress. But this is an imitation as well. It is as though the head of the Coca-Cola company made a statement in Congress and members of Congress heavily criticised it for the high concentration of sugar in the drink and for using the plastic packaging. What could they do apart from criticising? Nothing – Coca-Cola would continue to produce the same drink, with the same concentration of sugar and in the same packaging. In a similar manner, the FRB is accountable to Congress for its performance. And members of the Congress can criticise the organisation as much as they please, they can stamp their feet in anger and blame them for causing the recession and bad performance but it would have no legal implications.
As a result, we get a very peculiar image.
The main money for trading and main money for saving on the global scale is issued by an organisation owned by an unknown group of private bankers. But why should we care about the USA and the rest of the world – we should be primarily interested in our own country. It is high time we discussed the rouble. Let us look at it. Let us read what it is written on it. This is something that an ordinary person in everyday life never does. We are, frankly speaking, only interested in the value of the bill and not in what it says. Now, let us have a look. A note of the Bank of Russia'. Does it mean that the note was made in Russia? Geographically, yes. And de jure – no. Why? Remember the Federal Reserve System that issues green dollars with portraits of American presidents, an independent Central Bank, independent from the state. Is the Russian system the same?
In order to understand it, let us read the law on the Central Bank of Russia (Bank of Russia).[27] Let us start with the simplest question – who issues roubles? This is easy – the Central Bank of Russia, also known as that Bank of Russia, has the monopoly on issuing the Russian national currency. This is exactly what article 4 of the law says: 'has the exclusive right to issue cash money and organise its circulation'.[28] Does this sound sensible? Yes, there should be only one issue centre. But what is it controlled by? In order to find out, we carry on reading. The most interesting article in the law on the Russia Central Bank is probably article 2. It contains so much information that one needs to read it at least twice. Let us look at it as a whole and then examine the details.
Article 2. The registered capital or any other property of the Bank of Russia is considered federal property. In accordance to the goals and in the order specified by this federal act, the Bank of Russia exercises the authority to possess, use and dispose of the property of the Bank of Russia, including the gold and foreign currency reserves of the Bank of Russia. Withdrawal and encumbrance of the aforementioned property without consent of the Bank of Russia shall not be allowed, unless specified otherwise by a federal act. The state shall not be liable for the obligations of the Bank of Russia, and the Bank of Russia shall not be liable for the obligations of the state, unless they have taken such obligations or unless otherwise specified in federal acts. The Bank of Russia undertakes its expenditures by means of its own profits'.
So, what belongs to the state? The property of the Bank of Russia. That is – the real estate. Furniture of all sorts, chairs and suchlike. Wallpapers. Pens and computer mice. Turntables in microwave ovens. Is that it? No, it is not. There is also the 'registered capital' of the Central Bank in the amount of three billion roubles.[29] Is it much? You can answer this question yourself. First, look at the size of the gold and foreign currency reserve of the Central Bank.[30] These figures are published every day. Today the reserves amount to ca. 465 billion dollars. Now, you tell me whether three billion ROUBLES is a lot compared to 465 billion DOLLARS. This is very little. It is not the registered capital that matters but the assets of the Central Bank, its gold and foreign currency reserves. This is the 'grand prix', so to speak. And it is very peculiar that the gold and foreign currency reserves should be described in the law as 'other property'. Yet the most interesting part is ahead.
The gold and foreign currency reserves of the Bank Russia do not belong to Russia itself.
How else would you explain the following: 'Withdrawal and encumbrance of the aforementioned property without consent of the Bank of Russia shall not be allowed'. If the states owns the property, then it does not need consent from an organisation that uses the property ON BEHALF OF THE STATE. If the states owns a plot of land, it does not need any consent from the current tenant in order to build something on the land or sell it. In the case of the Central Bank we get a very strange picture – Russian citizens, voters, the people, elected high officials and through these officials granted the Central Bank with authorities in the financial sphere. It was entrusted with the country's gold and foreign currency reserves. And now they cannot use these values without consent of the Central Bank. Imagine that you let someone your own flat and then would not be able to use this flat without the tenant's consent.
'The state shall not be liable for the obligations of the Bank of Russia, and the Bank of Russia shall not be liable for the obligations of the state'.
If the state owns the property of the Central Bank and its gold and foreign currency reserves, why shall it not be liable for its obligations with this property? If the money and the gold belong to the state, then the state can pledge it, that is to be liable for its obligations with its assets. And in our situation, the country seems to have the money but it cannot be spent. It cannot be pledged. Nothing can be done without consent of the Central Bank of Russia. And we have come across another example of legal nonsense – the user can prohibit the owner to use their own property. Or does that mean that the gold and foreign currency reserves do not belong to the state?
'The Bank of Russia exercises the authority to possess, use and dispose of the property of the Bank of Russia, including the gold and foreign currency reserves of the Bank of Russia'[31].
Please note: the authority to dispose. What is that supposed to mean? When at a state institution, say, at a fire station or a tax office, a fire fighter or a tax inspector is sent to work and they are provided with appropriate instruments. The fire fighter is given a hose, a helmet and a fire engine, and the tax inspector is provided with a computer, a calculator and some paper. But the authorities of these employees are confined to, speaking of the language of the law on the Central bank, 'use and possession. There can be no disposition here. The fire fighter does not own the fire engine and the fire hose, and the tax inspector does not become the owner of the computer and the calculator. Similarly, a soldier does not become the owner of the tank or the aircraft that he has been entrusted with to protect the country, and a policeman does not become the owner of the gun and the bulletproof vest needed to capture criminals.
The 'right to dispose' is a legal term that indicates the owner of the gold and foreign currency reserves.
Your family has a wallet which contains a lot of money. You earned it over many years through honest labour. But you are not allowed to spend it. Under no circumstances unless you have the consent of an absolutely independent man who, incidentally, lives in your flat. Technically, he works for you. So to speak. But in reality, he is entirely independent from you. He sets the salary himself, he pays it himself.[32] And you are the one who depends on him, and quite a lot because he is the only person who can authorise you to spend the money YOU have earned. And without his consent you cannot do it. And to avoid all temptation, all your salary and your savings now go to the man and not to you. He guards the 'gold and foreign currency reserves' of your family. You find it unfair? Inconvenient? Strange? On the contrary! It is fair! Convenient! Progressive! And what is most important, there is no other way – if you are entrusted with the money, you can spend it. This is how this situation is explained to us. But you would quickly sort it out with the man in your family – you would simply kick him out. Right? But the man is cunning! As soon as you want to kick him out, he starts shrieking so that all the neighbourhood can hear him. And at the entrance to your house three more men are standing, 'just in case'. They are called 'Human Rights Organisations', 'Independent press', 'Civilised countries'. And it is not you who they listen to, but to your unwanted financial assistant. They vigilantly guard order and justice, effectively stopping you from hurting the man and making you politely ask him for approval of your expenditures. Why? Because you signed the Law on the Central Bank of your flat and now you are obliged to abide. Otherwise, all the newspapers of your district, as well as the bulletin of your company will have your portrait with nasty words about you. Your children will be lectured at school about their parent's 'legal nihilism'. And a sign saying WANTED under a picture of you will be attached to the door of your house.
