MGIMO Economics Professor: NIRP is Imploding Western Banking and Pension Systems, Russians Won't Accept the Cashless Society

In recent months the Russia Analyst has noticed a trend -- call it the 'teeter totter' of Russian action, which we've named in honor of the famous bond yield versus price seesaw that every wannabe stockbroker studying for the Series 7 exam learns. Whenever Russia is taking decisive military action as with its intervention to secure the reunification with Crimea or to help the legitimate Syrian government beat back the jihadists of Al Nusra and the Islamic State, Moscow's financial moves tend to receive far less press and are made quietly.

However, when the diplomatic and military fronts seem to cool off, the Russian financial 'front' heats up -- with the carefully coordinated December 2014 attack on the ruble and the oil price, which the Russian Central Bank adopted Paul Volcker-esque interest rate hikes to fight, as the most glaring example (see our essay from that month, "Russians Must Break Ties with the Dollar Before the Dollar Breaks Russia", or as the Guerrilla Economist would say, "de-dollarize or die!"). 

The Teeter-Totter of Russian Action Under Putin:
Veering from Military to Economic Reforms and Back Again

When the battle fronts of the Donbass and Syria aren't getting all the attention, we suddenly hear more (at least in the Russian and alternative or more accurately the real media) about Russian financial moves in concert with those of allies like China and Iran to dump the dollar and establish financial centers and trade deals that bypass the dying greenback. This trend is part of a long-term strategy assembled in Beijing as well as Russia's push back against what its nationalistic elites correctly perceive as a hybrid war waged by Washington's 'money masters' to destabilize Eurasia and any competing center of economic growth.

Perhaps the most famous example in Western countries of a Russian economist who believes his country must find a way to fight back and become more self-sufficient in terms of raising capital is Sergey Glazyev. Thanks to the efforts of Glazyev's friend of two-decades the American economist, former presidential candidate and philosopher Lyndon LaRouche and the LaRouche movement which includes RogueMoney friend Harley Schlanger, Glazyev's writings have reached a non-Russian speaking global audience. Below, you can watch a video from a Schiller Institute conference "U.S. Must Join the New Silk Road" held on December 7th, 2014 in Boston, Massachusetts in which a speaker reads out Putin adviser Sergey Glazyev's greetings to conference participants:

Sergey Glazyev vs. Elvira Nabiullinia, the Female Russian Paul Volcker

It was the LaRouche movement's multi-national think tank the Schiller Institute that published an English translation of Glazyev's turn of the millenium book, Genocide: Russia and the New World Order. While 'genocide' may strike some Westerners as hyperbole to describe what Russians experienced after the collapse of the Soviet Union, what is indisputable is that Russian life expectancy and mortality statistics for both infants and adults experienced their sharpest decline in the 1990s since the Second World War which claimed the lives of over 22 million Soviet citizens. Or as Glazyev himself put it, in alleging that the depopulation and economic dismemberment of Russia was carried out by design, "The rate of annual population loss has been more than double the rate of loss during the period of Stalinist repression and mass famine in the first half of the 1930s.... There has been nothing like this in the thousand-year history of Russia."

Glazyev, as seen in the video above of him speaking at the Moscow Economic Forum in 2013, has consistently championed the re-industrialization of Russia, which lost much of its productive industry with the collapse of the Soviet Union. In particular, Glazyev has long argued that the Western neo-liberal model is to turn countries like Russia (or Brazil, or South Africa) into raw materials exporters or sources of cheap labor (Mexico) while undermining their ability to maintain any domestic industry and therefore, any insulation from both deliberate commodity price manipulations and market crashes brought on by overproduction (aka oil gluts like what the world is experiencing today).

It should be noted here that just because we agree with much of what Glazyev says about Russia's grossly inadequate preparation for a protracted economic siege and his criticisms of a pro-Western banker '5th column' in Moscow, doesn't mean we agree with everything Glazyev says. For example, it would seem that Glazyev and some critics of the Russian Establishment were too hasty in their judgement that Russian Central Bank chairwoman Elvira Sakhipzadovna Nabiullinia had failed to stabilize the ruble after the Russian currency came under attack in December 2014.

As Team Rogue Money's Ken Shortgen Jr. wrote on March 9, International Women's Day, Nabiullinia's decisive rate hike to 17 percent stopped the rampant Western-manipulated speculation in the ruble. As a result, despite collapsing commodity prices that have hammered petro/commodity currencies from Canada to Norway (we mention these distinct countries because The Wall Street Journal and company can't blame their economic woes on 'systemic corruption' or 'Putinism'), the ruble has enjoyed a modest recovery alongside oil prices. This in turn has given Moscow a respite from Soros-esque if not Soros directed assaults on the ruble. 

