A Phantom Fund

I suppose that the finance minister surely knows that of the 6 trillion rubles thus received, 1 trillion was printed the day before yesterday by the CBR, given to the raw materials producers yesterday, and taken away from them today in purported taxes. He knows exactly that cash emissions and unsecured money must not be allowed to enter the domestic economy since that would only fuel inflation. But he fails to tell the public or the country's leadership the truth about the origin of this money. So he invents a nice fairy tale about concern for succeeding generations and comes up with some fantasy known as the Stabilization Fund.

Cash emissions are deposited into the Stabilization Fund, after which Finance Minister Alexei Kudrin says that it may not be spent on the domestic market. However, he fails to explain that this money is simply from cash emissions. He says that it should only be used to buy more foreign exchange from raw materials exporters to be invested in foreign debt paper - that is to say, to use once again to support the exchange rate of foreign currencies on the Russian market at twice or even triple their effective purchasing power.

Therefore, the rubles deposited at the Stabilization Fund are nothing but a phantom - money that does not exist in reality. Meanwhile, this is portrayed as a major success story of Russia's financial policy, pursued by the best finance minister of all time who has managed to save trillions of rubles "against a rainy day."

As a matter of fact, the aforementioned hat trick with the phantom fund can be used to raise any amount of rubles. For instance, print an amount of rubles that will make it possible to push the rate of the dollar to a preset level - e.g., 114 rubles per $1 (with a market rate of 14 rubles per $1). Then take 100 rubles from every 114 from forex sel- lers - i.e., raw materials expor-ters - as super-profit "windfall" taxes, send the same 4 trillion rubles (at a rate of 27-28 rubles per $1) to the budget and deposit the rest at the phantom Stabilization Fund. There will be 20 trillion rubles there while the artificial exchange rate will be 114 rubles per $1. It can be even more - as much as you wish.

This has absolutely nothing to do with the welfare of future generations. The only concern is about today, specifically about the interests of raw materials producers/exporters. This policy destroys the production of high-value goods while the assembling of imported components is presented as domestic production. It also benefits importers and bankers servicing import/export operations. In other words, by shifting 6 trillion rubles from the pockets of 90 percent of Russians to the bank accounts of the other 10 percent, they built an economy in the interest of the exporters of raw materials, importers of final goods and bankers.

At the same time, future gene-rations and future presidents have been deprived of a right to conduct a reasonable emission policy - a powerful instrument of the state that must be used very carefully and in small amounts, mostly to redistribute incomes in favor of the lower income brackets, and sometimes for investment purposes.

The present financial authorities have taken away this right to reasonable emissions from succeeding generations by printing rubles for many years ahead.