Therefore, the law should be obeyed, and one should meet one's commitments because this is the way the whole civilised world lives. To spend your own money yourself is obsolete. Look around – all the neighbours live like that. They also have an independent man in their flat, and so does everyone in the building. It is hard for everyone. But everyone has something to aspire to. The boss of all these men lives on the top floor. He spends his money the way he wants, and, what is more, he is authorised to control all the men in the building. He drives around in a Mercedes, and everyone else in the building drives old cars. But the reason why he is so prosperous is concealed – they say that his posh car comes from the right electoral system. Because all his family issues are only solved through election…
Lets us imagine that you have had enough of this situation and have decided to stop caring about the three guys at the door who make a scene about right violation and carry on with dragging your man to the exit. You have decided to stop listening to the tales that spending your own money yourself is obsolete and inefficient. You were not convinced that the independent man is the key to your prosperity and wealth. In a word, you have decided to kick the annoying man out of the flat once and for all. And what do you see? Next to the lift there are three more people. Huge muscular blokes with very grim faces. The armbands on their sleeves say 'The US army', 'The British army' and 'NATO'. Still determined to kick the man out? Get ready for a fight then…
The law on the Central Bank is full of controversies. It is technically federal property, and nevertheless, the Central Bank has no obligations towards the state. What is more, should we, that is the state, decide to get rid of the annoying man and use the gold and foreign currency reserves of the Central Bank to build new factories and roads, we would be doomed to failure. The three guys next to the lift would not beat us up while we still have the Russian army and the nuclear shield. But very soon a fourth roughneck would come to the flat. 'Independent International Court' is written on his back. You must have already guessed that there is no chance for justice. The Central Bank of Russia, if the Russian state wants to use what allegedly belongs to it… can file a complaint to the international court!
Article 6. The Bank of Russia is authorised to file suits to courts in accordance with the legislation of the Russian Federation. The Bank of Russia is entitled to appeal to international courts, courts of foreign countries and courts of arbitration for protection of its rights'.
The Bank of Russia and the state cannot decide a controversy themselves. It will be decided by the Stockholm court of arbitration. Or the independent court of the State of New York. This is as ridiculous as if the Central Party Committee and the People's Commissioners for Finances at the times of Stalin did not solve their disputes in the Kremlin or government sessions, but at the court of the Third Reich. It was equally independent from the Central Committee of the All-Union Communist Party and from the USSR government. Right? Right. Therefore it could decide who was right and who was wrong in the USSR, being the court of Nazi Germany. It would have been fair and impartial. And of course, it would have been guided only by the interests of Russia and by the letter of the law. But the funniest thing is that should the Central Bank appeal to the International Court of Justice, it would inevitably win. And Russia, that is us, would inevitably lose. Why? Because the Central Bank is a part of a whole system of similar central banks which, in their turn are a part of a web called the International Monetary Fund (IMF). And what is most important: the gold and foreign currency reserves of the Central Bank of Russia are not stored in Russia. Except for a small percentage of gold stored in Russia, the rest of the reserves of our Central Bank does not look like wads of cash from various countries bound with rubber bands but digital 'zeros'. Which are stored, incidentally, in computers abroad. Gold and foreign currency reserves of our Central Bank are invested in state bonds of other countries, mostly in US state bonds: 'Russia has spent over 30% of the gold and foreign currency reserves on buying securities issued by the US Treasury… According to the American Ministry of Finance, our country's investments in American state bonds have grown by 3.5 times over the last year – from 32.6 billion up to 116.4 billion dollars. And now Russia takes the 7th place in the rating of countries crediting the United States.'[33]
Can you imagine the USSR State Bank investing 30% of its reserves in US state bonds? Not in gold, but in bonds?
But let us be just – the Central Bank does not invest the gold and foreign currency reserves only in American securities. The International Monetary Fund also receives some funds: 'In the near future Russia will invest 10 billion dollars of the gold and foreign currency reserves in bonds of the International Monetary Fund (IMF). This was announced at a meeting with Russian president Dmitry Medvedev by the Finance minister of the Russian Federation Alexey Kudrin. According to the minister, it was the Central Bank that was going to invest the money'.[34]
The fact that the IMF is fully controlled by the Anglo-Saxons and other monstrous offspring of Bretton Woods will be discussed later. For now we will only note that the Central Bank always purchases various bonds when Russian economy needs the credits resources. But investing them inside Russia is impossible. Why? It is prohibited by law.
Article 22. The Bank of Russia is not entitled to credit the Government of the Russian Federation to fund budget shortfall, buy state securities at the initial offer, except for the cases when it is provided for by the federal law on federal budget'.
The Central banks of the so-called developed countries credit the budget through buying state bonds. And our Central Bank is not allowed to buy Russian bonds. But it can buy American state bonds and securities of some other countries. This is an important detail: the Central Bank of Russia is only entitled to buy bonds issued by OTHER countries, which means that it is obliged to credit other countries' economies. Very particular economies actually.
According to the legislation, the rouble can only be issued by the Bank of Russia. And according to the same law, it is not entitled to provide loans to the state. How is emission organised then, how are roubles introduced into circulation? Easily – through purchasing foreign currency at the stock exchange.
The system works as follows:
● Russia sells certain goods at the global market;
● the country receives 100 dollars;
● the Central Bank buys the dollars at the stock exchange;
● the dollars go to the gold and foreign currency reserves of the Central Bank;
● Russian economy gets 3000 roubles.
In other words, foreign currency can only get into the country through the stock exchange, where it is sold and the respective amount of roubles is 'injected' into Russian economy. Some sort of an unspoken parity rate for the population is observed. The parity rate between the amount of dollars in the gold and foreign currency reserves and the amount of roubles in the economy. For example, oil prices grow. For the same goods Russia now receives 110 dollars and not 100. The parity is tilted and the Central Bank corrects it. It lowers the dollar exchange rate, buys them for less money and injects in the economy a smaller amount of roubles per dollar. If the oil price drops, the process is reverse: the Central Bank increases the dollar exchange rate. And now, for each incoming dollar, more Russian currency is issued. It is the Central Bank that watches the gross volume of roubles. As according to the law on the Central Bank it is the governing body of the Central bank – the Board of Directors – that makes decisions regarding 'total volume of cash issue'.[35]
In other words, there is a strict relation between the monetary stock inside Russia and the dollar stock that Russia receives from the outside. And that means that we are vulnerable. We are not fully independent. Why does the Central bank keep the parity rate between the amount of dollars in the gold and foreign currency reserves and the gross volume of issued roubles? Because the Central bank controls issue of the rouble in the 'currency board' mode.[36]
It is required because any country which is a member of the IMF is obliged to guarantee single-step exchange of the total amount of the national currency into dollars and pounds using its own gold and foreign currency reserves. This rule has to be observed at any given moment. Otherwise, a country cannot be accepted to the IMF. And without being in the IMF one cannot be a part of the 'civilised society'.
As a result, the Russian economy does not have as much money as required for its proper operation but equal to the amount of dollars in the reserves of the Central Bank. The amount of roubles that can be issued depends of the amount of dollars Russia received for its oil and gas. That means that the whole Russian economy is artificially put in direct correlation with the export of natural resources. This is why a drop for oil prices causes a collapse of everything and everywhere. This is not due to insufficient tax collection from oil sales. The reason is that roubles disappear from the economy, which is followed by a collapse of trade, construction, reduction in salaries and curtailment of the whole production process.
It is important to understand that the gold and foreign currency reserves of the country are not state reserves. This money is not to be spent. It has to stay in the storage of the Central Bank just to make it possible to issue roubles. The gold and foreign currency reserves do not do any good to the government or the people. Their role is completely different – this is guarantee, which cannot be spent and which allows to issue roubles. Why they cannot be spent is clear – if we sell dollars to cover the country's external debt, the roubles issued under the guarantee will remain in the country. The balance will be distorted. And this is against the rules. This is not acceptable.
