I just translate to English paragraphs by paragraphs lol, it’s easier that way. I am very slowly working through them but it’s an interesting look at a system where there is virtually no source on it in English or any other languge.

Can you read Russian?

Asymmetric Economy (Асимметричная экономика) (2012) by Kurman Akhmetov (pseudonym of the Kazakh economist Bakhytzhan Auelbekov) described extensively the economic model of Stalin’s USSR, particularly on the dual circuit monetary system.

Valentin Katasonov’s Stalin’s Economy (Экономика Сталина) (2014) and Alexander Galushka’s Crystal Growth (Кристалл роста) (2020) also variously extended the research on the subject.

Note that prior academic research on Stalin was very much limited or even distorted as the full rehabilitation did not occur until 2008 under Putin.

However, perhaps the most comprehensive description and a primary source on the monetary system during Stalin’s time is A. D. Gusakov’s Money Circulation and Credit of the USSR (Денежное обращение и кредит СССР) published by Gozfinizdat (State Financial Publishing House) in 1951.

It’s been a side project/hobby for me to slowly go through the books with machine translation to re-examine the genius of Stalin’s economic model with an MMT lens.

To be fair, balancing the budget was important during the fixed exchange rate era, because spending more than what you tax in return can quickly lead to exchange rate depreciation.

After the Bretton Woods in 1944, many countries quickly learned the lesson that pegging their currencies to the USD (and the USD in turn to gold) very much limited their fiscal spending space. They often had to endure the “stop-go” growth cycles, where after a period of deficit spending, the governments had to impose austerity to increase unemployment to stabilize the exchange rate, then as their popularity fall, they would restart spending in more stimulus in order to win elections.

It isn’t a surprise that Bretton Woods eventually collapsed in the early 1970s. After that, the world entered the floating exchange rate era. At that point, the IMF and OECD began to push heavily the concept of NAIRU (non-accelerating inflation rate of unemployment), which, in simple terms, redefined full employment from “ensuring the full employment of the available labor force” to “achieving a level of unemployment such that inflation doesn’t go up”.

In other words, you must achieve this “natural rate of unemployment” to keep inflationary pressure down. That’s how they define “full employment” now. This made many countries very afraid of running expansionary fiscal policy to reduce and eliminate unemployment. They have believed in the neoclassical ideology that if you don’t have unemployment, you will get an inflationary spiral and it’s very bad for the economy.

As a result, many developing countries (as well as developed countries like Germany, Australia etc.) turned to export-led growth strategy to accumulate foreign reserves as assets to balance out their fiscal spending (note this is not their only response, different countries also introduced varying measures of austerity etc.). Almost all of the trade surplus countries, including BRICS, believe in this logic. Once this is understood, it will not be a surprise to see that China, a socialist country, has high level of youth unemployment right now.

The US itself also believe in this, of course. According to Michael Hudson, they were indeed panicking when Nixon ended the Bretton Woods, but the timely publication of Super Imperialism really explained how they could keep getting away with it using persistent trade deficit as an imperialist strategy to get free lunch all over the world.

As a clarification point, because many people get confused by this, note that the US running persistent trade deficit has little to do with its ability, or any country’s ability, to run up deficit spending domestically.

People will tell you it’s because the USD is the global reserve currency, but this is mistaking the consequence for the cause. The USD is the global reserve currency because it is the only country willing to deficit spend to import from the other exporter countries who have fully bought into the export-led growth strategy, so naturally those countries will accumulate USD simply as a result of running a trade surplus (export more than import) and they have no choice but to purchase US treasuries since there is nowhere else for their USD to go.

This, of course, does not interfere with any government with a monetary sovereignty (currency issuer authority) wanting to run up its deficit spending domestically to ensure full employment and prioritize domestic investment. But many countries already believe in the neoclassical theory so they won’t do this.

If I have time soon, I will perhaps write up how Stalin’s economy differed from these liberal economics and how the USSR under Stalin was pretty much unconstrained in its own domestic spending to drive investment and rapid expansion of the economy without having to suppress wages or rely on foreign capital investment, yet also experienced virtually no inflation as well as maintained full employment throughout. It is a direct repudiation of the neoclassical theory.