However, there's what works over the short term, including Nabiullinia's borrowing a page from President Ronald Reagan's former Fed Chairman Paul Volcker and his rate hike playbook for stopping runaway bets against the ruble, and then there's what may work over the long haul. Which will include a period of radical economic adjustment for the whole planet, also known as the Global Economic Reset (GER). If Russia has not yet had much less completed a debate on where its elites and people go from here, at least its economists can agree on what the West is doing that they MUST NOT do.

The Debate: Where Does Russia Go From Here?

The cargo cult of Western neo-liberalism, whereby whatever Washington, London or Brussels are doing must be aped by Moscow died along with the credibility of the 'reformers' Yegor Gaidar, Anatoly Chubais and Grigory Yavlinsky during the 1990s. What was left was for Vladimir Putin and his team was to assemble a group of both liberals and economic nationalists during the 2000s that picked up the pieces and made Russia a rapidly developing market economy with a newly emergent middle class, albeit one buoyed by high oil prices. That Putin's coalition included both hardline nationalists, who sought more money for 'guns' to rebuild Russia's then decrepit armed forces, and more liberal economists like Alexei Kudrin who sought more 'butter' in the budget or less government spending altogether, was an unwieldy consequence of the 'truce' struck between the Kremlin and the oligarchs after 2003.

According to this compromise among the Moscow elites, with the exception of Mikhail Khodorkovsky and a few others, Russia's oligarchic clans were permitted to keep their ill-gotten gains from the (Western banking cartel planned) looting of the country, in return for mostly staying out of politics and letting Putin pursue his agenda for reconstructing Russian institutions. That Russia has succeeded in rebuilding its military might to a great extent has been showcased by the intervention in Syria -- though Moscow is by no means attempting to rebuild its military on the old Soviet scale which was enormous and drained the USSR's economy until it collapsed. Other institutions, such as the  judiciary or regulatory bureaucracy, are taking much longer to clean up, and there are serious concerns even among Putin fans that the system might not be ready for an orderly succession once Vladimir Vladimirovich retires.

With expensive oil unlikely to return anytime soon to save the day and state budgets strained by reduced trade with Europe due to sanctions and (contrary to the Western media myths of growth) the G7 economies' ongoing implosion, economists like Sergey Glazyev argue that radical steps are necessary. Including those that Glazyev himself suggests may smack of socialism, or which will be dismissed by his critics among the West's darlings at the New Economic School and other centers of neo-liberalism in Moscow as statist attempts to return to the recent Soviet past. 

NIRP is What Russia Must NOT Do:
Cheap Loans for Russian Industry and Entrepreneurs YES, Negative Interest Rates NO

Nonetheless, just because many patriotic Russian economists would agree on what not do and whom NOT to listen to -- basically anyone still in thrall to the so-called 'Washington Consensus' or those who imagine Russia can go back to the old model of merely being an exporter of raw materials and an importer of Western consumer goods, technologies and ideologies-- doesn't mean they can all agree on Moscow's best path forward.

An example of this disagreement among the patriotic Russian economists is Sergey Glazyev's recent remarks reproduced here at Rogue Money by our very own Bankster Slayer on April 26, 2016. In her article drawing from a post at, Deb Caruthers quotes Glazyev as saying:

...the ideology of social-Christianity corresponds perfectly to the sixth technological level, the knowledge society, where profit doesn’t play a major role, and prices correspond to demand. In this ‘new economy’ the manufacturer sells to the rich at triple the price and gives to the poor for free, combining the Orthodox [Christian] and socialist doctrines.  

The western world has adopted negative interest rates. This is perfectly compatible with both Orthodoxy and socialism. [emphasis added by JWS] But Russia’s high interest rate economic policy is archaic and makes our situation worse.

That the world is crying out for prices based on actual supply and demand rather than pernicious central bank-enabled paper manipulation of commodities such as oil, gold and silver is hardly controversial among those of us familiar with the massive, unraveling fraud in these markets. That the global economy is also moving towards a 'knowledge' rather than raw material based society, meaning that Russia can no longer rely on her world-leading reserves of oil and gas to carry the economy, is also not controversial. Even the Russian liberals who promote something called a 'post-industrial' economy and Prime Minister Dmitry Medvedev, who promoted the showcase Skolkovo technology park outside Moscow and was nicknamed 'iPhone-chik' for his love of gadgets, 1990s A-list Hollywood stars and Silicon Valley, have accepted that raw materials export without value added industries aren't the future. 

