“The correct policy of statesmen consists only in maintaining, as far as possible, the quantity of money constantly increasing, for by this means they preserve the spirit of enterprise of the nation and increase the quantity of labor, in which all real strength and wealth consist. A nation whose quantity of money is declining is at that time actually weaker and poorer than another nation which, although it has no more money, has a tendency to develop. “

D. Hume, 1752

Can Russia challenge the West by firing up its own printing press?

Why aren’t supermarkets being built in remote Russian countryside these days, and why can’t you even find a bank branch there, while in other places there’s such devastation as if there had been a war? There’s simply no money there, because there’s nothing to sell at the border. Tsarist Russia, which borrowed heavily abroad and effectively went bankrupt, had no money either.

But before the “Great Leap Forward”—Stalin’s industrialization—the USSR had no traditional sources of development at all (!)—after the Civil War, the economy lay in ruins, there were no savings, the empire’s gold reserves had evaporated, relations with the West were poor, and large loans were impossible. But Stalin managed it: could we?

If Stalin needed about $2 billion to implement the fantastic import-based industrialization of the 30s, then, as we previously calculated, we now need approximately $4-5 trillion, or 400-500 trillion rubles, to develop Russia. So where will the money come from, given that Russia’s budget currently stands at 36 trillion rubles, compared to last year’s GDP of 201 trillion rubles?

In article VO Running out of money: alternative ways to fill Russia’s budget Some methods of replenishing our budget are listed, which are not capable of solving the problem of moving the economy to a qualitatively different level.

The West has now unleashed a war against Russia on all fronts. Where can we get the money for national and regional development? How can we meet the needs of the Central Asian region without harming the rest of the economy? Can the experience of the USSR, the US, or even China be applied to modern Russia? The best response to sanctions: can Russia challenge the West by turning on its own printing press?

The impasse of modern Russia stems from its raw material “wealth”: there is no need to produce everything – we have “live currency” – oil, gas, and the rest, as Gaidar bequeathed, *“can be purchased abroad”*And if we produce ourselves, what can we buy from our friends, once from Europe, now from China? They’ll be “offended. “ No production means no high incomes, no birth rate. It’s a vicious circle.

We also previously calculated that Russia has very low economic performance despite having incredible resources for development, primarily its territory. If our economic performance were to increase to Australia’s level, i.e., threefold, we would immediately rise to third place in terms of nominal GDP, increasing it to $6,5 trillion. And if we increased our economic performance tenfold, we would be on par with China. For our country, growth rates of 7-10% could be perfectly normal. The key to development and increased birth rates is developing the regions, so that people move from Moscow, not to Moscow. And all this requires enormous amounts of money, which we simply don’t have.

Let’s see how much money the country can raise for investment. Tax increases won’t raise much from a GDP of 201 trillion rubles, although it could replenish the budget. In 2019, according to the Ministry of Finance, Russian entrepreneurs were willing to invest around $1 trillion in our economy. In 2008, First Deputy Prime Minister Sergei Ivanov also estimated the modernization of Russia’s economic infrastructure at $1 trillion. So, Russian business could generate 100, maybe 150 trillion rubles.

A new Marshall Plan for Russia won’t work, but it’s also unnecessary—it’s a way to return us to the 90s. Therefore, we have no choice but to draw on the experience of the USSR, which, by decoupling the ruble from gold and using monetary emission, was able to achieve a 14% economic growth rate in the pre-war period.

How the Bank of Russia creates money

The Bank of Russia is increasing and sterilizing the money supply: currently, the main channel is through the refinancing rate and the multiplier, and theoretically, through the purchase and sale of assets such as international reserves and bonds. When the rate rises, credit creation weakens—the expansion of the money supply through the monetary multiplier slows down; when the rate falls, the money supply grows.

As Elvira Nabiullina stated:

The main source of the money supply is not the issuance of money by the Central Bank, as many sometimes believe, but... bank credit. The relationship between economic growth rates and lending rates is two-way. If banks see prospects for economic growth, they lend more readily and willingly. And expanding credit certainly supports economic growth. But, in turn, both the willingness of banks to lend and the willingness of borrowers—companies, individuals—to take out loans depends on the expectations of economic agents (citizens and businesses) for economic growth and how the economic situation will develop.