I’m going to say what I’ve always said: run up the deficit!

It’s crazy to think how many governments and even left wing people have completely internalized neoclassical theories. It has become an absolute truth that informs the world view of many who wish to fight back against capitalism, not realizing that they have inadvertently tied their own hands to their back.

That’s what the nationalists wanted to do - they wanted Russia to move back to Stalin’s mobilization economy. Remember Sergei Glazyev? You don’t hear about him anymore. That entire faction has been neutralized by the neoliberals who fought back around 2023.

Then you have the government itself (Cabinet of Ministers), such as Prime Minister Mishustin and former Deputy PM (now Minister of Defense) Belousov that are the more soc dem, deficit spending type. For example, Mishustin did a decent job with government stimulus during Covid pandemic that prevented Russia from going into recession, and repeated pretty much the same thing during the Ukraine war.

However, since the government itself does not control the central bank, it cannot make effective use of money creation to deficit spend. Remember the central bank of Russia works for the IMF and is effectively an agent of US imperialism. This is not a conspiracy or anything but simply the result of a monetary institution following the “best practices” taught by their enemy.

The government has to rely on shuffling around funds, forcing private capital to spit out their money etc. in order to finance government subsidies. The central bank simply raised the key rate to an exceeding high rate of 20% to counter the increased government spending. There were a lot of movements for import substitution but ultimately there isn’t enough money to drive up a rapid expansion of productive capacity (this is almost the reverse situation than China that has a problem with over-investment and under-consumption lol).

Finally, whether Putin is in on it or not is irrelevant, because it seems like even the nationalists holding key positions (like Glazyev) misjudged just how entrenched the liberals were in the political institutions and still command vast influence in the economic sphere.

Unless you do a Stalin-style purge, you’re probably not going to get rid of them. But then, remember how Russia has been extremely lucky that there weren’t mass internal dissent after the war started. Any kind of political instability caused by an ongoing purge can easily plunge the Russian society into another deep crisis (exactly what the West hoped), and after the experience of the 1990s, I doubt anyone is willing to risk that again.

Nor is Putin capable of achieving anything of such scale. One small mistake and the fragile country turns into a failed state, which is what Putin fears the most (that the Russian civilization will terminate in his hands). You have to remember that Stalin’s reforms came after a revolutionary fervor (the world’s first socialist revolution) and several years of bloody civil war. It was a very different historical circumstance back then. And even after Stalin’s death, the liberal policies immediately came back.

The lesson here is clear: you really have to figure out how to deal with the liberals if you want to have a successful reform.

Specific strategies are discussed internally and I don’t really see a benefit in openly advertising them, especially because they will vary in time and space.

Tactics, maybe, but I don’t see why strategy should not be discussed openly?

All revolutionary movements require a coherent strategy to move forward, and that can only be achieved through open discussion (and in many instances, even resulting in bitter struggles between factions that splinter into multiple smaller entities convinced that their was the correct way).

Otherwise, how could one assess which one is the correct path for the movement when you have 10 different socialist parties trying to do their own thing but you’re not allowed to know what and how they want to do it?

Maybe you don’t want to join a party just to be told to help campaign for the liberals? How would you know that if the party does not wish to tell you its “secret” strategy?

And what’s the point of hiding your strategy anyway? The whole point is that the establishment cannot do anything to stop it.

My favorite example is the decisive strategy that sealed the victory of the Chinese communist party. So what if the KMT recognized that Mao’s land reform was critical for its success to unleash the revolutionary potential of the Chinese peasantry?

The KMT literally could not do anything about it because the entire party was so deeply entrenched with the feudal landlords that they had no counter-strategy against land reform. Their eventual defeat was certain even with a far superior military force because the communists had correctly identified the principal contradiction of the Chinese society at the time and figured out how to leverage that to create the conditions for a revolution. The KMT literally could not do anything but to see mass defects among its own ranks, and ultimately its own collapse.

It is no coincidence that the KMT could only initiate their own land reform after retreating to the island of Taiwan and establish their own foothold there, away from the vice grip of the feudal landlords in the mainland.