That high interest rates taken straight out of the early 1980s inflation-fighting playbook of Paul Volcker can choke off borrowing, investment and household spending, creating a major economic cost to the clampdown on currency speculation, is also indisputable. Not very many Americans were willing to take out mortgages when the rate was around 18% in the stagflation-ary early 1980s, and even fewer Russians are willing to take on mortgages on apartments or houses while paying their banks interest rates of 25% or more (to partially make up for this, Russian government programs in recent years have subsidized housing for members of the military or police forces, creating new housing starts in places like Crimea where they might not otherwise exist). Where Glazyev faces some disagreement with his ideas is from more traditionally minded but nonetheless nationalistic economists who regard the adoption of Negative Interest Rate Policy (NIRP) as a death knell for the Western economies, rather than a sign of their progress towards some new 21st century economic model.


Meet Valentin Katasanov, MGIMO Professor and Critic of NIRP as the Fukushima-style Nuclear Meltdown of the Interlinked Western Banking, Bond Markets and Pensions

One of these Russian critics of NIRP is Valentin Katasanov, a chairman of the Russian Economics Society, editor in chief of the journal "Our Business", and a professor at the Moscow State Institute of International Relations, better known by its Russian acronym MGIMO. It is at the Russian Foreign Ministry-linked MGIMO that the next generation of Russian diplomats, security service/intelligence officers, and perhaps some of the military elite are educated. Thus when Prof. Katasanov speaks in condemnation not only of declining Western morality (like Glazyev) but also the imminent doom that NIRP spells for the solvency of banks and pension systems, the Russia Analyst stands up and takes notice.

Katasanov is not just another guy who publishes articles at Strategic or whose thoughts get picked up and translated into English by Ft. Russ, but a highly respected scholar who has the ear of the Foreign Ministry and thus, the Kremlin. Ft. Russ recently translated an interview with Katasanov, in which he discusses both NIRP and various EU economies' mad science experiment in technocratic social engineering via the cashless society:

Question from the editor: Recently The Wall Street Journal again sounded the theme of negative interest rates in Europe. Valentin Yuryevich, is this a new stage in this story?

Katasonov: The subject of negative interest seems to be old, but new stories emerge all the time.

Chronology of this story is approximately as follows: first, after the financial crisis of 2007-2009, Central banks of Denmark and Sweden introduced negative interest rates on deposits, then they were joined by Swiss Central Bank, ECB, Japan... Since February in the United States there is active debate whether the Fed should move into negative interest rates on deposits.

But then it turned out that the process has gone even further: negative interest rates are in effect on active operations of central banks – the so-called “base interest rates”. At least, the negative base rate have already been introduced in Sweden and Denmark.

This is a new phase. Negative interest rates captured the private banking sector: a number of commercial banks in Germany, Switzerland introduced negative interest rate on deposits.

The next phase is the emergence of a large number of debt securities with a negative yield. According to some data, in Europe today, a quarter of all debt securities traded on the market have a negative yield.

And finally, a story, published by the Wall Street Journal about Denmark. They found that some bank customers who received mortgage loans, no longer pay the banks. Moreover, banks are paying the customers. There is a negative interest on mortgage loans. And there are already quite a lot of such cases.

Similar cases, it appears, took place in Germany, starting in 2015. I believe, this is the last phase of the story with negative interest rate – that is, when credit will become negative.

After all, this is a theater of the absurd, surrealism. For several centuries formed the model which we call capitalism, and the cornerstone of this model is loan interest. Now everything is exactly the opposite. Even bankers and eminent economists are at a loss and can’t comprehend this phenomenon. Meanwhile, even Marx in the mid-twentieth [sic 19th - likely a translator’s error here - JWS] century talked about the fact that there is a tendency of the rate of profit to fall. However, Marx believed that interest will tend to zero, even he didn’t have the imagination to picture interest going into the negative.

But this story has another important aspect: if deposits have a negative interest, it triggers a flight from banks. And I see this trend of “going under the water” is accompanied by an active campaign to oust cash from circulation. And this is understandable: if there is no cash, then bank customers will have nowhere to escape.

Another interesting story in this regard: in January a well-known forum in Davos took place, where many meetings were held behind closed doors. And recently, finally, came reports about what was discussed behind closed doors - in particular, the issue of a negative interest. Surprisingly, most panelists didn’t mind to continue “going under water” (to set interest rates below zero). But how to do it, if bank clients start to run? So in parallel it is necessary to solve the issue of abolition, the displacement of cash which will probably be carried out in the next few years.


