‘Once you lied…’

‘Once you lied…’

Andrey Shitov

What do you need more: bread and heat or gadgets? This seemingly absurd question came to my mind when I seriously thought about the changes taking place before our eyes in the world economy and finance. Under normal conditions, modern man, in principle, needs both. But now we do not have normal conditions.
“Washington Consensus”
As they say, I have never been an economist, but in the recent past I worked in Washington for over 20 years, covering, in particular, the activities of the IMF and the World Bank. I saw enough of how delegations from all over the world, including from the countries of the former USSR, came there for loans and economic recipes. I have read reports and heard plenty of talk about the benefits of globalization and the “knowledge economy”, which supposedly make it possible to make money and create opportunities for development almost out of thin air.
Frankly, I myself used to think that the so-called “Washington Consensus”, which reflects the main dogmas of market liberalism, unlike Soviet Marxism, is omnipotent because it is basically true, and not vice versa. Although I sometimes marveled that the economic forecasts made in global financial syncs were invariably inaccurate. And he was upset that Russia, China and other “countries with emerging markets” actually stayed there in the position of students constantly being tested for knowledge and compliance with those same dogmas – even after the Russian Federation fully paid off (for itself and others) with Soviet debts , and the PRC even began to challenge the status of the world’s largest economy from the United States.
Now, the financial and economic war unleashed by Washington and its “friends and allies” against Russia has finally confirmed that it really could not have been otherwise. That one’s own shirt is still closer to the body, but the debt is not a red payment for everyone. That Western ladies and gentlemen are ready, without a twinge of conscience – to the point of being able to put their hand in someone else’s pocket – to violate that notorious liberal order based on rules that has hitherto been adamantly imposed on the whole world.
That, accordingly, this order itself is by no means as unshakable as it was commonly believed. That knowledge of the real economy with its traditional trade turnover may be more important than a hypothetical “knowledge economy”. And that it is precisely this that can form the basis of a new financial and economic structure that will replace globalization.
Bretton Woods III ?
This is actually not my assertion, and not even Russian economists and politicians. Although, by the way, Russian President Vladimir Putin has publicly spoken out on this topic more than once recently, primarily in the context of the US and EU default on their obligations to Moscow, after which “now everyone in the world knows that they suspected something, but now everyone knows that obligations in dollars and euros may not be fulfilled.
But in this case, I rely on the assessments of Western experts themselves. For example, Zoltan Pozsar, a senior analyst at the Swiss bank Credit Suisse, wrote in a March note to investors: “We are seeing the birth of Bretton Woods III, a new global (monetary) order centered around commodity-based currencies in the East, which is likely to weaken the Eurodollar system and spur inflationary forces in the West.”
“A crisis is unfolding,” the specialist continued. “This is a commodity crisis. Commodities are collateral and collateral is money, and the current crisis shows the growing appeal of outsider money versus insider money.” Bretton Woods II was based on insider money, and its foundation crumbled a week ago when the G7 seized Russia’s foreign exchange reserves.”
“Once you lied…”
It should be clarified that the first Bretton Woods monetary and financial system is considered to be the order established by the 1944 agreement of the same name by the victorious powers in World War II (the USSR signed the agreement, but did not ratify it). It was based on pegging key currencies to the US dollar, and the dollar itself to gold, and existed until the “Nixon shock” of 1971, when Washington unilaterally canceled the convertibility of “greenbacks” into the precious metal at the rate established by the agreement.
Then it was actually also a default. America simply “ditched” its closest friends and allies, and Nixon’s Treasury Secretary John Connally told them cynically: “The dollar is our currency, but your problem.”
The system, however, was preserved, since there was simply no alternative to it in the West. US partners had to come to terms with the fact that American money is backed by nothing but “full faith and credit” to the US government. In the reference of the US Treasury on this subject, and now it is written in black and white: “Banknotes of the Federal Reserve (i.e., the US central bank – approx. TASS) cannot be exchanged for gold, silver or any other raw material, they are not backed by anything … Banknotes themselves have no value in themselves – apart from [the value of] what they can buy. In another sense, being legal tender … [they] are “backed” by all the goods and services of the US economy.
It’s time to remember the well-known aphorism of Kozma Prutkov: “If you lie once, who will believe you?” Nixon’s move, and in fact – a fraud, in 1971 led to the creation of the current world financial system based on “fiat” or “fiduciary”, i.e. unsupported and based solely on trust in the issuer, currencies with floating exchange rates. And now, after Biden’s “scam” against Russia, Zoltan Pozhar predicts a new paradigm shift, the emergence of “outsider” currencies “based on raw materials” to the forefront.