It’s been a while since I posted anything about Russia’s economy, because, well, there isn’t much going on.

The whole window of opportunity afforded by the early stages of the Ukraine war for economic transformation has already closed, and nothing will change because of Neoliberalism™.

The following telegram post summarizes pretty much everything that you need to know about the Russian economy at this stage:

Recently, we commented on the causes of inflation in Russia. We have three theses:

1. Inflation in Russia is structural, not monetary, in nature, meaning it is linked to the specific structure of our economy.
2. The Central Bank is fighting inflation with monetary methods, which is a fight against the consequences, not the cause.
3. The Central Bank’s policy may temporarily slow inflation, but it cannot stop it. Moreover, at a certain point, monetary policy becomes pro-inflationary.

Briefly, the main problems of the Russian economy today are a shortage of qualified personnel, low labor productivity, and the absence of a domestic investment mechanism. These factors lead to rising wages and increased demand, which domestic production cannot meet for various reasons, including the Central Bank’s strict policy.

Inflation can be suppressed by expanding supply (this is difficult, as the task rests on a shortage of personnel and the absence of an investment mechanism) or by monetary pressure on demand, or, more simply, by slowing the economy. The Central Bank chose the second option because it simply has no other instruments. Furthermore, the Central Bank is not responsible for the country’s economic growth, which completely absolves it of responsibility for virtually all decisions.

From a certain point on, the Central Bank’s tight monetary policy becomes a pro-inflationary factor, as a high key rate drives money supply growth and increases production costs. Simply put, the Central Bank creates excess income for a small portion of the population by stifling the economy and lowering the standard of living for the majority. Excess income flows into the stock market, but also into consumption. The market reacts only by raising prices.

The Central Bank’s leadership is convinced (or pretends) that, in addition to a high key rate, the inflation problem can be solved by raising taxes, tariffs, and cutting spending. But these measures will only lead to higher inflation.

TL;DR: High interest rate monetary policy from the central bank killed the government’s attempt to spend fiscally while still wanting to balance its deficit. You cannot have it both ways.

I may be leaving the stage (for now), but trust me legends never truly exit.

The problem with the American left is actually worse than you thought.

I try very hard to understand from their websites and programs, whether it’s DSA or PSL, and you literally cannot tell what is their strategy to take political power.

Is it through taking over the federal government? If so, by what means? elections? running 100 candidates over the next 5 years? how exactly are you going to achieve that? how exactly are you going to fight the police state?

Is it through taking political power at the local and municipal level and infiltrate the key infrastructure of the countries with a vast network of grassroots activists?

Who are your friends? Who are your enemies? If you cannot answer these questions, you literally cannot formulate a strategy. You don’t know who and where to organize with. And when you can’t do that, you would not know what to do with the No Kings protest.

Identifying the principal contradictions of the United States in the year 2025 is going to be the first step:

Who are our enemies? Who are our friends? This is a question of the first importance for the revolution. The basic reason why all previous revolutionary struggles in China achieved so little was their failure to unite with real friends in order to attack real enemies. A revolutionary party is the guide of the masses, and no revolution ever succeeds when the revolutionary party leads them astray. To ensure that we will definitely achieve success in our revolution and will not lead the masses astray, we must pay attention to uniting with our real friends in order to attack our real enemies. To distinguish real friends from real enemies, we must make a general analysis of the economic status of the various classes in Chinese society and of their respective attitudes towards the revolution.

From Mao’s Analyses of the Classes in Chinese Society, 1926

In other words, they are not even at step one yet, they are at step zero.

It’s actually good thing to tell people to read Lenin, Mao and Gramsci and you’ll see how far they have thought out the key pieces of a coherent strategy to win political power from their respective historical circumstances.

That’s what I wrote in the end - Kaboub mentioned that a regional bloc of neighboring countries, especially weak economies, could come together and complement the economic diversity of one another, assuming that they can resolve whatever political, ethnic, cultural and socioeconomic tensions.

As to why self-sufficiency is so important? The most prominent example is the DPRK.

