Who is to blame for the fall of the ruble: the Central Bank in the role of scapegoat?

Published: December 10th, 2014

During the round table held in Moscow, the CB RF was charged with lack of citizenship, sectarianism and incompetence, by the authorities as well.

Three-hour criticism of the Central Bank of Russia administration sounded on 9 December, in “President-hotel” at the conference of the Moscow economic forum (IEF), dedicated to the policy of monetary authorities. The topic of the round table was titled quite categorically: “The Central Bank of Russia: a friend or an enemy”. The majority of the participants, without mincing words, chose the second option, and the Advisor of Russian President Sergey Glazyev concluded that the Central Bank's policy not only hinders economic growth of Russia, but also threatens its national security.

Co-chair of the International Committee of the MEF Konstantin Babkin told DW that the invitation to the conference was sent to the head of the Central Bank Elvira Nabiullina, however, the Central Bank refused to participate in the event. “They referred to the fact that they have a so-called “week of silence” before an internal meeting”, he said. The press service of the Central Bank told DW that it will take time to find out the reasons why the event of MEF was ignored.

Blitzkrieg in Japanese style

The Advisor of Russian President Sergey Glazyev was announced by the organizers of the round table as the main speaker, however, opening the discussion, he stated that he did not consider himself as having the right to evaluate the activity of the Central Bank and would prefer to listen to experts first. As it was discovered later, the Advisor of Vladimir Putin left his main speech for a dessert. The word was transferred to the foreign guest — former Minister of Finance of Japan Daisuke Kotegawa, which paid attention to the struggle against currency speculators.

Former Minister advised Russia to act tough and unpredictable. “We are talking about the war with speculators. In some cases, even arrests of dealers are possible”, Kotegawa advised. According to him, it is impossible to abandon currency interventions completely. “They should be unpredictable and confusing the enemy. Frequent small scale interventions only create the illusion of work”, he explained.

“Cave patriotism is not better than vulgar liberalism”

Picking up the theme, Russian experts agreed that the Central Bank does not counteract, but on the contrary, helps speculators. This opinion, in particular, is shared by the Director of the Institute of Globalization Problems Mikhail Delyagin. Some experts expressed confidence that the Central Bank serves the interests of global capital, not caring about Russian manufacturers at all.

As a member of the Federation Council Yevgeny Tarle stated, the Central Bank focused on struggle against inflation, absolutely not understanding how it is formed. Thus unaffordable loan interests, growing due to the increase of refinancing rate by the Central Bank, destroy the production. “They counted the prices on buckwheat and sunflower oil and started to destroy the industry. Austerity measures are needed”, he said flatly and added that the liberal economic model has become obsolete.

The First Deputy Chairman of the State Duma on budget and taxes Oksana Dmitrieva tried to intercede for the Central Bank. “Let us not demonize the Central Bank. The cave patriotism is not better than the vulgar liberalism”, she said, noting that a colleague from the Federation Council has certainly approved the budget for 2015, presupposing a tax maneuver next year. “The maneuver will lead to huge inflation of costs! So one should not blame the Central Bank for everything, while showing others as “innocent sheep”, she said.

60 rubles for 1 dollar before 31 December

However, during the discussion it became more and more obvious that this division is inevitable. A well-known in Russia winner of intellectual games and part-time political consultant Anatoly Wasserman said that it must be spoken not about an enemy or a friend, but about “a stupidity or a treason”. A TV presenter of a business channel RBC-TV reported that he does not exclude dollar achieving a 60 ruble mark before the New Year.

The inadequacy of the measures undertaken by the Central Bank sounded as a refrain. The desire of the Bank to concentrate on struggle against inflation by conservation of foreign exchange reserves and increasing the refinancing rate was especially critisized. “The rate should be lowered! In Russia inflation has a non-monetary nature, prices are rising not because of excess liquidity, but because of the growth of monopolies’ tariffs”, a member of the working group on foreign economic activity of the Economic Council of the President of the Russian Federation Konstantin Andrianov said. “Connection of finance sterilization with inflation processes is absent, — the head of the Centre for scientific and political ideology Stepan Sulakshin stated. — Things are heading forward to national default".

“Wandering in the forest of three trees”

Summarizing the discussion, Sergei Glazyev expressed regret at the lack of representatives of the Central Bank on the event. “They behave themselves as a sect, hiding on all issues that face with the edge today. It is unacceptable and due to either incompetence or lack of civic stand and weakness”, he said, still allowing himself to give some assessment of the Elvira Nabiullina’s office.

The President Advisor considers that the policy pursued by the Central Bank in terms of stagflation, makes economic growth unattainable. “The Central Bank goes beyond the scope of the President decrees, does not perform its duties. It seems that its management does not understand how economic processes work, and this causes great concern”, he noted. According to Glazyev, the Central Bank has to work only with three options - interest rate, exchange rate and money supply. “But in this forest of three trees our monetary authorities manage to wander for 20 years”, he metaphorically expressed.

Special criticism of the President Advisor caused an increase in the refinancing rate. According to Glazyev, the rise in credit costs makes access to funds more difficult and inhibits economic growth, which, as he estimates, could reach seven percent. “Theoretical inconsistency of the Central Bank‘s arguments leads to disastrous consequences and acquires nature threatening to the national security of the country”, he said and added that he intends to report on the results of the round table to authorities of the country.

Source: Deutsche Welle