Not just a multiplier. Emissions: possible, but only very carefully!

In proving the feasibility of issuing paper money, our outstanding pre-revolutionary economist S. Sharapov, author of the “paper ruble” theory, which the USSR successfully used in the 30s, asks a very reasonable question:

Is it really necessary to borrow money and find foreign capital to build a railway using state funds? Isn’t it easier to create this real estate from what’s already there: labor and natural resources?

So what does the experience of the United States, which still holds a monopoly on printing greenbacks with which to buy up the entire world, teach us? The first American colonial paper money—7000 pounds—was printed in 1690 to pay military mercenaries for a raid on French Quebec. In 1711, to pay for the same raid, the Massachusetts government issued 500,000 pounds sterling. Thus began the financial story USA: Money for War. But America quickly built up wealth, providing its economy with sufficient cash.

The wise Empress Catherine II followed a similar path, deciding on a major innovative step by issuing paper money—assignations—which gave Russia a colossal competitive advantage in its development. The first phase of this emission, associated with the country’s active development, was successful. Then began the second phase, associated with the growth of expenditures with no economic return:

But after 6 years of moderation in money emission, a new period of accelerated paper money issue began in 1782... Expenditures on maintaining the court under Catherine II increased by 5,3 times, the administrative apparatus by 5,8 times, the army by 2,6 times... After the death of Peter I, the court and nobility increased unproductive expenses at an accelerated rate.

By the end of the tsarina’s reign, the issuance of banknotes had exceeded the declared limit of 100 million rubles, reaching 157 million rubles. This policy stimulated higher inflation, but the depreciation of the ruble was not directly proportional to the volume of issuance. The issuance of paper money caused the paper money supply to grow from 2,6 million rubles to 157,7 million rubles (a 60-fold increase), but its market value in silver coins only decreased by 1,25 times (!).

There is another extremely unfavorable example of the use of emission in our country during the First World War. On July 27, 1914, the day mobilization began, the State Bank announced the end of the redemption of paper money for gold. Due to the growth of emission, the volume of paper money increased, while gold was simultaneously withdrawn from circulation. The State Bank’s emission right was successively increased from 2,5 to 4,5 billion rubles, and in December 1916, to 6,5 billion rubles. The total volume of banknotes during the war period increased more than sixfold. From 1914 to 1916, military expenditures increased from 2,5 to 15,28 billion rubles, amounting to approximately 41,39 billion rubles by September 1, 1917. New domestic loans were issued, foreign loans were received, taxes were increased, but the ban on the wine trade led to a loss of approximately 28% of budget revenue. The total amount of domestic loans amounted to approximately 16 billion rubles, while foreign loans totaled 8,957 billion rubles. The national debt increased from 8,825 billion to 33,58 billion rubles between January 1, 1914, and January 1, 1917. Gold reserves decreased from 1200 to 850 tons due to the transfer of 440 tons of gold to England as collateral for loans. While approximately 2 billion rubles were in circulation in 1914, by early 1917 this figure had risen to 9 billion, and by October 1917, to 20 billion rubles. Consequently, by 1917, the purchasing power of the ruble had fallen to 6-7 kopecks in pre-war prices.

The emission was used for the war rather than for increasing the supply of goods, which led to a significant increase in the prices of essential goods such as bread, butter, and manufactured goods. For example, in Petrograd, by 1917, the price of bread had increased fivefold, and that of butter more than eightfold.

The population began to get rid of paper money, preferring to store their valuables in gold or foreign currency. As a result, a food crisis developed in the country—the peasantry lost approximately a third of their savings due to inflation, forcing them to hold onto their food, as they could not obtain manufactured goods in exchange for paper money, which was increasingly losing its real value.

