Digital Mirages and Harsh Currency Reality
On January 16, the director of the Russian Association of the Cryptoindustry and Blockchain, A. Brazhnikov, announced that negotiations were underway between Russia and Iran to create a common gold-backed cryptocurrency (stablecoin). With the timely implementation of a number of legislative initiatives and the choice of technology, the launch of a payment instrument for settlements in foreign trade operations is possible within the next six months.
News this one is not that unexpected, rather, on the contrary, given the mass of attempts to make at least some kind of common working tool, it is quite even expected. Therefore, it is very interesting to consider whether this tool has a potential chance of success. Will such a decision strengthen Russia's position in the region as a whole, or will it remain another experiment, this, apparently, is worth sorting out.
Today, the expert environment and media space is literally crammed with various terms related to some kind of digitalization. But the fact is that not everything digital from the point of view of economic sense can be effectively used not just in interstate settlements, but in order to create and strengthen a single economic space. Simply because the words “digital currency” or “cryptocurrency” are often used to replace the concept of a means of payment.
Cryptomatrix
When in 2011-2012 t. bitcoin cryptocurrency began to go into mass circulation, i.e., it was developed in the form of a really working system, the media took it seriously, presenting it as a future alternative to state currencies. The basis for future truly free settlements, derived from the dictates of both the tyrant state and the evil Pinocchio corporations. Western mass production generally loves stories about the struggle of “a bunch of heroes with greedy corporations”, and it doesn’t matter that these images are financed, produced and capitalized by the corporations themselves. Such is the Matrix, which sponsors the theme of the struggle with oneself.
It would seem that the world banking system should have not just strained, but literally grabbed at the throat of this new Neo from digital finance, found their secret lair and displayed it indicatively on the squares, especially since in just a few years such (only really working) systems arose about ten. However, the reaction of the banking sector was surprisingly mild.
Perhaps such softness is due to the impotence of the system in the face of the digital genius of the creators and the cunning of the operators? Not at all. It’s just that the bankers were well aware that neither bitcoin, nor its analogues, are actually a currency.
Today, the terms "currency" and "money" have become stable synonyms in terms of public perception. But what is a currency, is it just the usual means of payment, savings, investments, etc.?
Currency in its original meaning is, after all, not only and not so much voiced instruments as a measure of value. And such a terminological difference is connected with the development and complication of the banking system, which began to operate not only with money, but also with derivative obligations.
Currency is value backed up and secured. You can put bills against a loan, but you need something to back up these obligations, strengthen them, and secure them. Actually, therefore, such a word as “strong” is involved in the etymology of the word “currency”. Currency is not just money, but strong, secured payment instruments, and only such an instrument, in turn, can provide and guarantee value.
The second point to keep in mind is that the currency is not just a measure of the "strong value" of an asset, but the very system of such an assessment. Her method is essentially accounting - double entry, only extended to all material objects of the economic sphere. In order for the conditional “cryptocoin” to become a currency, you need to make the entire assessment of your assets and liabilities through this tool, link (or rather, lead) to it all expenses and revenues, wages, material and intangible costs, etc.
And not only to you as a specific enterprise, but to the entire conglomerate of economic agents associated with you, however, provided that such an "agent" as the state would kindly not mind. But even after receiving such an “estimated value”, it will still have to be verified and confirmed in some way.
At a minimum, agree that your employees will receive funds either in crypto or in relation to the crypto, i.e. their labor, payroll or AUR, will be set and calculated through the crypto base. The author still remembers the times when the entire wage bill was recalculated in dollars, and often paid in them. Here, although approximately, but a similar story.
The third point is that the final material goods are eventually bought or exchanged not through crypto-instruments, but are obtained quite by exchanging crypto for ordinary, normal currencies, whose value is confirmed and provided by the entire financial system.
The banking machine was hurt not by the fact that bitcoin would supposedly replace it in the future, but by the opacity of the transaction system itself. That is, the banking system sees a conditional entry into the crypt, observes the exit when the crypt is exchanged for a normal currency in various ways, but it does not record flows within the network of alternative settlements. However, even here the banking machine managed to launch its hairy hand, taking advantage of the initial vulnerability - the lack of an emission control mechanism.
If you look at it, the crypto payment system is a free and impersonal platform where a kind of auction takes place. As long as the calculations fluctuate around certain values, it even quite corresponds to the classical description of the free market model, such is the bookish ideal of the stock exchange from the Economics textbook. However, if a few really big players get in there with an offer and payment for something really significant, while agreeing that the calculations are carried out outside the real market value, and the crypto system will be overloaded with emission, and the price of the crypto will increase to prohibitive values.
And what will happen if such a player or players stop their manipulations? The price of the crypto will collapse. And these manipulations can be repeated as much as there are free assets of such players, and they, as we understand, are not limited, in other words, the cycle can be reproduced until even the most stubborn crypto fans are tormented that the course flies like on rollercoasters.
