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Glazyev: Even Very Large National Credit for Real Economy’s Productivity Is Not Inflationary

May 12, 2014 (EIRNS)—Russian Academician, presidential advisor, and Obama sanctions target Sergei Glazyev has a long interview today with rbcdaily.ru, a Russian financial newswire; even in Google.translate, the interview is interesting and important for Russia’s economic policy.

Glazyev says that Russia is in process of being "cut off from the dollar" not by him or its government, but by the United States and Britain. His 10-year-old proposals for a national payments system and for settling Russia’s trade in national currencies—not only with Asia, but with EU as well—now are urgent. He deflects questions seeking detail on how the government and Finance Ministry are taking his 15-point proposal for economic and financial reindustrialization and re-onshoring late last month, saying that all the proposals are part of a coherent policy shift which circumstance will force.

Glazyev clearly proposes Russia should impose foreign exchange controls to stop/reverse capital flight (estimated at over $200 billion since the financial warfare began, by financial warrior Mario Draghi). Glazyev says the Russian economy, to resume growth, needs long-term loans for the development of "complex" or advanced manufacturing productions; but, the domestic interest rate is higher than the rate of return in manufacturing industry. Therefore, the government must provide national credit: expand non-market mortgages, make credit extensions, including through the development banks.

The economist and political leader who brought Lyndon LaRouche to address the Duma makes his most striking comments when asked whether national credit will exacerbate inflation, now 7% in Russia.

"During the recovery of the Chinese economy," Glazyev says, "currency emission rates were exceptionally high. It was the same during the Japanese economic miracle. Today we have a ratio of credit to GDP of about 50% of our competitors — some 100% higher—200%. If currency issue is given away to banks for speculation, then comes inflation. If it is for refinancing of the real sector and investment in the modernization of scientific and technical potential, it is anti-inflationary."

Note that China’s currency emission since 2008 has indeed been well over $10 trillion, three times the Fed’s total; this has been ritually denounced by British economic writers as guaranteeing a global crash, Chinese hyperinflation, etc. Instead, high-speed rail corridors begin to span the globe.