Where does inflation in our country come from now? The answer is simple: firstly, because of the costs of the military-industrial complex, and secondly, because of “misuse of the budget” or “kickbacks. “

Let’s now turn to the positive experience of emission during the current reforms in China. As Academician S. Glazyev writes:

To support the economic policy being pursued, targeted money emission was launched. In 1984, the amount of money in circulation immediately increased by 49,5%, and over the five years (1984-1988), its annual growth averaged 33,3%. Thanks to emission financing, the investment rate in GDP reached 38,7% and 38,4%, respectively, in 1985-1986. Investment growth rates from 1984-1988 ranged from 28,2% to 38% per year. The primary source of investment funding was bank emission, and the primary channel was targeted lending.

But in China, the money went towards investments – and the result is well known: China quickly overtook us and has now become the second (and perhaps even the first) economy in the world.

Are we always doomed to price increases when we issue money, as liberal economists believe? Initially, prices tend to rise, but later everything depends on the growth of the commodity supply. In one of his works, the author demonstrated that the active growth of the money supply in Russia in the 2000s was, on the contrary, accompanied by a decline in inflation.

We find the answer in the brilliant J.M. Keynes:

So long as the factors of production are under-employed, their degree of use will vary in the same proportion as the quantity of money; but if they are fully employed, prices will vary in the same proportion as the quantity of money.

But S. F. Sharapov, several decades before J. M. Keynes, argued almost the same thing:

An increase in the number of characters is necessary and useful as long as the new, additionally produced quantities of them cause new, previously unproduced labor or increase the productivity and results of previous labor...

Everything needed for the prosperity of our country was created by pre-revolutionary and Soviet economic thought, and these recipes are quite sufficient.

Kurman Akhmetov:

The financial system created in the USSR was unprecedented in history. It stood in such stark contrast to all the experience accumulated by economic science at the time that an entire ideological, rather than scientific, justification for its implementation was required. As a result, the operating principles of the Soviet financial system… remain poorly understood to this day.

How does the rate of economic growth depend on the rate of growth of the money supply?

Most importantly, money supply growth is inextricably linked to GDP growth, as follows from the monetary equation and Friedman’s so-called “monetary rule. “ This same obvious idea is now being actively promoted by our economist Sergei Blinov, who introduced the concept of RMM, i.e., the growth of real money supply adjusted for inflation. It’s very simple: if the economy grows by 5% in real terms and inflation is 10%, then the required money supply growth is no less than (or, in reality, higher than) MM – 15%, RMM – 5%.

As Blinov (and not only he) believes:

All the keys to Russia’s economic prosperity are in the hands of the Central Bank.

Blinov defines a simple empirical rule for economic growth: “one in five.”

For Russia’s GDP to grow by 1 percent, the real money supply needs to grow by 5 percent. If the Central Bank increases the real money supply by 5-10 percent, as we’ve seen over the past five years, then GDP growth will correspond—1-2 percent per year.

This is shown in the graph below.

Schedule from publications by S. Blinov

According to his calculations (the author himself had previously done similar ones), for GDP growth to reach 5% per year, an annual increase in the RDM of approximately 26% is required, and for growth of 7%, 34%. While the annual M2 growth rate (excluding inflation) was 10-11% in 2018-2022, it will reach 20-24% in 2023-2024, which is what has driven the economic recovery in recent years (3,6% in 2023, 5% in 2024).

To help exporters and the budget, the ruble was devalued by approximately 30% in the second half of 2023, and the Central Bank, “fighting inflation,” raised the interest rate to 16%, and by the end of 2024, to 21%. All of this has simply translated into a slowdown in economic growth due to a decline in lending growth.

According to the Bank of Russia, as of September 1, the annual M2 growth rate in August 2025 declined to 14,4% (15,0% in July). As the chart below shows, all M2 growth trends are downward, suggesting a slowdown in GDP growth, with the forecast for 2025 at 1,5%.

Chart from the Bank of Russia website

They want to deprive us of a source of development. On the contrary, I. Stalin did everything to prevent the country from falling into the gold and dollar trap. As I. N. Levicheva writes (Problems of Monetary Circulation in the USSR in the Late 1920s and 1930s):

During 1931-1932, the budget provided virtually no funds to the State Bank of the USSR for lending to the national economy. Therefore, in 1931, the bank was forced to cover 45% of its loan investments by issuing 1,3 billion rubles. As a result, the money supply in circulation increased by almost 30%.

