For starters, let us consider the year 2005. At that time, Russia's exports exceeded $250 billion. The owners of these resources - exporters - sold about $220 billion on the domestic market, at a rate of about 27 rubles per $1, thus receiving about 6 trillion rubles as a result. Had the Central Bank of Russia (CBR) not interfered in the currency trade, the dollar exchange rate would have been based on free market principles - that is, substantially less than 27 rubles per $1. In 2005, it would have been, for example, 14 rubles per $1 and raw materials exporters would have received not 6 trillion rubles but only 3 trillion for the hard currency they sold on the internal market.
To prevent this from happening, the Central Bank regularly issues so-called cash emissions - a practice that is completely beyond public control. In other words, it prints and puts into circulation money that is not covered by goods or services, spending it on the currency exchange as the largest buyer of foreign currency. The level of this intervention is such that it ensures the maintenance of the U.S. dollar rate on the exchange market. For example, in 2005, the Central Bank had to buy about $70 billion for that purpose, paying about 2 trillion rubles. Thus, it was forced to issue an additional 1 trillion rubles.
By keeping the dollar exchange rate at 27 rubles per $1, the financial authorities forced the whole country to buy dollars from raw material producers at double their market value. In other words, in addition to the Central Bank, the country's population directly or indirectly bought another $150 billion from the raw materials exporters for 4 trillion rubles, thus paying them 2 trillion rubles in excess.
It must be said that foreign exchange is bought not only by those who buy it outright, but virtually by all those who pay for related services and goods. Thus, in 2005, as a result of Central Bank manipulation, raw materials exporters were paid about 3 trillion rubles over and above what they should have been paid.
But this is only half the problem. In this context, the price of raw materials and related resources in Russia tends to exceed the normal domestic market prices by two or three times.
In a free market economy, one of the main price regulators on the internal market is the price of analogous imported goods.
For example, if cement imported from Bulgaria costs $50 per ton, with the dollar exchange rate of 14 rubles per $1, it would be 700 rubles per ton of cement excluding transportation costs, import duties, VAT, and other overheads (1,400 rubles per ton including all of these). But with the rate of the dollar twice as high, the price of Bulgarian cement on the Russian market will be in excess of 3,000 rubles per ton, which will enable domestic cement producers to offer it at 3,000 per ton.
Furthermore, due to certain specifics of the Russian market (large distances, artificially sustained local monopolist practices, the private interests of the procuring agencies, etc.), the price of cement can be as high 4,000 rubles per ton, whereas in Bulgaria it will be $5 per ton.
To sum up, as a result of CBR policy, Russians have to pay the raw materials producers double or triple the amount they should. Moreover, sometimes people simply do not know about this because they do not buy the majority of raw materials or related goods directly. Therefore, they are mostly outraged by the soaring gasoline prices. At the same time, they also overpay for natural gas, electricity, mineral fertilizer, and diesel fuel when they buy foodstuffs and pay their utility bills; for aviation fuel when they buy air tickets; for paper when they buy books and newspapers; for cement and other construction materials when they buy or build homes; for heating oil and coal when they pay for heating, and so forth.
A paradoxical situation has developed: Whereas in the world's mean statistical product, the raw material component does not exceed 20 percent, in Russia the figure stands around 50 percent. This makes it impossible for the processing, agricultural and food industries, as well as many service providers, to operate profitably. Enterprises are going bankrupt and closing, people are losing their jobs and wages, while producers are losing buyers. The domestic economy is suffering, verging on collapse.
As a result, the population overpays another 3 trillion rubles to raw material producers. In 2005, thanks to CBR's efforts, Russia overpaid about 6 trillion rubles, or more than one-third of the nation's GDP that year.
Later, the Finance Ministry, as it collects taxes from the 6 trillion that was effectively given away to the raw materials producers, pretends that these are production taxes, therefore taking, for example, only 4 trillion. The remaining "windfall" 2 trillion rubles form "super profits" and are shown in the books as a result of their effective operation, as well as the purportedly natural profitability of Russia's raw materials sectors.
This money does not return to the economy, but only a boom at specific points, such as the stock market, the real estate market, and foreign car sales. This only harms the economy insofar as it creates anti-market imbalances. It turns out that raw materials producers, who incidentally cause enormous environmental damage to the country, not only do not pay any taxes, but on the contrary, receive a subsidy from Russia's poverty stricken population at a rate of approximately 6 trillion rubles a year.
The Finance Ministry receives another 2 trillion rubles in taxes and duties from industries unrelated to the raw materials sector. In other words, in 2005, 8 trillion rubles was taken away from the country's population, whereas on paper it is made to look as though the raw materials producers contributed 4 trillion, with other sectors injecting a mere 2 trillion, thus giving the impression that the raw materials exporters feed the whole country.
What is this if not a fiscal scam of great proportions?
Деловое письмо
HOWARD & PRATT
Ladies’ Clothing
306, 3d Avenue
Chicago, III. 60602
USA
JACSON & MILES
118 Regent Street
London WIC 37D
UK
Gentlemen:
We saw a collection of women’s dresses in your October catalogue. The lines you showed would be most suitable for our market.
Would you kindly send us your quotation for clothing that you could supply to us by the end of November?
We would require 1000 dresses in each of the sizes 10-14, and 500 in sizes 8 and 16.
We propose the payment made by Letter of Credit.
Thank you for an early reply.
Very truly yours,
P. Pratt, Jr
Manager Buyers
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