Despite what the propaganda tells you, the DPRK was one of the fastest growing economies in Asia in the 60s and 70s, next only to Japan. It was one of the most urbanized countries enjoying high living standards in Asia (far higher than China at the time).

However, geographically, Northeast Asia is like rolling one of the worst starting conditions for a socialist country. The DPRK lacked both arable land for agriculture, and oil for fuel. As a result, the DPRK relied extensively on importing food and fuel from the USSR, and it had especially benefited from the Sino-Soviet split since both sides did not want the DPRK to fall into the sphere of influence of the other.

By 1973, crop failure in the USSR prompted the US-Soviet grain deal, resulting in a lack of agricultural supplies that the USSR could send to the DPRK. This was a critical moment that spurred the rise of Juche ideology (self autonomy aka self sufficiency), as the DPRK decided to invest heavily in agricultural mechanization to maximize the use of its limited arable land. (To give you an idea, agriculture comprises 20% of the DPRK’s GDP since the last few decades, even to this day. South Korea, in comparison, spent only 2% on agriculture, as it decided to import its food supply from foreign countries)

And they did succeed, the food sufficiency problem was practically resolved by the 1980s. However, due to the heavy mechanization of its agricultural sector, which required petroleum to operate, the DPRK still relied exclusively on the oil supply from the USSR.

By 1991, as the USSR collapsed, the newly formed Russia found itself in deep poverty, failed industries and was unable to deliver petroleum to the DPRK. This led to a breakdown in the agricultural sector in the DPRK, causing food shortage and severe famine. Combined with one of the worst weather in 1994-1996 (hail storm, flood and drought all within 2-3 years), the DPRK economy never recovered.

This shows how important it is to secure food and energy supply and ensure that they are under the control of foreign capital.

meanwhile China is amassing gold

I always find it funny when I read from the news that China has TRIPLED its gold reserves since 2023.

If you look at the reserve asset sheet from the PBoC, it amounts to ~$280 billion USD (~2300 tons) which is a fraction of its $3.7 trillion USD holding of reserve assets, and this is itself a fraction of the central bank’s total asset when you also take into account the claims on domestic institutions (which can also come from commercial banks’ holdings of USD and collateralized to the central bank in the form of government bonds).

The simple answer is that central banks around the world buy up gold to hedge against the potential depreciation of the dollar value under Trump, which they have accumulated through selling real goods and services to foreigners but don’t want to lose the value of their dollar assets. In other words, speculative asset. I strongly doubt that it will have any real impact on international finance or the dollar-based monetary system itself.

I honestly think gold investment is out of reach for most people. First, the tax is quite heavy, so you need to hold them for long enough and for the price to rise enough in order to be worth it. Great if you’re very wealthy and plan to store your wealth in something physical for several decades, otherwise it’s probably better to invest in something else and something much easier to cash out.

Then you have to figure out the physical storage and safeguarding it, since anything that is not physical gold, like ETFs, futures, stocks where you don’t hold the gold yourself is probably not worth the risks.

Haha, I try to think of stuff like that as Midas gold. Great curse will befall if I somehow attain that kind of fortune!

Take everything I say with a grain of salt:

Leaving sanctions and military invasion and coup aside for now, if you’re a developing country in the Global South with a newly elected socialist government, Fadhel Kaboub would suggest that in order to fully exercise monetary sovereignty to benefit your own people, you will first need to achieve food and energy self-sufficiency.

However, this is very difficult for a small economy if you (or the previous governments) listened to the IMF and have already over-invested in export capacity.

To transition away from the export-oriented economy into a self-sufficient domestic consumption-led economy is very costly for most countries that wish to achieve this, because once you have spent years and finite resources investing in something (sunk costs), then it becomes the one (or several) thing you’re good at.

Your economy will be even more vulnerable during the transition, and you’re basically betting that the entire decision to make the transition is well worth the risk.

The problem here is that there is no clear alternative. The BRICS+ bloc has not made itself an alternative institution that offers a different economic doctrine from neoliberalism, and worse, they all want to run trade surpluses against each other. In this case, wouldn’t it be better to bet on securing the US market as Trump attempts to reshuffle the deck?

