This originally appeared at Vzglyad.ru. It was translated by Lenok at The Vineyard of the Saker

National Bank of Ukraine decided to raise the refinancing rate to 30%. Raising interest rates, the financial authorities followed the same path as the Bank of Russia.

One thing is for sure: oligarchs and criminals will benefit

The consequences will be the same: compression of already inaccessible credit, worsening recession and high inflation at the same level – about 30%.

Monetary policy, reduced to limiting money supply, in times of crisis everywhere and always gives the same result – the retraction of the economy in stagflation trap, that combines the decline in production, high inflation, rising unemployment and falling incomes.

As I understand the argument, it is a requirement of the IMF. It is absolutely standard, based on the monetarist dogma, and, is widely known as a model of shock therapy. Only export-oriented activities will survive under such a policy.

Since the current Ukrainian authorities are breaking cooperation with Russia, only export possible is that the EU is interested in. Along with sunflower and scrap, it will export cheap labour, smuggle weapons, and, possibly, chernozem.

At the same time there won’t be any investment in agriculture. I mean the physical removal of Ukrainian black earth. Ukraine already has experience of European integration in 1941-1944. The occupation authorities were exporting from Ukraine to Germany chernozem and labour, especially women labour.

The same is happening today – the current government are also occupation authorities. They are assigned by the US and the EU and will likely pursue the same policy. Ukrainian women are always appreciated in Europe. Their removal becomes the main item of Ukrainian exports.

IMF recommendations are harmful to the Ukrainian industry, construction and agriculture. But they are quite useful for the US-European kudos.

Western speculators attract money on their financial market, where, as you know, for several years rampant money printing is taking place. Over the last decade the monetary base in Europe and US has increased three to five times.

This cheap money must be bind to avoid hyperinflation. Therefore, the IMF imposes to our own countries the policy of contraction in the money supply, replacing it by foreign loans and investments, and using all sorts of speculative funds.

Today you can buy Ukrainian assets on the cheap. Then they unleash market and resell them to direct investors.

Ukrainian economy will get nothing apart from little increase in foreign exchange reserves. But this will not be enough to stabilize the economy.

Any sane expert in these conditions would recommend restoring cooperation with Russia. Save a free trade zone with the EAEC and return to the path of Eurasian integration. There is simply no other way for the sustainable development of the Ukrainian economy. It is necessary to revise the agreement with the EU, based on the interests of Ukrainian producers and cooperation with Russia.

After that, one should start restructure of the external debt, while offering a program of restoration and modernization of the economy with deployment of long-term loans. To this end, the National Bank will have to master the technology of multi-channel refinancing of banking system and development institutions under the demand for money from the real sector with acceptable interest rates.

The current authorities will definitely steal everything. After all, from what I hear, the people demand dismissal of the head of NBU for this reason. Ukrainian authorities have already set up a multi-channel system – not for the economy but themselves. I mean special credits by NBU for commercial banks associated with Kolomoisky, Poroshenko and Yatsenyuk. Criminals will not work in another way.

They use the power solely for the purpose of personal enrichment. What can be easier? Make the NBU print money for their banks to cash them and then require the NBU to exchange it for dollars and export it to offshore.

Today it is the main business scheme of the Ukrainian euro-leaders. Perhaps today’s IMF mission is to fight against this oligarchic business in Kiev. But between two evils it’s not worth choosing.