Those institutions, against which all these newly-minted Neos and other Morpheuses allegedly fought, condoning the growth of these alternative systems themselves, ensured that a significant part of the illegal and openly corrupt turnover was transferred to this area, after which the US Treasury and the FBI went after the owners of crypto-exchanges. And they go along them, I must say, quite tightly. At the same time, the traditional banking system itself does not suffer from this - the real value is not formed in the crypt. So think, dear reader, was this Neo, the collective creator of the “Satoshi Nakamura” crypt, himself an agent of the Matrix?
Actually, this whole digression was needed in order to separate in advance such cryptocurrencies, which are not real currencies, from those instruments that could actually be used in interstate settlements and form a single economic zone.
Transferable ruble
Therefore, leaving the alternatives alone, let's try to consider such a fashionable phenomenon as "digital currency". Only the word digital makes it fashionable, but what exactly is the special difference between digital currency and ordinary currency? We disconnected Russia and Iran from the SWIFT system, banned correspondent services in the main reserve currencies, well, let's create our own system that will connect the Central Bank and the main banks, assign unique and other codes to payments and form an exchange system between correspondent banks. So there is such a system, it even works, but this is clearly not what is meant by “monetary digitalization”.
The story with non-cash payments in national currencies rests on exactly the same issue of value - neither we nor Iran can form the value of our assets in the currency of a neighbor, and if we can’t, then the idea of a “raw standard” or "gold standard". There seems to be no firmer foundation in the world.
But the idea of a golden basis is not new. Moreover, its implementation is technically not very complicated. However, at the same time, you, as a state, will have to solve three questions: the first is whether you transfer the entire currency to this basis or form a separate sub-currency, the second is what weight you put in the face value, and the third is whether you allow the direct exchange of this instrument for metal or form clearing mechanism for conversion to the main currency.
But it is much easier to raise these questions than to solve the tangle of problems that will inevitably arise. And here it is necessary to turn to two large and actually working projects: the “transferable ruble” system, which replaced the clearing ruble and operated from 1964 to 1991 between the CMEA countries and even sometimes with Finland, as well as the European Monetary System with its own unit, the ECU, which In 1976, it functioned in the capitalist countries of Europe and later became the basis of the EURO system.
There was much less in common in these systems than differences. Both systems had a gold content - 31,5 rubles. and 35 ECU per troy ounce, with no exchange for the metal. The gold content was fully justified, because both systems were formed back in the 1s, but even after the transition to the so-called. The Jamaican system of "free rates" gold content strengthened these instruments.
But the differences were bigger and deeper. If the transferable ruble was used as a means of settlement in mutual trade, then the ECU was a kind of “function operator” in the formula for calculating not only the mutual rates of participants, but also emissions. The transferable ruble did not directly participate in the formation of the value of the participants' assets, but the ECU formed such a value, and sometimes directly for a number of products.
Thus, both instruments cannot be called a full-fledged currency. The transferable ruble was a medium of exchange, but not a means of formation and provision of value, and the ECU formed and provided value, even the volume of issue of national currencies, but was not used in circulation. At the same time, the scope of the transferable ruble and the volume of trade were constantly growing. Nevertheless, the transferable ruble disappeared along with the CMEA, and the ECU lived to see the transition to the EURO zone.
It is not worth writing off the frank betrayal of state interests by the late Soviet elites - the CMEA was in demand, as was its original payment unit. But this demand was of a specific nature.
If we briefly describe this situation, then without a radical transformation of the CMEA economy and the transferable ruble would never have become a full-fledged international currency, and if the CMEA had not collapsed, it would have been impossible to create any “EURO zone”. To create the EURO, a consumer and market coverage were required, and for the functioning of the CMEA, full-fledged industrial integration and a multiple increase in the output of goods and services were required. CMEA did not save even the fact that foreign trade was in terms of interaction with the camp in a strict framework.
A paradoxical situation arose when the USSR, on the one hand, provided its allies and trading partners with preferential conditions for access to energy resources, invested in the development of generation, energy networks, heavy industry, machine tool building, and so on, but artificially limited its market for the products of the "socialist camp". But the resource was huge, given not only the unsatisfied demand in the USSR itself, but also in other countries of the world, which in one way or another depended on Moscow.
It was a natural paradox that was constantly discussed at the meetings of the CMEA, moreover, no one wanted to leave the CMEA either in 1988, or 1989, or even 1990. Yes, in fact, what was the point of leaving the potentially gigantic market for these countries?
But in 1990, in Sofia, N. Ryzhkov casually declared that the CMEA currency would no longer work, the calculations were converted into US dollars, and the question, what to do with the CMEA, would come out? He replied: "If you want, come out." But instead of the word “come out”, the functionaries should open their market, and also do exactly the same manipulations that were done before them in Europe – to link the transferable ruble with the issue of national currencies and set prices in the transferable ruble for a number of basic raw materials.
The transferable ruble in this case would become a full-fledged currency according to the criteria - security, value formation, emission and clearing, as well as a means of investment and circulation. Accordingly, the Union would receive an unconditional advantage in relation to the monetary systems of many states, stimulating the export of raw materials to the Soviet bloc from there, and the import back. At the end of the 80s, everyone complained about the general deficit, but the question is, how much could this deficit potentially be covered by the common CMEA market? This is not taking into account those frank oddities with the artificial restriction of trade in the USSR itself.
