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Posts Tagged ‘IMF’

Who Is Holding Back the Russian Economy? — Strategic Culture

Posted by M. C. on September 9, 2019

But those IMF rules are there to protect the IMF making the loans to the troubled nation, not to assist the troubled nation actually recover.

https://www.strategic-culture.org/news/2019/09/08/who-is-holding-back-the-russian-economy/

Tom Luongo

 

Russia’s economy has been a sore spot for more than two years now. Since the ruble crisis of late 2014 the role of the Bank of Russia has been to apply IMF-style counter-cyclical tightening to stabilize the situation in the wake of the decision to allow the ruble to float freely on the open market.

That was the right decision then. It was the move the US did not expect President Vladimir Putin to make. It was expected Putin would hold to his natural conservatism and keep the ruble trading in the 30’s versus the US dollar as opposed to risking a collapse in exchange rate in the face of an historic drop in oil prices over the eighteen months between July 2014 and the low made in late January 2016.

Oil dropped from $120+ per barrels to around $28 during that period. And if Putin hadn’t proactively allowed the ruble to fall from RUB32 to a high of RUB85 in early 2016 Russia would have been bankrupted completely.

During that time Bank of Russia President Elvira Nabullina raised the benchmark lending rate to 17.00% and Russia began the slow, painful process of de-dollarizing its economy.

It’s been five years since those dramatic times. But a lot of damage was done, not just to the Russian people and their savings but also to the mindset of those in charge at the Bank of Russia.

Nabullina has always been a controversial figure because she is western trained and because the banking system in Russia is still staffed by those who operate along IMF prescriptions on how to deal with crises.

But those IMF rules are there to protect the IMF making the loans to the troubled nation, not to assist the troubled nation actually recover. To explain this, I have to get a bit technical, so bear with me.

The fundamental problem is a miseducation about what interest rates are, and how they interact with inflation and capital flow. Because of this, the medicine for saving an economy in trouble is, more often than not, worse than the disease itself.

If Argentina’s fourth default in twenty years doesn’t prove that to you, nothing will.

Nabullina still believes that her job is to get inflation down to 4%. Inflation targeting, as central bank policy, is a disease that needs to be placed next to smallpox at the CDC in Atlanta.

It seems I have to write this article once every few months just to remind people what the problem is.

When inflation is above the target an austerity mindset dominates at the central bank who keeps interest rates above the market rate in the vain hope they can wring the last bits of inflation out of the economy, because sufficient confidence hasn’t returned to the banking system after the crisis.

This is Russia’s problem today. Nabullina still believes there’s work to be done before allowing the economy to grow.

When inflation is below the target, like in the ECB and the US, then to the miseducated central banker growth is sluggish and demands stimulus in the form of cheap money to create a virtuous credit cycle. It hasn’t worked and it won’t work.

Because both of these theories about the effects of inflation targeting are dead wrong.

They haven’t worked in the US and Europe because there is no more capacity within their economies to take on more debt to stimulate demand and increase spending. All they are doing is, as described by Mises and others, “pushing on a string” offering money no one wants at interest rates the market cannot sustain.

That cheap money inflates asset prices like stocks and bonds while diverting capital to long time-horizon projects like fracking in Texas, and housing and car loans, but it thieves working capital from the future by mispricing the risk of those projects in the form of the interest rate.

The net effect is enriching the already obscenely rich and powerful, through wealth transfer which feeds leftist and Marxist criticisms of the ‘free market’ while they proclaim the end of capitalism.

But central bank inflation targeting and control is the height of a centrally-planned economy. Control the value and cost of money and you control the means of production. So, capitalism this ain’t folks.

Miseducation on matters economic are commonplace today from the commanding heights to the lowest barrios.

Eventually, you reach the point we’ve arrived at in the west where no amount of forcing the market, through punitive negative rates, can stimulate growth. This is simply arrogant men praying at the altar of math torturing equations which have no resemblance to reality and turning it into policy.

On the other hand, we have Nabullina trained in this world of econometrics and its econo-babble, holding back the Russian economy with interest rates set above the market. She is either overly-cautious, if I’m being generous, or a full on fifth-columnist stifling growth to support Russia’s enemies, if I’m being cynical.

I think the truth lies somewhere in the middle, if I’m being fair. Today I’ll be fair.

The Russian economy, structurally, is in excellent shape. John Hellevig at the Awara group recently published an excellent report explaining the guts of what’s going on there. And John notes, like I have been for more than a year (here and here), that the Bank of Russia has interest rates too high given what the market is telling it.

