Russia and China Should Go Their Own Way

Yesterday Russia created a new world. The Hegemon is dead. Today Russia and China should begin their disengagement  from the West, while remaining wary that the Satanic concoction is capable of striking with nuclear weapons while in its death throes. There is nothing in the West worth having.  The countries have already given away their most important industries to the Chinese and renounced the civil liberties of their citizens.  As the Covid mandates prove, the West no longer believes in the values that it mouths.  People who exercise, or attempt to exercise, their constitutional rights to free speech and freedom of association are branded “domestic terrorists.”  Their voices are suppressed, they are fired from their jobs, their medical licenses are taken away, they are arrested and imprisoned.  The Western World has been transformed into a hellhole of tyranny.

Russian economists, brainwashed by American neoliberals, are, without realizing it, among Russia’s worst enemies.  They have been indoctrinated to believe that Russian economic development depends on access to Western financing.  This is total nonsense. 

Several years ago Michael Hudson and I made it clear that to rely on foreign loans, foreign capital, to finance its development was the stupidest thing Russia could do.  We asked, publicly, the Russian central bank how it was going to spend borrowed dollars or euros in Russia on development projects?  The projects are, of course, paid for in rubles as that is the national currency.  What magically transforms the dollars and euros into rubles?  Does the central bank use the foreign currencies Russia has borrowed to buy up rubles in the currency market?  Why do that when the central bank can create rubles?

We pointed out to the central bank that when it receives a loan in dollars or euros, it puts the foreign exchange in its reserves.  To finance the project, the central bank creates rubles, just like a private bank does when it finances a project.  All the foreign loan does is to saddle Russia with interest payments to foreign creditors.  As the central bank can finance the projects, and does finance the projects, by creating rubles, there is no point in the foreign loan.  All Russia does when it takes a foreign loan is to incur a liability without acquiring an asset.  (The central bank makes the same kind of mistake when it advises the Kremlin to sell Russian assets to foreigners in order to acquire foreign exchange which then makes Russia subject to sanctions!   As Russia doesn’t need foreign exchange, she should keep her natural gas for the development of Russia and China’s economies and not deplete her reserves by selling to her Western enemies who impose sanctions and issue threats at the drop of a hat.  If Russia does sell, she should price in rubles in order to strengthen the ruble.)

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