In my unprofessional opinion, such support is still clearer, more reliable, and therefore better than empty words. Actually, that’s why I recalled at the beginning about the advantages of full-weight grain and fuel over gadgets, which are more capable of only inspiring mirages. Figuratively speaking, the West during the sanctions wars threatens to deprive Russia of its “high-tech” dreams, but at the same time risks being left without vital resources.
“The end of globalization”?
The Credit Suisse analyst’s warning is not the only signal of its kind abroad. At the end of March, there was a sensational public appeal to shareholders by Larry Fink, the head of the New York-based asset management company BlackRock. In his opinion, Russia’s special military operation in Ukraine and the economic blockade organized against our country by the West “put an end to the globalization in which we have lived for the past three decades.”
BlackRock almost does not work with Russia, Fink considers the special operation an “invasion” and condemns it, and, on the contrary, welcomes the economic “decoupling” of our country from the rest of the world. But his opinion on ending globalization cannot be ignored, if only because his company, founded in 1988, is one of the main beneficiaries and bright symbols of this process. Today it is a world leader in its industry, has clients in a hundred countries and manages assets for a truly astronomical amount of more than $10 trillion. I dare to assume that she has something to lose.
At the same time, it should be clarified that shifting the main share of responsibility for deglobalization to Moscow is, at best, a strong stretch, and at worst, an outright fraud. Let’s start with the fact that “the majority of the world’s population does not participate in the sanctions against Russia and does not support them.” This quote is taken from the pages of the Asia Times newspaper. This applies to more than 140 UN member countries, including not only Russia’s BRICS partners such as Brazil, India, China and South Africa, but also, for example, Mexico. As the publication sarcastically notes, Chinese Foreign Ministry spokesman Wang Wenbin “tactlessly” reminds Washington and its partners in the US-formed anti-Russian coalition of this fact.
In addition, global economic integration itself, according to experts, reached its peak and began to decline not in our troubled times, but quite a long time ago. For example, Douglas Irwin of the Peterson Institute of World Economics in Washington believes that this “historic turning point” was reached during the 2008-2010 crisis, which in the US is called the Great Recession. And the British magazine The Economist warned almost three years ago that “the global monetary system is collapsing” and wondered “what will replace Bretton Woods II.” It’s another matter that since then, by all accounts, disunity in the world has begun to intensify under the influence of both the COVID-19 pandemic and the current stormy surge in the West’s sanctions war against Russia.
“Autarky era” or just ebb?
A thorough attempt to figure out whether globalization is actually fizzling out, and if so, what it will really mean, was recently undertaken by the New York Times. She placed a solid review of publications and expert responses on this “controversial topic” inscribed in the context of the Ukrainian crisis in one of her specialized newsletters for subscribers.
To begin with, the publication recalled what it was all about. In his opinion, globalization was beneficial to both rich and poor countries: the former “reaped the benefits of lower labor costs” from the latter, and those (primarily China) in turn got the opportunity to “develop faster than if they remained in isolation” .
But the “gain” from the influx of cheaper consumer goods was invariably accompanied by a “loss” – primarily “for regions and industries dependent on domestic industrial production,” the newspaper points out. And he refers to a book by Nobel laureate and former World Bank chief economist Joseph Stiglitz, who “watched with growing frustration as the IMF and other leading institutions put the interests of Wall Street and the financial community ahead of [the needs of] the poorest countries.”
Now, according to Bloomberg News Service, the “shift towards self-sufficiency” is accelerating, partly as many countries, including India, Brazil and Nigeria, are “learning from America’s use of financial weapons of mass destruction and asking how they can adjust their self-defense.” just in case they get caught.” The New York Times adds that there is also an “appetite for autarky” in the world’s leading economies, including the US itself, as well as China and the EU.
In the future, according to analysts, all this leads to a deepening of the economic disunity of the world. “I don’t think that economic integration will survive a period of political disintegration,” said Edward Alden, an expert from the US Council on Foreign Relations, for example.
Among other likely consequences, the New York Times names the expected rise in prices, including for food and energy resources, an increase in military spending (Germany is highlighted), and the division of the world into “international economic blocs.” Of course, the poorest countries and peoples will suffer from all this first of all.