The ECU system had collateral, participated in the emission and clearing, formed the value, but at the same time the market of the countries of the European Monetary System was open to each other. Europe had very balanced exports and imports, but did not put the ECU into circulation until it had simply gained markets as a result of the collapse of the CMEA, and had not brought the integration processes to membership or candidacy for EU membership. Note that on this path, "enlightened Europe" did not disdain anything, including the bombing of Belgrade. In 1995, they adopted a resolution on the creation of the EURO, but introduced it only in 1999, two months after the bombing of Yugoslavia, and this is hardly a mere coincidence.
All this suggests that in order to create a supranational currency, it is not enough to be even just a currency, although this criterion already requires the state, as we see, not just to issue another digital instrument at least ten times. For example, the same EU, having indicators of foreign trade turnover (not to the EU countries) of 5,1 trillion dollars (40%), forms an internal market with a turnover between EU members of 7,6 trillion dollars (60%), with a GDP of 17,1, 9,2 trillion dollars. Let's look at the similar indicators of the EAEU, the countries of Central Asia and Iran: with a good GDP indicator of $1,03 trillion, foreign trade turnover (outside these countries) is $92 trillion (0,092%), foreign trade turnover within these countries is $8 trillion (XNUMX %).
Supranational currency
All this clearly demonstrates the real, and not declarative, level of interconnectedness of the economies of the region, in which Russia is somehow going to build a whole separate pole. The question arises why the countries of the region need a new currency, which, if it is thought of as such, and not its surrogate, on which the cost of national wealth and emission will depend, because it will not be possible to buy and sell 92% of foreign trade with it?
Now it becomes clear why China is still trying to work in the shadow of two major currencies - the dollar and the EURO. With all its economic power, its share in the world in terms of physical volume is generally large, but relative to specific players it reaches 5–12% of turnover. And China is not yet seeking to force settlements in yuan - no matter how much they announce to us that the “yuan zone” will come right now, and China continues to be content with 1,5% of settlements in yuan in world trade.
For the yuan zone, there are no participants in the zone itself, which would cover most of their needs with trade with China. It is possible that after reunification with Taiwan, Beijing will begin this expansion, but for now it is cautious, and there are many reasons for this. For example, the fact that you will have to strengthen your currency, and this is not always an advantage.
To what extent could this situation in terms of Russia and its neighbors be changed by introducing a conditional “golden ruble” tomorrow? No way.
Perhaps this tool can be used to enhance trade with specific countries? Technically, it is possible to issue, even increase its gold content, especially since foreign trade between Iran and Russia is still ±10 billion dollars, and we have a gold reserve of 130 billion dollars. It is possible to issue, but it will only work if both parties, presenting this instrument in their bank, will receive either gold in its natural form or domestic currency at the metal trading rate. And here another problem awaits all players.
You can end up using pure gold for subsequent foreign trade - at the established international exchange rate, but when exchanging for the domestic main currency, you will end up with a devaluation of the latter due to the fact that the base is limited. What will this mean in practice? This will mean that it will become unprofitable to trade for export through this channel.
This material does not touch on many, many issues of the formation of what we call a supranational currency, but at least it is an attempt to refresh the terminology and economic essence of the currency. Now the idea that the world will be divided into economic clusters and currency zones is very popular, and it is undoubtedly true as a vector, but its specifics are not at all so obvious. Here's a merger in the future of the euro and the dollar looks more realistic so far with the rest of the trade that has gone "under the yuan."
Is it possible to oppose something to this natural economic ice rink, the question is complex. For example, China has worked for twenty years under the umbrella of foreign reserve currencies. And it will be much more difficult for us with sanctions. In fact, the sanctions themselves in their current form are a tool for Russia to create any separate zone, not only not being able to, but even not trying to try.
Yes, in fact, we ourselves “successfully” spent the past years on getting a fantastic ratio of general and regional foreign trade in proportions of 92% to 8%. And now, let's introduce an instrument, even a digital one, with a gold content, and everything will become like that of older comrades: 40% to 60%?
Hack and predictor Aviator
And there can be only one summary here, we want to get our own economic cluster, we have no other ways, except to put pressure on strengthening our exports to the region by any means. Any export: from raw materials and grain to machinery and equipment, from electricity to threads, spoons, cups and mattresses, from mammoth tusk to weapons.
Only in this case will the neighbors need to keep more and more rubles on their balance sheets. After all, in the end, we must come to the point where even a labor migrant takes out only the ruble, and not any other currency.
The example with gas last year was not bad, it's a pity that the music didn't play for long. And only when the ratio of trade between countries in the region begins to move towards certain indicators, only then it will be possible to raise the question of the joint formation of the value of national wealth - a supranational currency.
Only this does not require the gold standard. This requires a completely different investment policy.
In the meantime, we have “import substitution”, sweet thoughts that soon everything will fall apart on its own into separate zones and clusters, and instead of “nibbling the granite” of industrial production, we will only need to release a new calculation tool.
No, even having recreated a bit of an industrial basis, it will still have to be pushed out for export with a stern hand in the style of Machiavelli. Exactly the way the US, the EU and China do it without hesitation.
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