Here is an example: Putin paid Russia's external debt. Well done him, he cut one of the financial ropes that the global puppeteers used to control us. Only one so far – the other one is still in use. And he did everything 'in accordance with the rules'. The external debt was paid from the stabilisation fund which actually belongs to the state.[37] No money from the gold and foreign currency reserves of the Central Bank was paid to cover that debt. Why? Because it is not allowed! Why is not allowed? Because in 1944 in a town called Bretton Woods international agreements feigning further development of mankind were signed. We will talk about the Bretton Woods agreements and everything that has happened in the financial mirror-world since when in another chapter.
And now let us continue being amazed while reading the law on the Central Bank. It contains a lot of much more important information. Again, we are going to deal with the main question: who is in charge of the Central Bank of Russia? Who controls it? It seems that no one. At least, no one in Russia. Article 1 on the law is unambiguous enough:
'The functions and authorities specified in the Constitution of the Russian Federation and this Federal law, are exercised by the Bank of Russia independently from any other federal bodies of state authority, bodies of state authority in subjects of the Russian Federation or local government bodies'. We can try our last chance to find any governmental nature of our Central Bank by looking at the order of forming the governing bodies. Chapter III is called 'Governing bodies of the Bank of Russia'.
Article 12. The Chairman of the Bank of Russia is appointed by the State Duma for a term of four years by a majority of votes of the total number of members of parliament. The candidate for the post of the Chairman of the Bank of Russia is presented by the President of the Russian Federation. The State Duma is entitled to dismiss the Chairman of the Bank of Russia upon the recommendation of the President of the Russian Federation'.
Is that clear? The Russian President introduces and the State Duma appoints. The Duma as well dismisses the Chairman from the post. But this is just the beginning. The law is written in such a cunning manner that the possibility to dismiss the Chairman of the Bank of Russia from their position for the President and the State Duma is purely theoretical. In order to make sure in this, let us just read article 12 to the end.
'The Chairman of the Bank of Russia can only be dismissed from the position in the following cases: 1) expiry of term in office; 2) disability which makes performance of duty impossible and which is confirmed by a state in the US government stocks and other abstract entities. You can see that for medical commission; 3) there is a personal resignation letter; 4) the person in question committed a penal offence and was found guilty and sentenced; 5) if federal acts regulating issues related to the activities of the Bank of Russia have been violated'.
So, apparently, if the Chairman of the Central Bank: 1) is fit as a fiddle, 2) the term in office has not expired 3) is not willing to leave the job, 4) does not pinch wallets off old ladies, 5) observes the federal legislation (that is, does not credit his own country) – dismissing the man is impossible.
He can even pinch wallets off old ladies but until there is a sentence from court, the State Duma cannot dismiss him. The Russian president cannot do anything either. It is interesting, is it not? Cannot the head of an organisation appointing a financial director dismiss him with a decree and appoint a new one? Or does he have to wait for four years? Or a sentence from court? Or summon a medical commission? No, in reality, the head of an organisation is free both to appoint and dismiss his subordinates. The head of state in Russia is the President. All other governmental officials are his subordinates whom he controls, not directly, but through ministers, governors, mayors, generals and admirals. And only the Chairman of the Central Bank is beyond time and space. The President cannot dismiss him or give him the sack. And if he does, the banker can appeal an international court. And the position of the head of the Central Bank is indeed a key position!
Article 23. The federal budget funds and state non-budget funds are stored in the Bank of Russia unless otherwise specified by federal laws'.
So, apart from the gold and foreign currency reserves… it also stores the whole Russian budget. Accounts of the Central Bank hold what used to be the unified Stabilisation fund. 'The Reserve fund and the National Welfare Fund are stored on accounts of the Central Bank of the Russian Federation to account these funds in foreign currency in Moscow'.[38] You would not be wrong if you said that the Central Bank is our everything, meaning that all funds of our country are concentrated there. And this key department is not controlled by the state?! Do you understand what that means?
If you look closer at it, you will see traces of the compromise achieved by the Russian authorities and almighty bankers in the scheme of control over Russian finances. I would like to remind you that the Stabilisation fund that we have just spoken about was divided in two parts: they were called Reserve Fund and National Welfare Fund. So, the funds in the first one are controlled by the Central Bank, that is not the state, and the funds in the second one – the Ministry of Finance, that is the Government, that is the state…[39]
Article 5. The Bank of Russia is accountable to the State Duma of the Federal Assembly of the Russian Federation. The accountability of the Bank of Russia to the State Duma means that the Chairman of the Bank of Russia is appointed and dismissed from the post by the State Duma on the recommendation from the President of the Russian Federation'.
And this is all the accountability there is? But we have just found out that it is only an illusion because the head of the Central Bank cannot be dismissed without his consent and will. Incidentally, it is practically impossible to dismiss other bankers from the Central Bank.
Article 13. The members of the Board of Directors are appointed for a term of four years by the State Duma on the recommendation of the Chairman of the Bank of Russia, agreed upon with the President of the Russian Federation. The members of the Board of Directors can be dismissed: at the end of their term specified in this article – by the Chairman of the Bank of Russia; before the end of the term specified in this article – by the State Duma on the recommendation of the Chairman of the Bank of Russia'.
So it is only the Chairman of the Central Bank who can give the sack to stubborn colleague – as to dismiss a banker who is also a member of the Board of Directors of the Central Bank a recommendation of the Chairman is needed. The State Duma itself cannot dismiss bankers unless the Chairman of the Central Bank wants it. How can they say that the Central Bank is accountable to the Parliament then?
What was it like before? In the USSR the financial system was based on the principles of common sense. The Council of ministers of the USSR, that is the Government, was in charge of the financial sphere. The State bank authorised to perform emission operations was the body that followed all instructions from the USSR Government regarding the monetary system. This was an antipode of today's Central Bank. It followed the orders of the Government, no consent from the State Bank was needed, and its head was appointed by the Council of Ministers and was dismissed in the same manner. The State Bank had no right to appeal to a foreign court. The amount of money required for the country's economy was defined by the Council of ministers and the State Bank only issued it.
The money issued in the USSR was of three types: notes of the State Bank of the USSR, treasury notes and metal coins. The differences between the bank and the treasury notes were purely juridical. Only bank notes were backed with gold, precious metals and other assets of the State Bank, which as stated on the bills from ten roubles. One-rouble, three-rouble and five-rouble notes (treasury notes) had a different inscription on them and were backed with the whole 'property of the state', so they did not have any gold content. In everyday life ordinary citizens had no idea about these details and that there was a difference between the two types of Soviet money. All types of money were issued into circulation by the State Bank of the USSR.
Did Yeltsin understand what he was doing in 1990? I am sure, he did not. Illiteracy of the USSR population in financial issues was amazing. But it was not too bad back then – the Soviet people did not have to deal with anything more complicated than public bonds and deposits in a savings bank. The problem was that the elite were just as illiterate. And that ended with a catastrophe. An idea of a bank independent from the state was brought into the Soviet Union as a Trojan horse – through 'advisors'. through those who had practical trainings at Columbia University, those who were recruited or simply betrayed their country. Just as in the Hollywood film Alien' – an extra-terrestrial creature was implanted into a living body. I am exaggerating – a private Central bank was indeed like an alien for the USSR.
Now, are the following events surprising at all? I do not think so. If anything, they are logical. I would just like to address Gorbachev with one question: Mikhail Sergeevich, how did you let this happen being the president of the USSR? What were these banks, independent from the people's authorities, which appeared in our still multinational state still governed by the people? He will not reply though. Or he will start his old song about humanity, the new way of thinking and a chance to get everyone disarmed. I put all my hopes on hell and cauldrons with boiling oil…
Do the Russian authorities know about this 'strange' situation with the Central Bank?