Then there is an entire “chain of suspicion” being played out with your competitors. Let’s say we have two exporter countries e.g. Thailand and Indonesia - one wishes to invest in the extra costs to transition away from export-led growth and decouple from the US, while the other bets on Trump being an aberration or even an opportunity for a reshuffle, and thus instead double down on the export strategy.

You literally will not know which one is the correct decision 5-10 years down the road. If you make the transition and then the US and China have a rapprochement, then you’re in trouble because you would have given up your competitive advantage and let your competitors overtake you and even capture the market you once secured. In this case, you’re screwed.

So the cost of transition becomes even greater, especially with Trump’s erratic behavior that has turned the global economy into a “slot machine” that makes you think that if you whisper the right words, or do the right ritual for Trump, you could somehow win the lottery and become the next key partner of the US market, displacing your competitors. This also in part explains why so many countries are desperately trying to make deals with the US.

This is why I still prefer the Chinese-style Marshall Plan strategy, or China gives up its net exporter status to absorb the surplus goods from the Global South, because the Chinese economy is more resilient to make the transition much better than the other smaller economies. By importing goods from those exporter countries who have over-invested in export industries, it helps raise the wages of those countries and prepares them to better invest in achieving self-sufficiency in food and energy, which is absolutely critical to shield one’s economy from the US economic and financial warfare.

Kaboub’s suggestion is that a bloc of Global South countries, such as neighboring countries in the African continent, to band together and form regional blocs, and make a grand bargain with China - demanding technology sharing in exchange for their market. However this would require China giving up its net exporter status, as dumping cheap goods on to those countries will not help those countries develop themselves, whereas gaining access to the know-how of green technology from China can help the African countries gain their own energy and food self-sufficiency.

Obviously there are plenty geopolitical, economic and ideological obstacles that would need to be resolved, so it’s never that simple. And the US simply has to make sure that those countries can never get together by creating division and chaos around them.

If you have a time machine, you should travel back 10 years in time and invest your entire savings on gold, and you would have made an absolute fortune by now. Same with Bitcoin.

HOWEVER, the very moment you do that, you would have triggered a cascade of the butterfly effects that guarantee that gold would not rise lol.

It is simply a defense mechanism against mercantilism. The Western countries are forced to raise the prices because no country could possibly compete with China’s industries without driving down wages and production costs, which will undoubtedly destroy their own domestic industries in the process.

In the old days, after the Industrial Revolution, under free trade, the most industrialized nation with the most cost efficient productive capacity will be able to flood the competitor’s markets and kill off their domestic industries.

The most successful countries were the countries running trade surpluses, weaponizing mercantilistic warfare to destroy the trade revenues of their competitors.

It took two world wars to eliminate such excess industrial capacities in the West.

After the collapse of Bretton Woods in the 1970s, global trade was kept in a unique configuration where the US, whose currency is no longer tied to gold, is able to run persistent trade deficits in order to absorb the surplus industrial goods from the rest of the world, thereby balancing the excess industrial capacity of the world.

Such oversupply of industrial capacity was what allowed global commodities to remain relatively cheap over the past few decades, as surplus values were extracted from the Global South and in return, the consumption demand for such surplus capacity in the US keeps the workers employed and factories opened in those Global South economies.

The US finance capitalists are the true winners of this arrangement, as the de-industrialization killed off the growing trade union movements that accompanied the rise of the post-war industrial capitalism. However, the long term consequences of de-industrialization began to emerge in the 2010s, after the GFC in 2008 ended what remained of social mobility of the middle class, in the form of populism under the Sanders and Trump.

So what you’re really seeing, at its core, is the US attempting to transition away from the neoliberal arrangement that had worked so well for nearly half a century. The US knows that there is no way any Western country could possibly compete with Chinese industrial goods, so it is attempting to upend this trade relations by invoking global tariffs, which will reduce the consumption demand from the US, and thereby causing an excess of surplus capacity in the rest of the world.

