The Process Has Started, the Main Thing Now Is Not to Interfere (Part 3)

NEW – June 20, 2022

Part 1 can be found here
Part 2 can be found here

“The ruble exchange rate is absolutely market-oriented.. it will continue to strengthen in July, but by the end of 2022 it will go down and return to the range of 70-75 rubles per dollar,” Gref said on the sidelines of SPIEF and added that this will be good for business and for the budget.

Without laying claim to anyone’s laurels, I suggest that we look at the topic a little wider and deeper, which no one can forbid us from doing.

To begin with, I would like to note that the modern world economy, made up according to Western patterns – is primarily an economy of expectations, in which market capitalisation is indirectly related to the real value of assets and even money in the accounts of an individual company, for example, a manufacturing company. That is, if a company has issued securities that are traded on the stock market under expert evaluation and further, under the expectation of production growth and under positive reporting, these securities grow spontaneously, then this means only a psychological pumping of the soap bubble and nothing more. And raising money through such a market mechanism is one of the ways for external players to take over someone else’s business in the event of such interest.

It is unnecessary to talk about commodity markets with their market prices for the future (futures) – this was actually originally invented for agriculture (for future crops), which at least has a rational logic, but when it spread to everything, it turned the market into a fiction like a casino.

Finally, when the form of commodity circulation “C-M-C” (the universal formula of capital) first turned into mass mediation through the form of “M-C-M” (buying goods exclusively for resale), and then separated into “M-M-M” (currency transactions, derivatives, etc.), the circle has closed and talking about the market rate of any currency has become familiar and fashionable, but completely detached from reality.

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Nevertheless, since, on the one hand, something is changing in the world, but, on the other hand, we are still living in the old monetarist paradigm, in the following reasoning I will most likely use a rather mixed argument, well, here it is. However, let’s see how it turns out, maybe I won’t.

Basics: for several weeks now, the ruble has been recognised as the strongest currency in the world and it continues to strengthen. In fact, this fact does not require any recognition from anyone, because it is obvious. To talk about the “absolutely market” rate is to say nothing at all. About the rate in relation to what? To the dying green paper, to which the ruble will fall by the end of the year? Isn’t that funny? In my opinion, it is not just ridiculous, but also goes far beyond common sense.

I’ll explain.

Yes, the US dollar is still the reserve currency and the dominant means of payment. Both functions have an obvious tendency to narrow the scope of application, but even so, the world has accumulated a huge amount of this currency, thousands of times larger than the real assets of America. This, and not Nixon’s formal cancellation of the gold guarantee, is the main criterion for the total emptiness of this “piece of paper”, which has only psychological content, which has great inertia and which is just now being subjected to unprecedented blows.

And now to the ruble, which is virtually growing against the dollar.

In fact, the ruble is growing relative to the void, which is much more accurate, so to talk about its exchange rate against the dollar – whether it is market or, moreover, “absolutely market” – I can only assess as an attempt to stay in the previous paradigm, where Russia is destined to play the role of an eternal raw material colony, and in fact – feverish nonsense, having zero meaning, which is excusable for sofa experts, but not for serious people in responsible positions. In positions of responsibility, it’s necessary to work for the good of the country, not for Uncle Sam.

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Moving on.

In general, the old formula of “gold security” of the currency of any, more or less, large economy is a totally outdated illusion, because no gold will be enough for this. It’s too late to talk about it today, because it’s pointless. However, there is a caveat: the world is already shouting that it can no longer exist under the control of empty candy wrappers, no matter how much inertia the human psyche has, clutching at illusions to the last. Decisions here should be made at a completely different level, by people with a completely different level and quality of the psyche, based not on illusions, but on real processes. And when at this level comes the understanding of the irreversibility of fundamental changes, only after that the process of awareness goes to the masses. This is already happening all over the world, and the task here is the same – not to interfere and not to fill the natural course of events with artificial constructs.

It’s very simple: hooked on the needle of empty candy wrappers, the global economy is out of control. Inflated by emptiness, soap bubbles began to burst naturally (waves of financial crises became more frequent), then the first blow was dealt to the fragile logistics web (pandemic), and now the next blow (anti-Russian sanctions). Everything snapped, but most importantly: it turned out that most of the technological foundations of modern civilisation revolve around the Russian economy, where not printing presses and virtual businesses are concentrated, but real production and not only raw materials, but also high-tech finished products, not to mention agriculture.

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Yes, of course, the sanctions have played a positive role in strengthening the ruble, because huge amounts of money have stopped being withdrawn from the country, staying and working in the country. But the main thing is different: the first step in the form of selling gas for rubles just spurred a psychological turn from illusions to reality. It turned out that the firmness of the ruble is provided by colossal material assets, where gold is only a drop in the bucket.

Conclusion: the Russian ruble, if left unimpeded and events are not forced, has taken its rightful place as the world’s strongest currency due to the enormous supply of Russian material assets – raw materials, minerals, mining and processing industries, high-tech industries, a surplus of all types of energy resources, a stable positive trade balance, a surplus budget, a low credit burden, and the status of the largest manufacturer of basic agricultural products, etc., etc., everyone can add to the list. And trying to reverse global changes with mantras about the “market rate” is like stopping a locomotive by putting an obstacle in the form of your own head under its wheels.

It should also be understood that reasoning about what is good for business and the budget based on exchange rate indicators is definitely yesterday, for which you should not cling, but make efforts to prepare for a new reality in which there is no place for virtual emptiness and illusions. Either you are psychologically enslaved to a monetarist paradigm that sells emptiness wholesale and retail, or you are involved in building a new world based on fair rules that take into account real values that can be touched with your hands. A third option is not given.

Aleksandr Dubrovsky

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