What should one do if there is understanding of the importance of the task and yet there is no power to solve the problem? One should start a systematic siege. The task should be broken into several smaller ones. To change the legislation regarding the Central Bank, a vote in the State Duma is needed. The founders of the Bank of Russia saw perfectly well what a key role it would play. And therefore they did their best to create several security levels. The first level is the law on the Central Bank. Among other things, it contains such amusing details as article 7: 'Drafts of federal law and regulatory documents of the federal bodies of executive power concerning duties of the Bank of Russia and it performance shall be submitted to the Bank of Russia for approval'.[40]If you want to dismiss bankers through making amendments to the legislation – kindly submit the draft of the bill to them in advance. Otherwise, they might as well sue you for your legal mayhem in a court of Delaware…
The second security level is the Constitution. As the 'reformers' shoved some words on the Central Bank and its status even into the Constitution. Article 75 (points 1 and 2) says that 'the currency of the Russian Federation is the rouble', and 'issuing of money shall only be done by the Central Bank of the Russian Federation', that 'it performs independently from any other governing bodies'.[41] If you want to be surprised – have a look at Soviet Constitutions. Read the Constitution of the USA. You will find no mention of a bank that issues money independently anywhere, because such articles should not be a part of the main law of the country. What body issues the currency is a technical question, it is not fundamental for the country and its people. For the people it is not very significant, but it is a key issue for enslaving the country. That is why it was hastily dragged into the Constitution. And now this technical detail is there next to the fundamental rights of Russian citizens.
All the following steps of the Russian authorities will make more sense if we use the failed mounted attack against the Central Bank as a reference point.
Laws need to be changed. That means that it is necessary to take the State Duma under control. That means that a parliamentary majority is required. And therefore, a party needs to be created that will win the general elections. A political structure which is currently rather popular starts being created.
Winning the elections is not possible without controlling the mass media. The process of talking the mass media under control begins.
But what is even more important is talking Gazprom under control. In spring 2001 a new team comes to the company headed by Alexey Miller. Gazprom is not just gas flares and pipelines. It is also money required to buy the loyalty of the elite.
The cold truth among politicians in Russia at the time was that if you do not pay for loyalty, you are going to be betrayed as very few people can work for the sake of the idea, putting material welfare at the very end of their priorities. It takes a while to find such people. Where? Among one's friends. This is when people from St. Petersburg start coming into Russian politics and economy. It is required to put one's own people at key positions and secure their loyalty with a high salary provided by Gazprom, with some encouragement' in an envelope or turning to blind eye to their 'mischievousness'. One can only have very few close friends whom they know very well. When one runs out of them, one has to switch to friends' friends. These will not betray in conditions when betrayal is normal, as long as they have a secure reasonable income.
One of the most important parts of the preparation are the law enforcement structures. Otherwise, one may just not live long enough to see the victory. It is required to fill the key positions. First of all, the doctor, the head of security and the cook. Then the minister of defence, the Home Minister, the head of the FSB, the head of the Federal Security Guard Service. If you look at the dynamics of changes of leading officials in these spheres – a lot of things will become clearer.
If you are still not entirely convinced that the key to all the problems is hidden in the corridors of the Central Bank of Russia, then there is an interesting table at the website of the Central Bank – just for you.[42] It is called 'The Base Rate of the Central Bank of the Russian Federation'. In crude terms, this is the interest rate at which the Central Bank credits banks and through them the whole Russian economy. As, let me remind you, no one is authorised to do it except for the Central Bank because roubles are issued by the Central Bank which then lends them to commercial banks.
Looking at the table you will easily see that from 1st June 2010 the base rate has been 7.75%. This is written at the very top. And now scroll down. Have you still got any questions why the Russian economy was dying in the early 90s? Simply because the only issuing authority lent money at a 210% annual interest rate.[43] We have forgotten about that but this is how it was. This is a record-breaking rate of course, but generally in the period between 1993 and 1996, for nearly three years, the interest rate was a three-figure number. Try and borrow some money at a 210% rate! It does put you off from starting your own business and talking a loan, does it not?
This is not a number, this is something out of this world! And, what is most interesting, do not confuse the consequence with the reason. It is the Central Bank that is to regulate the circulation of money in the country so that the country could breathe normally and develop. And it is on its activities that the level of inflation depends.
That is to say that the inflation rate was extraordinary, and the prices were skyrocketing exactly because the Central Bank credited the Russian economy at such an extortionate rate. And not vice versa! If the idea of borrowing money at a 210% rate does not appeal to you, may be you would like 55% more? Still no? Yet this was the base rate when Putin became the head of the country in 2000. And since then the percentage has been gradually reducing until it reached 7.5% of today. The economy could finally breathe. The Central Bank had been purposefully smothering it, absolutely consciously. It can be proved by the negative processes that took place in the absolutely market and very capitalist American economy when the Federal Reserve System of the USA held the base rate not even at a rate of 210% or 55% but at a mere 20% rate.
'In April 1980 the main interest rates in the USA exceeded 20%. Cars stopped being sold, houses remained unfinished, millions of people lost their jobs – by the middle of 1980 the level of unemployment reached 9% and kept rising until the end of 1982, nearly reaching 11%'.[44] It is no one but the former Fed Chairman Alan Greenspan himself who tells us about this. And if you do have a look at the aforementioned table, you will make sure that the Russian economy lived at such a deadly rate of 21% from 7 August 2002 until 16 February 2003, and about ten years more at astronomical rates of up to 210%. What would have happened to the US efficient' economy if the FRB had raised the base rate up to 45% and kept it at this level for five years?
In order to see what destructive consequences bankers from the Central Bank and their superiors from abroad were leading our economy to, just look at the following table. There is much less money in the Russian economy than in economies of Western countries. Some might say that Russia does not work enough. Rubbish! This is like trying to explain anaemia with the fact that the patient does not work enough, forgetting that the doctors just do not trouble themselves with feeding the patient properly. The Central Bank consciously performed a demonetisation of the Russian economy. Just as a normal human body requires a certain number of litres of blood to function properly, an economy needs a certain stock of money. The amount of money in the Russian economy was drastically reduced, which immediately led to a lack of longer-term money required for economical growth and caused a stagnation of the economical development. And the volume of 'blood' let out of the economy amounts to 1.3-2 trillion dollars.[45] For such a policy the Central Bank can be considered the Central Bank of anything but Russia.
Demonetisation of the Russian economy was performed from early 1990s during active implementation of developments prepared by American experts into the Russian macro-economical and political policies. Monetisation still has not been restored[46]
So, what made the Central Bank gradually lower the high base rate? Or maybe, WHO made them reduce the interest rate grip at the throat of the Russian economy? All it takes is to look at the steady lowering of the base rate since Vladimir Putin's team came into power in Russia…
And if are still not convinced that the vast gold and foreign currency reserves of the Central Banks do not belong to Russia, just ask yourself one question: why is the Government going to privatise and sell shares of various companies owned by the state? Why sell shares of'Rosneft' and VTB when you have 450 billion dollars in the reserves? In order to get some money. Why sell liquid assets to get some money if you have plenty of money?
There can only be one answer – if these billions do not belong to you. And projects require money, development requires funds. Even fighting terrorists requires money as well as secret services. Money is required for everything and all the time. But when was the first time the 'printing machine' become non-governmental? When did this madness begin?
It all dates back to history.
2
What do we see? This is an imitation of subordination. This is what you will find in the book written by the Fed Chairman, Alan Greenspan: 'Federal Reserve System, formally independent from the White House'.[26] What is informal dependence then? In a world where the whole management structure is strictly vertical, such dependence simply does not exist. No structure has one. There are always superiors and subordinates, ordered according to the staffing establishment, law or criminal practices.