Katasanov Can See Where the EUrocrats and Technocrats Are Going With NIRP...
and It's a Very Dark Place that More of the Public Is Likely to Resist Worldwide

Katasanov goes on to say that a negative interest rate policy is completely unsustainable over any substantial period of time. This means that while the number of government issued securities paying negative interest rate rises from Japan to Sweden, the ability of pension and retirement funds like CALPERS to turn any kind of profit on previously 'safe' and in some cases government-mandated investments in these bonds is destroyed. Which makes the pension funds which are already straining under the weight of Baby Boomer retirements even more insolvent and likely to fail much faster than they would have been without NIRP. Which in turn, allows the technocrats to step in with their 'solution': electronic currency invented unlike paper fully ex-nihilo, out of nothing, and attached to biometric cards (which is the way station to, you guessed it RogueMoney readers -- implanted chips to buy or sell). These are drastic steps which the public would never accept without the alternative of millions who worked and saved for decades being left with destitute in their old age:

Europeans are already beginning to understand what is happening. Pensioners, for example, are beginning to protest against it – but not only and not so much because it is inconvenient to use plastic cards – they begin to realize that pension funds “will expire”. And this is just one example – after all, institutional investors work with debt securities, particularly state securities. If today a quarter of all debt securities in Europe went negative – how will pension funds, medical funds, insurance companies operate?

In short, this whole financial architecture will begin to crumble, to deteriorate. Capital will begin to melt, and soon only a puddle of water will remain from pension funds. In general, there are many consequences, and Europe is beginning to be wary, to think and resist...

— Ibid

The good news, according to Katasanov, is that a growing number of Europeans will reject the cashless society. Although Katasanov only explicitly mentions pensioners as a group that distrusts plastic, there are many others who would first try to opt out before fighting back if left with no other option. With every cash transaction getting taxed, the ability of Europeans to work odd jobs off the books when youth unemployment is officially above 20% or more would be hindered, leading to riots in places like Spain, Portugal, Greece or Italy. Even with the legalization and taxation of 'sex work' paid for using credit cards in many European countries from the Netherlands to perhaps Ukraine the large scale use of cash by still powerful organized crime in Italy and other EU countries would ensure plenty of support for a revolt from the underworld (we already see, for example, the old school Italian Mob fighting back against encroachments on its classical Sicilian and Naples turf by African drug dealers).

While Team Rogue Money's friend the Golden Jackass Jim Willie has joked that cocaine and hookers will save cash, the ability of various groups ranging from Muslim drug dealers to the Mob to Molotov cocktail throwing, hoodie wearing anarchists in Athens will likely ensure cash sticks around and the technocrats plans to finalize their tyrannical end game fall apart. In Germany the Bundesbank board member Carl-Ludwig Thiele has warned that the end of cash means the end of freedom. Coming from a German who is more than familiar with the darkest chapters of Germany's past, that warning ought to count for something -- but the technocrats never listen until the wolf of social unrest is at the door. Perhaps this is why the British euroskeptic tabloid Express is reporting about 'extremely worrying' civil unrest exercises being performed by combined EU gendarme forces this weekend.

In the conclusion to the Ft. Russ-published interview, Katasanov repeats an old Russian joke about how Russia's traditionally terrible roads were used by God to save the country from Napoleonic and Nazi invaders. In doing so, Katasanov suggests that not only Russians' distrust of banks and preference for keeping cash 'under the mattress', but also the sheer size of the country that makes it so much harder to 'wire' for a cashless system than the likes of Denmark or Luxembourg, will once more save the Continent from tyranny on the march. Instead of defeating Napoleon's masonic minions or Hitler's Nazis, Mother Russia's task in the early 21st century may be to defeat the globalist technocrats, using the weapons of honest weights and measures for gold and good ole' cash:

Europe is beginning to be wary, to think and resist. I must say that in Russia there are attempts to push us into a cashless paradise, there are lobbyists. However, there is a group of people (alas, small) who understand this and are trying to counteract.

But there are objective reasons, which will not allow to drive us into cashless heaven in the coming years: first, because the whole mother-Russia must be technically equipped, installing terminals everywhere and equipping merchants – and on Russia’s scale, it is still technically impossible.

At one time, they joked that “bad roads saved Russia”, but now the lack of necessary technical base, God willing, will save Russia from this ‘cashless paradise.’

— Ibid

You can pry paper rubles from Russians' cold dead hands...