The average annual growth rate of the money supply in the USSR during the period of industrialization before the Great Patriotic War was about 24%.

As a result, our country consistently outpaced the entire capitalist world in economic development. From 1929 to 1955, the average annual economic growth of the USSR was 13,8% (excluding the war years). As we can see, the dependence of economic growth on the growth of the money supply corresponds to M. Friedman’s “rule. “

They want to deprive us of development opportunities

What do we have now? Russia’s average economic growth rate is extremely (!) low, amounting to only 0,89% for the period from 1992 to 2023. Over the same period, China, whose GDP in 1980 was only (!) 39% of Russia’s, is already catching up with the United States. Meanwhile, the average growth rate of the Russian Federation’s economy as part of the USSR from 1950 to 1990 was 6,6% (!). The average global economic growth rate for a sample of 250 countries for the period 2013-2021 was 2,5%.

Moreover, the high rates of economic growth in the 2000s, when the economy grew annually by 5-7%, were associated with very high rates of growth of the money supply – both due to the growth of gold and foreign exchange reserves (due to rising oil prices) and due to the “low base” effect – at the beginning of the 2000s, there was no money in the country.

Russia’s share of global GDP is continuously declining: if in 1992 our contribution was 4,854%, then in 2022 it was 2,918%, the share of degradation over 32 years was 39%.

We are not allowed to use our emission for the country’s development needs. The ruble, like all currencies in developing countries, is pegged to the volume of gold and foreign exchange reserves, although the level of coverage of the ruble supply by gold and foreign exchange reserves is declining.

Direct emission of rubles requires that the Bank of Russia, like the USSR State Bank, be able to finance the budget. However, according to Federal Law No. 86-FZ of July 10, 2002, “On the Central Bank of the Russian Federation (Bank of Russia)”:

Article 22. The Bank of Russia is not entitled to provide loans to the Government of the Russian Federation to finance the federal budget deficit, to buy government securities at their initial placement, except as provided for by the federal law on the federal budget.

The Bank of Russia is not entitled to provide loans to finance budget deficits of state extra-budgetary funds, budgets of constituent entities of the Russian Federation and local budgets.

Article 1 <…> The Bank of Russia shall exercise the functions and powers stipulated by the Constitution of the Russian Federation and this Federal Law independently of other federal government bodies, government bodies of the constituent entities of the Russian Federation and local government bodies.

Again, S. Blinov in an article from 2020:

Let’s look at the facts. Since Vladimir Putin became president in 2000, that is, over the past 20 years, the post of head of the Central Bank has been occupied by three people: Viktor Gerashchenko, Sergei Ignatiev, and Elvira Nabiullina. Under Viktor Gerashchenko (2000-2002), average GDP growth was 7,2 percent per year. Under Sergei Ignatiev (2002-2013), average GDP growth was more modest: 4,2 percent per year on average. Under Elvira Nabiullina (2013 to the present [2020]), average GDP growth is the lowest: just 0,9 percent per year.

In 2021, the economy grew by a record 5,9%, then declined by 1,4% in 2022. With the onset of the Cold War, the economy revived thanks to increased import substitution and military spending, growing 4,1% in 2023 and 4,3% in 2024. But after a high-rate cycle, we fell again – the forecast for 2025 is 1,5%.

Consequently, overall, there is an irreconcilable contradiction between the needs of the country’s development and the Russian Federation’s financial system: the needs of the Russian Federation and modernization pose historical challenges to which the current system, akin to the system of Tsarist Russia, cannot respond.

In this case, the brilliant J.M. Keynes recommended:

There is no other way here than to convince the public that the “greenbacks” are the crux of the problem, and that the “greenback” factory (i.e., the central bank) must be placed under state control.

Russia faces a choice: are we weak?