We are dealing with an imitation. An imitation of formal subordination. Going back to the Coca-cola example, its shareholders can write in the corporate charter that every CEO has to be confirmed by the President of the United States. The head of the White House does not own any shares and therefore cannot vote. But he is granted the honourable right to sign the confirmation of the head of the company. The situation with the Fed is exactly the same because the appointment of the Fed Chairman is the most important appointment in today's world economy and hierarchy. Far more important than that of the US President.
You will also read that the FRB is accountable to the US Congress. But this is an imitation as well. It is as though the head of the Coca-Cola company made a statement in Congress and members of Congress heavily criticised it for the high concentration of sugar in the drink and for using the plastic packaging. What could they do apart from criticising? Nothing – Coca-Cola would continue to produce the same drink, with the same concentration of sugar and in the same packaging. In a similar manner, the FRB is accountable to Congress for its performance. And members of the Congress can criticise the organisation as much as they please, they can stamp their feet in anger and blame them for causing the recession and bad performance but it would have no legal implications.
As a result, we get a very peculiar image.
The main money for trading and main money for saving on the global scale is issued by an organisation owned by an unknown group of private bankers. But why should we care about the USA and the rest of the world – we should be primarily interested in our own country. It is high time we discussed the rouble. Let us look at it. Let us read what it is written on it. This is something that an ordinary person in everyday life never does. We are, frankly speaking, only interested in the value of the bill and not in what it says. Now, let us have a look. A note of the Bank of Russia'. Does it mean that the note was made in Russia? Geographically, yes. And de jure – no. Why? Remember the Federal Reserve System that issues green dollars with portraits of American presidents, an independent Central Bank, independent from the state. Is the Russian system the same?
In order to understand it, let us read the law on the Central Bank of Russia (Bank of Russia).[27] Let us start with the simplest question – who issues roubles? This is easy – the Central Bank of Russia, also known as that Bank of Russia, has the monopoly on issuing the Russian national currency. This is exactly what article 4 of the law says: 'has the exclusive right to issue cash money and organise its circulation'.[28] Does this sound sensible? Yes, there should be only one issue centre. But what is it controlled by? In order to find out, we carry on reading. The most interesting article in the law on the Russia Central Bank is probably article 2. It contains so much information that one needs to read it at least twice. Let us look at it as a whole and then examine the details.
Article 2. The registered capital or any other property of the Bank of Russia is considered federal property. In accordance to the goals and in the order specified by this federal act, the Bank of Russia exercises the authority to possess, use and dispose of the property of the Bank of Russia, including the gold and foreign currency reserves of the Bank of Russia. Withdrawal and encumbrance of the aforementioned property without consent of the Bank of Russia shall not be allowed, unless specified otherwise by a federal act. The state shall not be liable for the obligations of the Bank of Russia, and the Bank of Russia shall not be liable for the obligations of the state, unless they have taken such obligations or unless otherwise specified in federal acts. The Bank of Russia undertakes its expenditures by means of its own profits'.
So, what belongs to the state? The property of the Bank of Russia. That is – the real estate. Furniture of all sorts, chairs and suchlike. Wallpapers. Pens and computer mice. Turntables in microwave ovens. Is that it? No, it is not. There is also the 'registered capital' of the Central Bank in the amount of three billion roubles.[29] Is it much? You can answer this question yourself. First, look at the size of the gold and foreign currency reserve of the Central Bank.[30] These figures are published every day. Today the reserves amount to ca. 465 billion dollars. Now, you tell me whether three billion ROUBLES is a lot compared to 465 billion DOLLARS. This is very little. It is not the registered capital that matters but the assets of the Central Bank, its gold and foreign currency reserves. This is the 'grand prix', so to speak. And it is very peculiar that the gold and foreign currency reserves should be described in the law as 'other property'. Yet the most interesting part is ahead.
The gold and foreign currency reserves of the Bank Russia do not belong to Russia itself.
How else would you explain the following: 'Withdrawal and encumbrance of the aforementioned property without consent of the Bank of Russia shall not be allowed'. If the states owns the property, then it does not need consent from an organisation that uses the property ON BEHALF OF THE STATE. If the states owns a plot of land, it does not need any consent from the current tenant in order to build something on the land or sell it. In the case of the Central Bank we get a very strange picture – Russian citizens, voters, the people, elected high officials and through these officials granted the Central Bank with authorities in the financial sphere. It was entrusted with the country's gold and foreign currency reserves. And now they cannot use these values without consent of the Central Bank. Imagine that you let someone your own flat and then would not be able to use this flat without the tenant's consent.
'The state shall not be liable for the obligations of the Bank of Russia, and the Bank of Russia shall not be liable for the obligations of the state'.
If the state owns the property of the Central Bank and its gold and foreign currency reserves, why shall it not be liable for its obligations with this property? If the money and the gold belong to the state, then the state can pledge it, that is to be liable for its obligations with its assets. And in our situation, the country seems to have the money but it cannot be spent. It cannot be pledged. Nothing can be done without consent of the Central Bank of Russia. And we have come across another example of legal nonsense – the user can prohibit the owner to use their own property. Or does that mean that the gold and foreign currency reserves do not belong to the state?
'The Bank of Russia exercises the authority to possess, use and dispose of the property of the Bank of Russia, including the gold and foreign currency reserves of the Bank of Russia'[31].
Please note: the authority to dispose. What is that supposed to mean? When at a state institution, say, at a fire station or a tax office, a fire fighter or a tax inspector is sent to work and they are provided with appropriate instruments. The fire fighter is given a hose, a helmet and a fire engine, and the tax inspector is provided with a computer, a calculator and some paper. But the authorities of these employees are confined to, speaking of the language of the law on the Central bank, 'use and possession. There can be no disposition here. The fire fighter does not own the fire engine and the fire hose, and the tax inspector does not become the owner of the computer and the calculator. Similarly, a soldier does not become the owner of the tank or the aircraft that he has been entrusted with to protect the country, and a policeman does not become the owner of the gun and the bulletproof vest needed to capture criminals.
The 'right to dispose' is a legal term that indicates the owner of the gold and foreign currency reserves.
Your family has a wallet which contains a lot of money. You earned it over many years through honest labour. But you are not allowed to spend it. Under no circumstances unless you have the consent of an absolutely independent man who, incidentally, lives in your flat. Technically, he works for you. So to speak. But in reality, he is entirely independent from you. He sets the salary himself, he pays it himself.[32] And you are the one who depends on him, and quite a lot because he is the only person who can authorise you to spend the money YOU have earned. And without his consent you cannot do it. And to avoid all temptation, all your salary and your savings now go to the man and not to you. He guards the 'gold and foreign currency reserves' of your family. You find it unfair? Inconvenient? Strange? On the contrary! It is fair! Convenient! Progressive! And what is most important, there is no other way – if you are entrusted with the money, you can spend it. This is how this situation is explained to us. But you would quickly sort it out with the man in your family – you would simply kick him out. Right? But the man is cunning! As soon as you want to kick him out, he starts shrieking so that all the neighbourhood can hear him. And at the entrance to your house three more men are standing, 'just in case'. They are called 'Human Rights Organisations', 'Independent press', 'Civilised countries'. And it is not you who they listen to, but to your unwanted financial assistant. They vigilantly guard order and justice, effectively stopping you from hurting the man and making you politely ask him for approval of your expenditures. Why? Because you signed the Law on the Central Bank of your flat and now you are obliged to abide. Otherwise, all the newspapers of your district, as well as the bulletin of your company will have your portrait with nasty words about you. Your children will be lectured at school about their parent's 'legal nihilism'. And a sign saying WANTED under a picture of you will be attached to the door of your house.