It’s not that tough really, just look at the Russian yield curve and you can see what I’m talking about.

The current benchmark rate in Russia is 7.25%, down from 7.75% just two months ago (and that I’ll get to in a minute). The entire interbank market and short-term deposit market is trading below that benchmark rate.

This means the central bank is holding back a market that wants to trade at lower rates. This is keeping liquidity low and access to loans in the domestic and commercial market low as well.

Meanwhile, the demand for Russian debt, because as a country Russia’s balance sheet is so clean, in part due to Nabullina’s stewardship of the 2014-16 crisis period, is pushing rates lower. And for the first time in close to 5 years Russia has a normal positively-sloping yield curve from 1 year to 20 years, with no humps or flat spots.

Demand for Russian debt is finally market driven in a way that is predictable and can allow banks to make money paying short and lending long. This is how banks are supposed to make their money, not speculating on stocks and currencies!

Moreover, domestic savings rates at all maturities in the CD and money markets are below the benchmark rate, so Russian banks are under zero stress. High savings offer rates indicate a need to shore up reserves by attracting savings. It’s a bad sign.

Non-performing mortgage loans stand at less than 1%…. 1% !!

The only worry is the outstanding dollar-denominated debt, but that makes up around 1% of the total Russian mortgage market. It’s literally chump change.

I mean, for pity’s sake, what on god’s green earth is Nabullina waiting for? An engraved invitation from the Fed to the next convocation at Jackson Hole? She’s done her job, now let the Russian people do theirs.

Nabullina has kept rates high out of fear of inflation returning due to a rising US dollar and falling oil prices which is putting upward pressure on the ruble. She made an egregious policy error hiking rates in response to Trump’s crazy aluminum tariffs last year. And then held that level until June.

She’s only now just beginning to lower rates after the policy became ludicrous and Russian GDP growth has stalled. Again, incompetence and treason look very similar from a distance.

She keeps jumping at the shadows of a dollar-induced crisis. But the Russian economy of 2019 is not the Russian economy of 2015. Dollar lending has all but evaporated and the major source of demand for dollars domestically are legacy corporate loans not converted to rubles or euros.

So, the Russian economy is so much more insulated from a rise in the dollar than it was before.

The fundamental flaw in the thinking behind most central bankers, especially those trained by the IMF, is that lowering the cost of money stimulates growth and raising it reins it in. It’s an overly simplistic model to explain why we need philosopher kings like Nabullina, Mario Draghi and Jerome Powell to tinker with the economy and engineer growth and stability.

The reality is it’s more complicated than that, because access to capital means different things at different parts of the business cycle to different economies. And Russia’s role in the global economy is changing.

Russia is becoming an independent node in the global economy. Shut out of the US dollar markets, Russia now has to lead the part of the world it dominates – the EAEU, Turkey, Iran, the CSTO states – and show confidence by making the ruble more accessible to foreign investment.

Projecting confidence comes in the form of lowering rates to reflect a healthy domestic market, not keeping rates high because you’re afraid of the US

That yield curve I posted above is a picture of a central bank scared of the future, like Jerome Powell at the Fed, and not one sanguine about Russia’s future prospects. Powell has problems Nabullina doesn’t have, like hundreds of trillions in unfunded future liabilities that require much higher rates to stabilize.

Lowering interest rates in Russia from 7.25% to 6.5% or even 6% is likely all she needs to do and then let the markets take care of things from there. That’s what the market’s actually telling her.

And I believe Vladimir Putin has had enough of Nabullina’s fears. He’s getting more and more impatient with his central bank president. He sees the lack of growth of the Russian economy and wonders why capital formation is locked up behind a wall of overly-high interest rates.

Recently Putin sat down with Nabullina and right after that interest rates dropped 0.25%. The same thing happened in 2015 when she had rates stuck at 10% and Putin had to finally forced her to justify herself.

It’s clear that there is something wrong at the Bank of Russia; whether it’s Nabullina herself, her staff or the legacy of insipid and dangerous Western economic theories refusing to die, is beyond my knowledge.

The cynic in me says the foot-dragging by the Bank of Russia is the final vestige of US infiltration in Russia’s institutions rearing its ugly head. That fight is ongoing, but the recent drops in the benchmark rate are a good start.