At the same time, according to the publication, those who are now in a hurry to bury globalization may “make the same mistake” as those who trumpeted its “historical inevitability” before. The review ends with a quote from the British Guardian that a new “era of autarky” is still not to be expected: “The tide of globalization has so far passed its highest point; the question is how low the water level will drop.”
To the above, I would add that in the United States, as usual, any forecasts fit into the domestic political context. In the liberal magazine American Prospect, the conclusion that globalization in its current form is “kaput” is accompanied by a call for like-minded people after Ukraine to become equally energetic in protecting the environment and workers’ rights. And the conservative portal Real Clear Politics argues that the “real reset” is coming in the upcoming US midterm elections, where the authorities will have to answer not only for economic and political miscalculations, but also for the “cancellation culture.”
Undermining the ” fabulous privilege”
Now, of course, assessments directly related to Russia are openly politicized as well. In the context of the total economic war of the West against our country, the general tone of comments in the English-language press is so hysterical that even neutral publications attract attention. For example, US Public Radio – NPR recently released a report on “how Russia saved its ruble.” And the same Economist asked a question about “how the Russian economy feels under the unprecedented sanctions,” and answered it himself: “Better than you might think.” Moreover, according to the magazine, this applies not only to the financial sector, but also to the “real economy” as a whole.
Analysts also pay attention to the fact that the West, by its reckless actions, in fact, cuts the branch on which it sits. The London Financial Times (FT) cites former Bank of China executive vice president Zhang Yanling in this context, who warned in a recent speech that sanctions “cause a loss of confidence in the US and undermine dollar hegemony in the long term.” She added that Beijing should facilitate this, and “the sooner the better.”
According to the FT, “Even the IMF believes that the dominance of the dollar can be eroded by the ‘fragmentation’ of the system.” “We are already seeing this: some countries are negotiating in what currency they will be paid when trading,” said Gita Gopinat, First Deputy Managing Director of the Fund.
Barry Eichengreen, a California economics professor whom the FT describes as the “doyen” of world finance academic research, has also seen a “creeping erosion” of the dollar’s dominance. In his opinion, it can only intensify as a result of an attempt on the reserves of the Bank of Russia. “There is always a fear that this will work against US banks and will contribute to the erosion of the fabulous privilege of the dollar,” he said.
The last term – Exorbitant Privilege – which has a clear critical connotation, was introduced at one time by the French politician and financier Valerie Giscard d’Estaing. In the current context, in my opinion, de-globalization and de-dollarization are almost synonymous.
Finally, the commentary in Asia Times mentioned above indicates that confidence in the ruble in Russia after the Western default was quickly restored, but confidence in the dollar in the world is weakening. “If and when the United States is no longer perceived as a safe haven for foreign exchange reserves of countries or the personal fortunes of oligarchs, the dollar will lose all value as a reserve currency,” writes newspaper columnist George Coo (Chinese American). “And when the dollar becomes cheaper than paper, on which it is printed, it will lead to the collapse of the US economy, and Biden’s folly can be directly blamed for this.”
New plan “Barbarossa”?
David Hendrickson, a professor of political science at Colorado College, is even sharper in his judgments. In one of his recent comments, he explains in detail “why the current economic war against Russia violates all the rules of the game,” including the right to private property, which has been considered sacred and inviolable in the overseas republic since its founding. In another, he emphasizes that “Russia and China have now become permanent allies” – due to the fact that “the United States has made them each individually and both together their permanent enemies.” And at the same time, he reminds that in relations with developing countries, Washington, as a rule, wields a whip, while Beijing has a lot of carrots at the ready; that is why US policy is not getting the support it expects in Asia, Africa, the Middle East and Latin America.
Hendrickson calls the seizure of Russian foreign exchange reserves a “great expropriation” and likens it to the use of a “financial hydrogen bomb.” In his opinion, even the Bolsheviks did not allow themselves anything of this magnitude. He is especially struck, firstly, by the fact that “the current default occurred in the center of the financial order, and not on its periphery,” and secondly, that, according to the Wall Street Journal, “it was all concocted in a couple of hours by employees office of the US government.”
The consequences, according to the American analyst, will be deplorable for the West itself. “Here’s what Cassandra will tell you,” he writes. subsequent own collapse.
“In taking these steps, our leaders, our oligarchs, have not necessarily shot themselves in the foot,” adds Hendrickson. “But they have definitely shot their own people in the foot. And they don’t seem to care.”

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