Therefore, the law should be obeyed, and one should meet one's commitments because this is the way the whole civilised world lives. To spend your own money yourself is obsolete. Look around – all the neighbours live like that. They also have an independent man in their flat, and so does everyone in the building. It is hard for everyone. But everyone has something to aspire to. The boss of all these men lives on the top floor. He spends his money the way he wants, and, what is more, he is authorised to control all the men in the building. He drives around in a Mercedes, and everyone else in the building drives old cars. But the reason why he is so prosperous is concealed – they say that his posh car comes from the right electoral system. Because all his family issues are only solved through election…
Lets us imagine that you have had enough of this situation and have decided to stop caring about the three guys at the door who make a scene about right violation and carry on with dragging your man to the exit. You have decided to stop listening to the tales that spending your own money yourself is obsolete and inefficient. You were not convinced that the independent man is the key to your prosperity and wealth. In a word, you have decided to kick the annoying man out of the flat once and for all. And what do you see? Next to the lift there are three more people. Huge muscular blokes with very grim faces. The armbands on their sleeves say 'The US army', 'The British army' and 'NATO'. Still determined to kick the man out? Get ready for a fight then…
The law on the Central Bank is full of controversies. It is technically federal property, and nevertheless, the Central Bank has no obligations towards the state. What is more, should we, that is the state, decide to get rid of the annoying man and use the gold and foreign currency reserves of the Central Bank to build new factories and roads, we would be doomed to failure. The three guys next to the lift would not beat us up while we still have the Russian army and the nuclear shield. But very soon a fourth roughneck would come to the flat. 'Independent International Court' is written on his back. You must have already guessed that there is no chance for justice. The Central Bank of Russia, if the Russian state wants to use what allegedly belongs to it… can file a complaint to the international court!
Article 6. The Bank of Russia is authorised to file suits to courts in accordance with the legislation of the Russian Federation. The Bank of Russia is entitled to appeal to international courts, courts of foreign countries and courts of arbitration for protection of its rights'.
The Bank of Russia and the state cannot decide a controversy themselves. It will be decided by the Stockholm court of arbitration. Or the independent court of the State of New York. This is as ridiculous as if the Central Party Committee and the People's Commissioners for Finances at the times of Stalin did not solve their disputes in the Kremlin or government sessions, but at the court of the Third Reich. It was equally independent from the Central Committee of the All-Union Communist Party and from the USSR government. Right? Right. Therefore it could decide who was right and who was wrong in the USSR, being the court of Nazi Germany. It would have been fair and impartial. And of course, it would have been guided only by the interests of Russia and by the letter of the law. But the funniest thing is that should the Central Bank appeal to the International Court of Justice, it would inevitably win. And Russia, that is us, would inevitably lose. Why? Because the Central Bank is a part of a whole system of similar central banks which, in their turn are a part of a web called the International Monetary Fund (IMF). And what is most important: the gold and foreign currency reserves of the Central Bank of Russia are not stored in Russia. Except for a small percentage of gold stored in Russia, the rest of the reserves of our Central Bank does not look like wads of cash from various countries bound with rubber bands but digital 'zeros'. Which are stored, incidentally, in computers abroad. Gold and foreign currency reserves of our Central Bank are invested in state bonds of other countries, mostly in US state bonds: 'Russia has spent over 30% of the gold and foreign currency reserves on buying securities issued by the US Treasury… According to the American Ministry of Finance, our country's investments in American state bonds have grown by 3.5 times over the last year – from 32.6 billion up to 116.4 billion dollars. And now Russia takes the 7th place in the rating of countries crediting the United States.'[33]
Can you imagine the USSR State Bank investing 30% of its reserves in US state bonds? Not in gold, but in bonds?
But let us be just – the Central Bank does not invest the gold and foreign currency reserves only in American securities. The International Monetary Fund also receives some funds: 'In the near future Russia will invest 10 billion dollars of the gold and foreign currency reserves in bonds of the International Monetary Fund (IMF). This was announced at a meeting with Russian president Dmitry Medvedev by the Finance minister of the Russian Federation Alexey Kudrin. According to the minister, it was the Central Bank that was going to invest the money'.[34]
The fact that the IMF is fully controlled by the Anglo-Saxons and other monstrous offspring of Bretton Woods will be discussed later. For now we will only note that the Central Bank always purchases various bonds when Russian economy needs the credits resources. But investing them inside Russia is impossible. Why? It is prohibited by law.
Article 22. The Bank of Russia is not entitled to credit the Government of the Russian Federation to fund budget shortfall, buy state securities at the initial offer, except for the cases when it is provided for by the federal law on federal budget'.
The Central banks of the so-called developed countries credit the budget through buying state bonds. And our Central Bank is not allowed to buy Russian bonds. But it can buy American state bonds and securities of some other countries. This is an important detail: the Central Bank of Russia is only entitled to buy bonds issued by OTHER countries, which means that it is obliged to credit other countries' economies. Very particular economies actually.
According to the legislation, the rouble can only be issued by the Bank of Russia. And according to the same law, it is not entitled to provide loans to the state. How is emission organised then, how are roubles introduced into circulation? Easily – through purchasing foreign currency at the stock exchange.
The system works as follows:
● Russia sells certain goods at the global market;
● the country receives 100 dollars;
● the Central Bank buys the dollars at the stock exchange;
● the dollars go to the gold and foreign currency reserves of the Central Bank;
● Russian economy gets 3000 roubles.
In other words, foreign currency can only get into the country through the stock exchange, where it is sold and the respective amount of roubles is 'injected' into Russian economy. Some sort of an unspoken parity rate for the population is observed. The parity rate between the amount of dollars in the gold and foreign currency reserves and the amount of roubles in the economy. For example, oil prices grow. For the same goods Russia now receives 110 dollars and not 100. The parity is tilted and the Central Bank corrects it. It lowers the dollar exchange rate, buys them for less money and injects in the economy a smaller amount of roubles per dollar. If the oil price drops, the process is reverse: the Central Bank increases the dollar exchange rate. And now, for each incoming dollar, more Russian currency is issued. It is the Central Bank that watches the gross volume of roubles. As according to the law on the Central Bank it is the governing body of the Central bank – the Board of Directors – that makes decisions regarding 'total volume of cash issue'.[35]
In other words, there is a strict relation between the monetary stock inside Russia and the dollar stock that Russia receives from the outside. And that means that we are vulnerable. We are not fully independent. Why does the Central bank keep the parity rate between the amount of dollars in the gold and foreign currency reserves and the gross volume of issued roubles? Because the Central bank controls issue of the rouble in the 'currency board' mode.[36]
It is required because any country which is a member of the IMF is obliged to guarantee single-step exchange of the total amount of the national currency into dollars and pounds using its own gold and foreign currency reserves. This rule has to be observed at any given moment. Otherwise, a country cannot be accepted to the IMF. And without being in the IMF one cannot be a part of the 'civilised society'.
As a result, the Russian economy does not have as much money as required for its proper operation but equal to the amount of dollars in the reserves of the Central Bank. The amount of roubles that can be issued depends of the amount of dollars Russia received for its oil and gas. That means that the whole Russian economy is artificially put in direct correlation with the export of natural resources. This is why a drop for oil prices causes a collapse of everything and everywhere. This is not due to insufficient tax collection from oil sales. The reason is that roubles disappear from the economy, which is followed by a collapse of trade, construction, reduction in salaries and curtailment of the whole production process.
It is important to understand that the gold and foreign currency reserves of the country are not state reserves. This money is not to be spent. It has to stay in the storage of the Central Bank just to make it possible to issue roubles. The gold and foreign currency reserves do not do any good to the government or the people. Their role is completely different – this is guarantee, which cannot be spent and which allows to issue roubles. Why they cannot be spent is clear – if we sell dollars to cover the country's external debt, the roubles issued under the guarantee will remain in the country. The balance will be distorted. And this is against the rules. This is not acceptable.