If no other countries wants to run up their deficits to absorb such surplus capacity, then we will return to the old days of mercantilism. The EU market, once projected to overtake the US in the 2020s, is now dead in the water because of Ukraine. China also struggled to transition into domestic consumption after Covid.

The chaos created by the US tariffs thus has the potential to cause damage to many exporter economies as they desperately lower their costs (and wages) to compete China’s vastly superior and cost efficient productive capacity. The US can then pick off the failing economies by bailing them out, and reshapes the global supply chain through financial takeovers.

The first reason is cost, and the same reason why the US continues to rely on importing uranium from Russia even to this day, more than 3 years since the war in Ukraine has started.

After the fall of the USSR, the Lisbon Protocol was signed which included Russia converting their highly enriched uranium from their massive nuclear arsenals (as part of the non-nuclear proliferation agreement) and blending them down into low-enriched uranium to be used as fuel for the nuclear power plants in the US.

Why invest in uranium extraction and processing when you’re practically getting it for free?

The second reason is the export of environmental pollution to the developing world.

You’d notice that the narrative now is that the Western world lost its supply chain and falling behind China because of the restrictive environmental policies that made it very expensive and hazardous to perform and to maintain such dirty extraction and processing work in their own countries.

It will be used as excuses to kill the environmental policies in Western countries, and perhaps the main reason behind this whole drama, to drive the narrative that “left-wing environmentalism is why you’re losing your jobs”.

The fact that almost a decade after Bernie was first ratfucked by the DNC, the American left still pins their hopes on a single mayoral candidate (in NYC of all places) tells you everything you need to know about this pipeline.

Bernie boasted one million strong volunteers during his 2020 primary campaign. You’d think that even after he got screwed again, it would have snowballed into a nationwide movement to run socialist mayor and city council candidates to take over the political machineries starting from the municipal level all across the country.

It’s almost amazing to see such energy dissipated into almost nothing right after Bernie conceded and failed to win a single concession, not even healthcare-related, at the height of Covid pandemic for the working class.

Internally, they had many economic shortcomings but most of it was still preferable to status quo.

I have written at length about this in the past so won’t be doing a deep dive here. The economic problems of the Soviet Union began to emerge after Khrushchev reversed many of Stalin’s policies after his death and brought liberalism back into the system.

The most notable was the 20-year suspension of Soviet public debt repayment (effectively a default) in 1957.

The genius of Stalin’s Five-Year Plan was partly due to its ability to utilize the State Bank to effectively create an unlimited amount of rubles to finance its domestic development (implemented during the Credit Reform in 1930-32). The Soviet (internal) ruble was already unpegged from gold as early as 1933, and since the ruble was not convertible to any foreign currency or precious metal, the Soviet government will always be able to repay its public debt.

To make it even clearer, the Soviet (internal) ruble was effectively a fiat currency 40 years before the Americans discovered the power of monetary sovereignty by accident after abandoning the Bretton Woods.

However, Khrushchev and his finance minister Arseny Zverev believed that the Soviet government had “too much national debt” and the government had “no more money to service its annual debt”. This is no different than the Democrats and the Republicans in the US crying about trillions and trillions of national debt and not realizing that the US government as the issuer of a sovereign currency will always be able to create the amount of dollars needed to pay the treasury holders.

As a result of this “default” in 1957, the circulation of ruble in the hands of the people was disrupted. With less money to spend, this caused a slump in domestic consumption, and led to commodity shortages as demand weakened. This was also when the stereotypical “food and goods shortage in the Soviet Union!” began to occur.

Later, an attempt was made to fix the problem by increasing the prices to control demand for goods shortages, and spiraled into even worse and more problematic economic issues. This culminated in the Novocherkassk massacre in 1962 when rail workers began to strike in the face of rising prices while forced to take pay cuts, and was suppressed by the government.

A rare anti-labor stance by the Soviet government due to the introduction of liberalism back into the Soviet economic system.

The Soviet economy would eventually turn into stagnation by the 1970s after much of Stalin’s policies had been completely reversed, further deterioration prompting more liberal reforms, and the rest is history.

Please don’t tell me he lost the nation because he spent too much time playing video games.