Be seeing you

 

 

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Christine Lagarde’s Move from IMF to ECB is Bad for Europe | Mises Institute

Posted by M. C. on July 6, 2019

Moving from one crime family to another.

https://mises.org/power-market/christine-lagardes-move-imf-ecb-bad-europe

Tho Bishop

Earlier today, the internet was aflutter with rumors that we were on the verge of an international crisis following schedule changes involving Russian President Vladamir Putin and Vice President Mike Pence. While it appears there two events were unrelated, a different sort of tragedy struck the international stage hours later when it was announced that Christine Lagarde had been named the new head of the European Central Bank.

Joining the ECB after a lengthy stint as head of the IMF, Lagarde certainly has the resume to be the next “great” central banker. Unfortunately, she has a record of folly which we’ve come to expect from such a title.

In the words of our friend Mike Shedlock, “It’s rare to find someone who is consistently wrong on everything. Christine Lagarde…comes close”

A conventional policymaker that fears deflation most of all, Lagarde has been a high profile defender of the negative interest rate policies we’ve seen doing damage in Europe and Japan. Her selection is being widely seen as an endorsement for continuing the policies of the outgoing Mario Draghi at a time when the ECB desperately needed a hawk to help defuse their trillion-Euro time bomb.

As Daniel Lacalle put it:

Read more: The ECB Continues to Incentivize Reckless Behavior by Daniel Lacalle

Earlier this year, Alasdair Macleod outlined the damage being done by the policies Lagarde is expected to continue.

Pumping yet more credit into the Eurozone is as effective as giving adrenalin to a dead horse. Lack of credit is not the problem. Put simply, there is a global momentum of economic contraction evolving, which any business and lending banker would be foolish to ignore. There is a developing crisis, the consequence of earlier monetary inflation in the credit cycle. Economic actors may not understand the origins of the crisis, but we can be certain they are becoming acutely aware of its looming presence. And as the crisis rapidly develops, those that require additional loans will already be insolvent.

The signal sent by the ECB to lending-bankers is likely to be misinterpreted when credit contraction is the looming threat: if TLRTO-III is the smoke, there must be a fire, possibly out of control. Better surely to call in existing loans to businesses rather than waiting to be repaid from profits unlikely to materialise. An encouragement to lend early in the credit cycle is more effective and less likely to be misunderstood than a similar encouragement later in the credit cycle. This is why a renewed TLTRO policy will almost certainly fail.

The inability of bureaucrats, with their heads buried in spreadsheets, to appreciate the role of human psychology is not the ECB’s only failing. Its executives do not even understand what interest rates represent, thinking it is simply the price of money. This is why it believes in keeping interest rates suppressed as a means of increasing credit. Earlier in the credit cycle, rate suppression does generate some credit expansion, mainly in financial rather than non-financial activities, because lower interest rates lead to higher prices for financial assets. That is basically a spreadsheet, almost non-human function. Large industrial corporations are opportunist, borrowing to fund buy-backs and to take over weaker rivals. Smaller and medium-sized business borrowers are usually offered credit only later in the cycle, when it is a mistake to accept it.

Consequently, in a zombie economy, such as that of the Eurozone, the only borrowers are wealth-destroying, socialising, debt-entrapped governments, taking full advantage of the Basel accords, which rates them for lending banks’ purposes as riskless borrowers…

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Printing Press - HISTORY

 

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IMF’s Christine Lagarde Wins EU Support to Lead European Central Bank

Posted by M. C. on July 3, 2019

In 2016, a French court found her guilty of committing negligence in 2008 when she was finance minister in the cabinet of former President Nicolas Sarkozy. The judge didn’t hand down a punishment, saying the ruling took into context the role Ms. Lagarde played in crafting France’s response to the global financial crisis. The IMF backed her, as did the French government.

Pro inflation and fiat money. Her middle name is ‘one world government’.

Her other face looks like George Soros.

The status quo will be safe. Don’t know about the citizenry that pays the bills.

https://www.wsj.com/articles/imfs-christine-lagarde-wins-eu-support-to-lead-european-central-bank-11562087529

By

Valentina Pop and
Brian Blackstone

BRUSSELS—International Monetary Fund chief Christine Lagarde is likely to become the first woman to run the European Central Bank, putting an experienced crisis fighter in charge and paving the way for a continuation of easy-money policies.

Ms. Lagarde also would be the institution’s first president without a pedigree in central banking. That has raised doubts about whether she would command the same credibility in financial markets as current chief Mario Draghi, who emerged as a dominant figure in the global economy during his nearly eight years at the ECB.