Here is an example: Putin paid Russia's external debt. Well done him, he cut one of the financial ropes that the global puppeteers used to control us. Only one so far – the other one is still in use. And he did everything 'in accordance with the rules'. The external debt was paid from the stabilisation fund which actually belongs to the state.[37] No money from the gold and foreign currency reserves of the Central Bank was paid to cover that debt. Why? Because it is not allowed! Why is not allowed? Because in 1944 in a town called Bretton Woods international agreements feigning further development of mankind were signed. We will talk about the Bretton Woods agreements and everything that has happened in the financial mirror-world since when in another chapter.
And now let us continue being amazed while reading the law on the Central Bank. It contains a lot of much more important information. Again, we are going to deal with the main question: who is in charge of the Central Bank of Russia? Who controls it? It seems that no one. At least, no one in Russia. Article 1 on the law is unambiguous enough:
'The functions and authorities specified in the Constitution of the Russian Federation and this Federal law, are exercised by the Bank of Russia independently from any other federal bodies of state authority, bodies of state authority in subjects of the Russian Federation or local government bodies'. We can try our last chance to find any governmental nature of our Central Bank by looking at the order of forming the governing bodies. Chapter III is called 'Governing bodies of the Bank of Russia'.
Article 12. The Chairman of the Bank of Russia is appointed by the State Duma for a term of four years by a majority of votes of the total number of members of parliament. The candidate for the post of the Chairman of the Bank of Russia is presented by the President of the Russian Federation. The State Duma is entitled to dismiss the Chairman of the Bank of Russia upon the recommendation of the President of the Russian Federation'.
Is that clear? The Russian President introduces and the State Duma appoints. The Duma as well dismisses the Chairman from the post. But this is just the beginning. The law is written in such a cunning manner that the possibility to dismiss the Chairman of the Bank of Russia from their position for the President and the State Duma is purely theoretical. In order to make sure in this, let us just read article 12 to the end.
'The Chairman of the Bank of Russia can only be dismissed from the position in the following cases: 1) expiry of term in office; 2) disability which makes performance of duty impossible and which is confirmed by a state in the US government stocks and other abstract entities. You can see that for medical commission; 3) there is a personal resignation letter; 4) the person in question committed a penal offence and was found guilty and sentenced; 5) if federal acts regulating issues related to the activities of the Bank of Russia have been violated'.
So, apparently, if the Chairman of the Central Bank: 1) is fit as a fiddle, 2) the term in office has not expired 3) is not willing to leave the job, 4) does not pinch wallets off old ladies, 5) observes the federal legislation (that is, does not credit his own country) – dismissing the man is impossible.
He can even pinch wallets off old ladies but until there is a sentence from court, the State Duma cannot dismiss him. The Russian president cannot do anything either. It is interesting, is it not? Cannot the head of an organisation appointing a financial director dismiss him with a decree and appoint a new one? Or does he have to wait for four years? Or a sentence from court? Or summon a medical commission? No, in reality, the head of an organisation is free both to appoint and dismiss his subordinates. The head of state in Russia is the President. All other governmental officials are his subordinates whom he controls, not directly, but through ministers, governors, mayors, generals and admirals. And only the Chairman of the Central Bank is beyond time and space. The President cannot dismiss him or give him the sack. And if he does, the banker can appeal an international court. And the position of the head of the Central Bank is indeed a key position!
Article 23. The federal budget funds and state non-budget funds are stored in the Bank of Russia unless otherwise specified by federal laws'.
So, apart from the gold and foreign currency reserves… it also stores the whole Russian budget. Accounts of the Central Bank hold what used to be the unified Stabilisation fund. 'The Reserve fund and the National Welfare Fund are stored on accounts of the Central Bank of the Russian Federation to account these funds in foreign currency in Moscow'.[38] You would not be wrong if you said that the Central Bank is our everything, meaning that all funds of our country are concentrated there. And this key department is not controlled by the state?! Do you understand what that means?
If you look closer at it, you will see traces of the compromise achieved by the Russian authorities and almighty bankers in the scheme of control over Russian finances. I would like to remind you that the Stabilisation fund that we have just spoken about was divided in two parts: they were called Reserve Fund and National Welfare Fund. So, the funds in the first one are controlled by the Central Bank, that is not the state, and the funds in the second one – the Ministry of Finance, that is the Government, that is the state…[39]
Article 5. The Bank of Russia is accountable to the State Duma of the Federal Assembly of the Russian Federation. The accountability of the Bank of Russia to the State Duma means that the Chairman of the Bank of Russia is appointed and dismissed from the post by the State Duma on the recommendation from the President of the Russian Federation'.
And this is all the accountability there is? But we have just found out that it is only an illusion because the head of the Central Bank cannot be dismissed without his consent and will. Incidentally, it is practically impossible to dismiss other bankers from the Central Bank.
Article 13. The members of the Board of Directors are appointed for a term of four years by the State Duma on the recommendation of the Chairman of the Bank of Russia, agreed upon with the President of the Russian Federation. The members of the Board of Directors can be dismissed: at the end of their term specified in this article – by the Chairman of the Bank of Russia; before the end of the term specified in this article – by the State Duma on the recommendation of the Chairman of the Bank of Russia'.
So it is only the Chairman of the Central Bank who can give the sack to stubborn colleague – as to dismiss a banker who is also a member of the Board of Directors of the Central Bank a recommendation of the Chairman is needed. The State Duma itself cannot dismiss bankers unless the Chairman of the Central Bank wants it. How can they say that the Central Bank is accountable to the Parliament then?
What was it like before? In the USSR the financial system was based on the principles of common sense. The Council of ministers of the USSR, that is the Government, was in charge of the financial sphere. The State bank authorised to perform emission operations was the body that followed all instructions from the USSR Government regarding the monetary system. This was an antipode of today's Central Bank. It followed the orders of the Government, no consent from the State Bank was needed, and its head was appointed by the Council of Ministers and was dismissed in the same manner. The State Bank had no right to appeal to a foreign court. The amount of money required for the country's economy was defined by the Council of ministers and the State Bank only issued it.
The money issued in the USSR was of three types: notes of the State Bank of the USSR, treasury notes and metal coins. The differences between the bank and the treasury notes were purely juridical. Only bank notes were backed with gold, precious metals and other assets of the State Bank, which as stated on the bills from ten roubles. One-rouble, three-rouble and five-rouble notes (treasury notes) had a different inscription on them and were backed with the whole 'property of the state', so they did not have any gold content. In everyday life ordinary citizens had no idea about these details and that there was a difference between the two types of Soviet money. All types of money were issued into circulation by the State Bank of the USSR.
Did Yeltsin understand what he was doing in 1990? I am sure, he did not. Illiteracy of the USSR population in financial issues was amazing. But it was not too bad back then – the Soviet people did not have to deal with anything more complicated than public bonds and deposits in a savings bank. The problem was that the elite were just as illiterate. And that ended with a catastrophe. An idea of a bank independent from the state was brought into the Soviet Union as a Trojan horse – through 'advisors'. through those who had practical trainings at Columbia University, those who were recruited or simply betrayed their country. Just as in the Hollywood film Alien' – an extra-terrestrial creature was implanted into a living body. I am exaggerating – a private Central bank was indeed like an alien for the USSR.