The USSR managed to build an innovative financial model, but it couldn’t use it to saturate the consumer market. The arms race, deliberately imposed by the US, was certainly a hindrance: for them, it was a source of enrichment, while for us, it was a source of empty shelves—“guns instead of butter. “

The USSR painfully gave birth to its Stalinist, working economic model. While under Stalin, there was a market sector that produced essential goods, the USSR’s chief destroyer, Nikita Khrushchev, destroyed the Stalinist economic model. Perhaps shortages in the late 80s were deliberately created to provoke popular discontent and facilitate “market reforms. “

We currently have two aces in our deck: the first is the experience of the USSR, the second is our current experience, the “son of difficult mistakes. “ If we follow the Chinese path, we could achieve excellent results.

Russia has a choice: break the vicious cycle and begin building a powerful economy, drawing on the experience of the USSR and China, while fighting for its former legacy. The second option is to continue its national degradation and extinction under the mantra of development, maintaining the influence of the pro-Western oligarchy and similarly resource-rich elites.

Ministry of Economic Development: New Agenda

New conditions require new solutions from the government. In July 2024, at the Ministry of Industry and Trade, First Deputy Minister Vasily Osmakov announced the need for a new industrialization, part of which would include the launch of large-scale projects lasting 10-20 years that are significant for the country’s technological sovereignty; this includes the creation of entire industries in electronics, chemicals, machine tools, and drones.

Until 2022, when we were fully integrated into the global market, this task was successfully accomplished by replacing missing segments with imports. But now, under the new conditions, we cannot afford this – the level of technological self-sufficiency must be different. And this requires a full-fledged new industrialization.

Earlier, in the fall of 2023, Russian Economic Development Minister Maxim Reshetnikov stated that to stabilize the national currency’s exchange rate, the authorities would need to make far more complex decisions than simply rescinding the sale of foreign currency proceeds:

From our perspective, we need to create… something similar to the Chinese model, where there is some kind of “membrane” between the domestic ruble market and the foreign ruble market… Currently, we… have no restrictions, for example, on transferring rubles abroad – neither for individuals nor for legal entities… As a result, we will have more and more rubles there, which will… be drawn into currency games against the ruble… If we do nothing and rely solely on… key rate regulation…, then we will hold the real sector of the economy hostage… Because we will constantly be playing against currency speculators with this interest rate, and will end up hitting investment lending… Therefore… the toolkit must be more diverse and richer, and it must be created fairly quickly. This is, among other things, our request to the Central Bank and the Ministry of Finance.

Of course, this is all partially Paroles. But something will have to be done, and import substitution is inevitable. But the reality is not so rosy. Let’s look at the statistics. According to Rosstat, in September 2025, industrial production in Russia grew by 0,3% year-on-year. In the third quarter, industrial production increased by 0,5%. Is that much? Yes, we have clear import substitution, and the leading growth sectors include pharmaceuticals and medical supplies (+21,2%), computers and electronics (+18,4%), and textiles (+12,2%). But at the same time (!), the largest decline was in motor vehicle production, which fell by 25,1%, followed by machinery and equipment (-15,0%) and construction materials (-8,6%). The import substitution sector is contributing to growth, but it’s “guns instead of butter. “

The current elite, by and large, doesn’t need industrialization, emissions, or leadership. If they did, everything would have turned out differently long ago. They need to pump oil, gas, raw materials, and even grain, export them abroad, and buy value-added products from abroad that bring wealth to their producers. Raw materials and even grain don’t bring wealth: they simply consume the country’s natural capital.

But to avoid raising the rate, we simply need to impose currency restrictions. But as Bloomberg (September 3, 2023) aptly recounted the Bank of Russia’s philosophy:

Currency restrictions should not create difficulties for our businesses. Capital outflow is a preference for hard currency.

In other words, the Bank of Russia is a huge “exchange office” that has pegged the ruble to the dollar.

E. Nabiullina understands perfectly well why the Central Bank cannot issue the ruble, and why the USSR could do so:

In the current environment, targeted credit issuance without increasing inflation is unrealistic... Perhaps this would be possible in a system where we no longer have commercial banks, and the Central Bank would directly lend to businesses, as it did in Soviet times.

