Russia's IMF Director: Next Crisis Will Find Us Unprepared
Russia’s IMF Director: Next Crisis Will Find Us Unprepared
An event held at the Russian Embassy titled “BRICS 2.0—A Metamorphosis of Globalization,” sponsored by Russia Direct, a monthly magazine with news on Russia, brought together some pro-BRICS intellectuals to counter much of the recent slander about the alleged imminent break-up of the BRICS. While much of what they said was of some interest, most of the presentations were narrowly focused on particular items of the BRICS agenda, without really getting to the heart of the matter.
Most interesting, however, was the presentation by Aleksei Mozhin, the Executive Director of the IMF for Russia. He noted that the BRICS configuration came out of the aftermath of the G20 Pittsburgh summit in 2009.
“It was not accidental that it occurred at that time in the midst of the global financial crisis,” which was characterized by “a loss of trust in the financial institutions and in the advice of the ‘financial experts.'” He said the present system dated back to August 1971, with Nixon’s decision to leave the gold standard, and this led to floating exchange rates. “Nobody is happy with the international system,” Mozhin said. “The distribution of the voting power in the IMF is totally absurd.”
In the Q&A, the first question was asked by EIR’s Bill Jones. Referring positively to what Mozhin had said, Jones continued,
“That crisis is still ongoing and getting worse. One too-big-to-fail bank today would set off an unequaled systemic crisis. Total debt, including derivatives and other exotic instruments, is estimated at $2 quadrillion. This can never be paid, no matter how much austerity is imposed on the world’s population. The establishment of the BRICS and AIIB, as well as the Silk Road Economic Belt, represents a new trajectory, away from the insanity of a bankrupt speculative financial system, toward a system based on credit for infrastructure. While Europe and the U.S. still feel that they are stakeholders in this failed system, the reality of the economic collapse will force them to revise that judgment. And anyone who looks at the total collapse of infrastructure in the United States will understand the mood-swings. This trajectory, of BRICS, the AIIB, and the Silk Road, is the only possible trajectory for humanity today, because continuing on the other path will lead to total devastation.”
Almost all of the speakers nodded agreement as Jones spoke.
“I agree with everything you have said. There is a massive debt overhang. Japan is at the top of the list. And this includes both public and private debt. It is a very fragile situation, and the next financial crisis will find us unprepared to deal with it. The attempt to maintain a zero interest-rate means we will not have the tools we had during the last crisis, and it has created many distortions. 96% of incremental income has been going to 1% of the population. And there is a very high level of public indebtedness.”