Now, are the following events surprising at all? I do not think so. If anything, they are logical. I would just like to address Gorbachev with one question: Mikhail Sergeevich, how did you let this happen being the president of the USSR? What were these banks, independent from the people's authorities, which appeared in our still multinational state still governed by the people? He will not reply though. Or he will start his old song about humanity, the new way of thinking and a chance to get everyone disarmed. I put all my hopes on hell and cauldrons with boiling oil…
Do the Russian authorities know about this 'strange' situation with the Central Bank?
What should one do if there is understanding of the importance of the task and yet there is no power to solve the problem? One should start a systematic siege. The task should be broken into several smaller ones. To change the legislation regarding the Central Bank, a vote in the State Duma is needed. The founders of the Bank of Russia saw perfectly well what a key role it would play. And therefore they did their best to create several security levels. The first level is the law on the Central Bank. Among other things, it contains such amusing details as article 7: 'Drafts of federal law and regulatory documents of the federal bodies of executive power concerning duties of the Bank of Russia and it performance shall be submitted to the Bank of Russia for approval'.[40]If you want to dismiss bankers through making amendments to the legislation – kindly submit the draft of the bill to them in advance. Otherwise, they might as well sue you for your legal mayhem in a court of Delaware…
The second security level is the Constitution. As the 'reformers' shoved some words on the Central Bank and its status even into the Constitution. Article 75 (points 1 and 2) says that 'the currency of the Russian Federation is the rouble', and 'issuing of money shall only be done by the Central Bank of the Russian Federation', that 'it performs independently from any other governing bodies'.[41] If you want to be surprised – have a look at Soviet Constitutions. Read the Constitution of the USA. You will find no mention of a bank that issues money independently anywhere, because such articles should not be a part of the main law of the country. What body issues the currency is a technical question, it is not fundamental for the country and its people. For the people it is not very significant, but it is a key issue for enslaving the country. That is why it was hastily dragged into the Constitution. And now this technical detail is there next to the fundamental rights of Russian citizens.
All the following steps of the Russian authorities will make more sense if we use the failed mounted attack against the Central Bank as a reference point.
Laws need to be changed. That means that it is necessary to take the State Duma under control. That means that a parliamentary majority is required. And therefore, a party needs to be created that will win the general elections. A political structure which is currently rather popular starts being created.
Winning the elections is not possible without controlling the mass media. The process of talking the mass media under control begins.
But what is even more important is talking Gazprom under control. In spring 2001 a new team comes to the company headed by Alexey Miller. Gazprom is not just gas flares and pipelines. It is also money required to buy the loyalty of the elite.
The cold truth among politicians in Russia at the time was that if you do not pay for loyalty, you are going to be betrayed as very few people can work for the sake of the idea, putting material welfare at the very end of their priorities. It takes a while to find such people. Where? Among one's friends. This is when people from St. Petersburg start coming into Russian politics and economy. It is required to put one's own people at key positions and secure their loyalty with a high salary provided by Gazprom, with some encouragement' in an envelope or turning to blind eye to their 'mischievousness'. One can only have very few close friends whom they know very well. When one runs out of them, one has to switch to friends' friends. These will not betray in conditions when betrayal is normal, as long as they have a secure reasonable income.
One of the most important parts of the preparation are the law enforcement structures. Otherwise, one may just not live long enough to see the victory. It is required to fill the key positions. First of all, the doctor, the head of security and the cook. Then the minister of defence, the Home Minister, the head of the FSB, the head of the Federal Security Guard Service. If you look at the dynamics of changes of leading officials in these spheres – a lot of things will become clearer.
If you are still not entirely convinced that the key to all the problems is hidden in the corridors of the Central Bank of Russia, then there is an interesting table at the website of the Central Bank – just for you.[42] It is called 'The Base Rate of the Central Bank of the Russian Federation'. In crude terms, this is the interest rate at which the Central Bank credits banks and through them the whole Russian economy. As, let me remind you, no one is authorised to do it except for the Central Bank because roubles are issued by the Central Bank which then lends them to commercial banks.
Looking at the table you will easily see that from 1st June 2010 the base rate has been 7.75%. This is written at the very top. And now scroll down. Have you still got any questions why the Russian economy was dying in the early 90s? Simply because the only issuing authority lent money at a 210% annual interest rate.[43] We have forgotten about that but this is how it was. This is a record-breaking rate of course, but generally in the period between 1993 and 1996, for nearly three years, the interest rate was a three-figure number. Try and borrow some money at a 210% rate! It does put you off from starting your own business and talking a loan, does it not?
This is not a number, this is something out of this world! And, what is most interesting, do not confuse the consequence with the reason. It is the Central Bank that is to regulate the circulation of money in the country so that the country could breathe normally and develop. And it is on its activities that the level of inflation depends.
That is to say that the inflation rate was extraordinary, and the prices were skyrocketing exactly because the Central Bank credited the Russian economy at such an extortionate rate. And not vice versa! If the idea of borrowing money at a 210% rate does not appeal to you, may be you would like 55% more? Still no? Yet this was the base rate when Putin became the head of the country in 2000. And since then the percentage has been gradually reducing until it reached 7.5% of today. The economy could finally breathe. The Central Bank had been purposefully smothering it, absolutely consciously. It can be proved by the negative processes that took place in the absolutely market and very capitalist American economy when the Federal Reserve System of the USA held the base rate not even at a rate of 210% or 55% but at a mere 20% rate.
'In April 1980 the main interest rates in the USA exceeded 20%. Cars stopped being sold, houses remained unfinished, millions of people lost their jobs – by the middle of 1980 the level of unemployment reached 9% and kept rising until the end of 1982, nearly reaching 11%'.[44] It is no one but the former Fed Chairman Alan Greenspan himself who tells us about this. And if you do have a look at the aforementioned table, you will make sure that the Russian economy lived at such a deadly rate of 21% from 7 August 2002 until 16 February 2003, and about ten years more at astronomical rates of up to 210%. What would have happened to the US efficient' economy if the FRB had raised the base rate up to 45% and kept it at this level for five years?
In order to see what destructive consequences bankers from the Central Bank and their superiors from abroad were leading our economy to, just look at the following table. There is much less money in the Russian economy than in economies of Western countries. Some might say that Russia does not work enough. Rubbish! This is like trying to explain anaemia with the fact that the patient does not work enough, forgetting that the doctors just do not trouble themselves with feeding the patient properly. The Central Bank consciously performed a demonetisation of the Russian economy. Just as a normal human body requires a certain number of litres of blood to function properly, an economy needs a certain stock of money. The amount of money in the Russian economy was drastically reduced, which immediately led to a lack of longer-term money required for economical growth and caused a stagnation of the economical development. And the volume of 'blood' let out of the economy amounts to 1.3-2 trillion dollars.[45] For such a policy the Central Bank can be considered the Central Bank of anything but Russia.
Demonetisation of the Russian economy was performed from early 1990s during active implementation of developments prepared by American experts into the Russian macro-economical and political policies. Monetisation still has not been restored[46]
So, what made the Central Bank gradually lower the high base rate? Or maybe, WHO made them reduce the interest rate grip at the throat of the Russian economy? All it takes is to look at the steady lowering of the base rate since Vladimir Putin's team came into power in Russia…
And if are still not convinced that the vast gold and foreign currency reserves of the Central Banks do not belong to Russia, just ask yourself one question: why is the Government going to privatise and sell shares of various companies owned by the state? Why sell shares of'Rosneft' and VTB when you have 450 billion dollars in the reserves? In order to get some money. Why sell liquid assets to get some money if you have plenty of money?
There can only be one answer – if these billions do not belong to you. And projects require money, development requires funds. Even fighting terrorists requires money as well as secret services. Money is required for everything and all the time. But when was the first time the 'printing machine' become non-governmental? When did this madness begin?
It all dates back to history.