Her nomination comes as central bankers face challenges on a number of fronts. Inflation has weakened below target in many developed economies including the eurozone, while trade conflicts have crimped economic growth. But central bank rates are already super low or—in the case of Europe and Japan—negative, which spurs lending by reducing borrowing costs and making it unattractive to hold deposits…

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mark of the beast

The Mark of the Beast

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Assange Arrested, Brexit Squashed – Just Another Day in the Empire – Gold Goats ‘n Guns

Posted by M. C. on April 16, 2019

https://tomluongo.me/2019/04/12/assange-arrested-brexit-squashed-just-another-day-in-the-empire/

And down goes Julian Assange, right beside Brexit. If there was ever any doubt that The Powers That Be are unrelenting in their cruelty just look at the 24 hours starting on Wednesday.

First Theresa “The Snake Oil Lady” May kicks 17.4 million voters into the weeds.

And then she oversees the arrest and judging of Wikileaks founder Julian Assange.

The timing of this is important beyond dovetailing it with her Brexit betrayal. They had to go after Assange now, because Theresa May’s time in office is ending.

A Jeremy Corbyn-led government would not grant the U.S. it’s prize.

Corbyn, for all of his faults, would be a breath of fresh air in the unraveling of the ‘special relationship’ between the U.S. and U.K. in foreign policy for as long as he lasted in office.

Still think Theresa works for anyone other than her owners?…

But nothing surprises me about the evil of Theresa May anymore. Read the rest of this entry »

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Australia Inserting Nano-Chips in $50 & $100 Bills to Track Underground Economy & Coming Barter System | Armstrong Economics

Posted by M. C. on January 4, 2019

The IMF is advocating the end of paper money to kill the underground or black economy solely to aid the hunt for taxes and to PREVENT bank runs. If there is no paper money, how can you run to the bank in a panic demanding to withdraw your money? 

https://www.armstrongeconomics.com/armstrongeconomics101/economics/australia-inserting-nano-chips-in-50-100-bills-to-track-underground-economy-coming-barter-system/

by Martin Armstrong

While the BitCoin people have hated me for not agreeing with them that a private currency could displace the currencies of all nations and BitCoin would be the new “reserve currency” killing the dollar, to me they are in serious need of help. They have ZERO comprehension of governmental power and ZERO understanding of what is going on behind the curtain. The IMF has come out and stated that each nation should issue their own cryptocurrency and these fools cheers claiming I am not with it and do not get this new age of technology. Sorry, but these people are really clueless if not perhaps undercover people with a mission to get people willing to surrender their final liberty – paper money.

While cryptobugs advocate gold is dead and BitCoin will conquer the financial world, they miss the point entirely. The IMF is by no means embracing cryptocurrencies for the same reason these people have claimed it will bypass central banks. The IMF is advocating the end of paper money to kill the underground or black economy solely to aid the hunt for taxes and to PREVENT bank runs. If there is no paper money, how can you run to the bank in a panic demanding to withdraw your money? They also argue eliminating paper money will end crime… Read the rest of this entry »

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The Myth of Western Democracy – PaulCraigRoberts.org

Posted by M. C. on December 18, 2018

The question before us is whether the Western peoples are too brainwashed, too firmly locked in The Matrix, to exhausted to stand up and defend their freedom.

https://www.paulcraigroberts.org/2018/12/16/the-myth-of-western-democracy/

Paul Craig Roberts

How does the West get away with its pretense of being an alliance of great democracies in which government is the servant of the people?

Nowhere in the West, except possibly Hungary and Austria, does government serve the people.

Who do the Western governments serve? Washington serves Israel, the military/security complex, Wall Street, the big banks, and the fossil fuel corporations.

The entirety of the rest of the West serves Washington.

Nowhere in the West do the people count. The American working class, betrayed by the Democrats who sent their jobs to Asia, elected Donald Trump and the American people were promptly dismissed by the Democratic candidate Hillary Clinton as “the Trump deplorables.”

The Democrats, like the Republicans, serve power, not the people.

In Europe we see the squashing of democracy everywhere.

British prime minister May has turned Brexit into subservience to the EU. She has betrayed the British people and has not yet been hung off of a lamp post, which shows how acceptance the British people are of betrayal. The British people have learned that they do not count. They are as a nothing.

The Greeks voted for a leftwing government that promised to protect them from the EU, IMF, and big banks, but promptly sold them out with austerity agreements that destroyed what remained of Greek sovereignty and Greek living standards. Today the EU has reduced Greece to a Third World country.