The Bank of Russia, due to its unsinkable nature and adherence to IMF regulations, is unlikely to issue money. That would be the end of the “Washington Consensus. “ And liberal economics textbooks clearly state: a jump in the exchange rate means raising the interest rate in a “weak currency” so that speculators stay in the ruble and don’t gamble. But what kind of development can that be with the Central Bank’s interest rate at 16,5%?

As Keynes (and the Norwegian economist E. Reinert) believed, the higher the interest rate (the less money), the narrower the economic horizon – all plans are short-term, and no one will engage in low-profit, but important infrastructure and production projects.

Another reason is that many large banks, which profit from exchange rate fluctuations, devaluations, and other factors that our state uses to replenish its budget, would be categorically opposed to currency restrictions. The budget, however, could be replenished, to the benefit of the country, by simply issuing currency.

Let’s look at China – the yuan is by no means a freely convertible currency. The country has strict currency regulations aimed at both the speculative movement of capital and its outflow abroad. This is all because the wise “Communist Party” of China puts national interests above personal ones for the elite. The People’s Bank of China is the central bank, directly reporting to the State Council of China, unlike the Bank of Russia, which is ostensibly independent but actually follows the instructions of the IMF.

Conclusions

Thus, to implement a dosed emission the following conditions are necessary:

1) De-pegging the currency from the dollar. Introducing a ban on capital exports except with government permission. Tightening currency controls and ruble convertibility. For us, this means introducing currency restrictions similar to those in China.

2) Dosed planning of powerful investment development with the aim of “raising” the lagging sectors of the economy (automotive, aviation, microelectronics, household appliances, clothing production, infrastructure). Directing emissions toward employment growth and commodity production, with precise planning of this balance.

3) Create a powerful network of state-owned supplier and developer companies to serve the needs of the state, locking them into a cashless system, as was the case in the USSR. If market suppliers have no access to budget funds, stealing will be difficult, as in the USSR. In turn, the procurement activities of state-owned supplier companies should be subject to strict price control by independent, well-motivated state-owned auditors who perform this role anonymously. Then the size of kickbacks will drop sharply, and with further measures, they will simply disappear. The current system deliberately traps officials in corruption schemes so they can later manipulate them. But those who have become too greedy and/or violate the system’s rules will eventually become the “result” of the fight against corruption, which is absolutely impossible to defeat in the current system.

4) Implementation of investment projects within a special, closed system of special accounts, where all contractors undergo rigorous state accreditation to participate. There will be no “shell companies” or (!) “in-laws” from local administrations. Contractual breaches will result in fines and permanent loss of accreditation, along with any associated parties. This model will eliminate mechanisms for corruption and kickbacks, making them physically impossible.

Links:

https://dzen.ru/a/X5XFrNK35BKIAfOk

Murray Rothbard, “A History of Money Circulation and Banking in the United States,” Society, 2009, p. 48, http://finbook.news/bankovskoe-delo-book/gosudarstvennyie-bumajnyie-dengi-12108.html

Amosov A.I., Evolution of the monetary system of Russia, http://historystudies.org/2012/06/amosov-ai-evolyuciya-denezhnoj-sistemy-rossii/

S. Glazyev, The Chinese Economic Miracle: Lessons for Russia and the World, 2023

S.F. Sharapov, Paper Ruble (Its Theory and Practice), http://static.my-shop.ru/product/pdf/112/1116819.pdf

M2, or the Magic Pill for GDP, https://dzen.ru/a/XxhfCQp0UTsTsTgU?ysclid=lz2irq2wui775646665

The Ministry of Industry and Trade stated the need for new industrialization (RIA News)

https://www.interfax.ru/business/922467

https://www.ng.ru/economics/2023-09-03/1_8816_instability.html?ysclid=lpkwpypcg7655515940

Nabiullina: The printing press is taking us back to the USSR, http://ktovkurse.com/rossiya/nabiullina-pechatnyj-stanok-vozvrashhaet-nas-v-sssr

• Alexander Odintsov