The French have been in the streets in revolt for weeks against the French president who serves everyone except the French people…

The question before us is whether the Western peoples are too brainwashed, too firmly locked in The Matrix, to exhausted to stand up and defend their freedom. Resistance is happening in France and Belgium, but the government that sold out Greece hasn’t been hung off of lamp posts. Americans are so brainwashed that they think Russia, China, Iran, Syria, North Korea, and Venezuela are their enemies when it is perfectly clear that their Enemy is “their” government in Washington.

Except for my American readers, Americans are locked in The Matrix. And they will kill in order to stay in The Matrix, where the controlled explanations are reassuring. Anyone who looks to Washington for leadership is an idiot.

Washington is a master of propaganda. Washington’s propaganda has even infected the Russian government, which from all reports stupidly believes that accommodation to Washington is the secret that will make Russia successful.

It is a foolish government that relies on agreements with Washington.

What it comes down to is this: If acceptance of provocations avoids war, that is the correct policy, but if acceptance of provocations encourages more provocations until war is unavoidable, then a more robust response to provocations is the correct policy. A more robust response introduces caution into the process, whereas acceptance of provocations encourages the aggressor.

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sheeple

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More Loot for Hillary – LewRockwell

Posted by M. C. on July 14, 2017

https://lewrockwell.com/2017/07/no_author/more-loot-for-hillary/

chelsea

It appears that the Pinchuks and their Ukrainian allies were interested in Hillary Clinton’s victory in the 2016 presidential run given their longstanding and close collaboration.

However, that is not all.

Cyberberkut assumes that the funds given to the Clinton Foundation by Pinchuk could have originated from vanished IMF loans allocated for Ukraine. Read the rest of this entry »

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After Destroying Cambodia, the U.S. Wants the Country to Repay It For The Bombs They Dropped

Posted by M. C. on March 16, 2017

http://theantimedia.org/cambodia-us-repay-bombs-dropped/?_sm_byp=iVVJR033P2sp1jNF

While the U.S. was backing the Lon Nol government, it was also strafing the Cambodian countryside with bombs—a carpet-bombing campaign that would eventually see over 500,000 tons of explosives dropped on the small Asian country, killing hundreds of thousands of civilians and leaving a legacy of unexploded ordnances.

“[The U.S.] dropped bombs on our heads and then they ask us to repay. When we do not repay, they tell the IMF [International Monetary Fund] not to lend us money,” Hun Sen said at an Asia-Pacific regional conference earlier this month.

“At the same time the U.S. was giving weapons to Lon Nol, it was bombing the Cambodian countryside into oblivion and creating millions of refugees fleeing into Phnom Penh and destroying all political fabric and civil life in the country,” former Australian ambassador to Cambodia Tony Kevin told Australia’s ABC.

“And all of this was simply to stop the supplies coming down to South Vietnam, as it was then, from the north,” Kevin added. “So the United States created a desert in Cambodia in those years, and Americans know this.”

Hun Sen has argued that the U.S. has no right to demand repayment of its “blood-stained” funds.

“Cambodia does not owe even a brass farthing to the U.S. for help in destroying its people, its wild animals, its rice fields, and forest cover,” wrote former Reuters correspondent James Pringle for The Cambodia Daily.

In fact, during his tenure as prime minister Hun Sen has asked the U.S. to drop the “dirty debt” several times, but American leaders have refused.

“[The] U.S. would not drop it. It would have been so easy to forgive the repayment, it would have been easy to refinance it for education like they did in Vietnam,” the reporter Elizabeth Becker, who covered the Cambodian genocide in the 1970s, told Al Jazeera.

“The U.S. intervention in Cambodia was easily the most controversial that we had in that era,” Becker said. “[The U.S.] dragged Cambodia into the Vietnam War for hopes that by expanding it they could win, the complications now are that even 50 years later, the Khmer Rouge legacy is horrible.”

“The U.S. owes Cambodia much more in war debts that can be repaid in cash,” Becker argued to The Cambodia Daily.

by Nika Knight / Creative Commons / Common Dreams / Report a typo

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Is the European Debt Crisis Designed to Create a One World Currency?

Posted by M. C. on April 15, 2012

This analysis in The Daily Bell indicates this is the case.  I am sure the movers and shakers of the New World Order want a single currency. I don’t think the current opportunity is so much the result of a master plan but a by-product of decades Keynesian thinking.  None-the-less the central banksters and central planners are taking advantage of the disaster they have wrought.  The end result for all of us may be unwittingly played out by Greece.  The Cloward-Piven strategy.  A domestic socialist takeover plan on an international scale. Read the rest of this entry »

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