UNHRC resolution is a diversion: Blake’s real target is the rupee and the economy!
Posted on March 4th, 2012
Those who ought to be keeping an eye on that shifty neocon agent Robert O BlakeÃƒÆ’Ã‚Â¢ÃƒÂ¢Ã¢â‚¬Å¡Ã‚Â¬ÃƒÂ¢Ã¢â‚¬Å¾Ã‚Â¢s conspiracies for Sri Lanka need to be awake to the possibility that the ridiculous move through his off-sider Maria Otera at the UNHCR and the rapid slide of the Sri Lankan rupee at the same time may not be sheer coincidences.
It is likely that Sri Lanka will be able, with the help of the real ÃƒÆ’Ã‚Â¢ÃƒÂ¢Ã¢â‚¬Å¡Ã‚Â¬Ãƒâ€¹Ã…â€œinternational communityÃƒÆ’Ã‚Â¢ÃƒÂ¢Ã¢â‚¬Å¡Ã‚Â¬ÃƒÂ¢Ã¢â‚¬Å¾Ã‚Â¢ of the non-aligned countries and the 53 member Islamic nations group, to laugh away BlakeÃƒÆ’Ã‚Â¢ÃƒÂ¢Ã¢â‚¬Å¡Ã‚Â¬ÃƒÂ¢Ã¢â‚¬Å¾Ã‚Â¢s suggestions that Sri Lanka owes some kind of duty to the neocon cabal to follow their diktats: Sri Lanka will of course, implement the recommendations of the Lessons Learnt and Reconciliation Commission (LLRC).
The almost seven per cent depreciation of the Sri Lankan rupee against the US dollar so far this year to coincide with the UNHCR sessions could be signalling the real attack they are planning on President Rajapakse and his government: the free fall of our rupee this year so far, since the ÃƒÆ’Ã‚Â¢ÃƒÂ¢Ã¢â‚¬Å¡Ã‚Â¬Ãƒâ€¹Ã…â€œexpert adviceÃƒÆ’Ã‚Â¢ÃƒÂ¢Ã¢â‚¬Å¡Ã‚Â¬ÃƒÂ¢Ã¢â‚¬Å¾Ã‚Â¢ of the International Monetary Fund (IMF) was adopted, is only second to that of the similarly beleaguered IranÃƒÆ’Ã‚Â¢ÃƒÂ¢Ã¢â‚¬Å¡Ã‚Â¬ÃƒÂ¢Ã¢â‚¬Å¾Ã‚Â¢s rial.
The low level it reached on 28 February (122.35 per dollar) and the Reuters monthly forex poll forecast ÃƒÆ’Ã¢â‚¬Å¡Ãƒâ€šÃ‚Â that it will fall to 128.50 by the end of August (they know!) should ring alarm bells in government quarters; a closer look at the weirdness of the neocon cabalÃƒÆ’Ã‚Â¢ÃƒÂ¢Ã¢â‚¬Å¡Ã‚Â¬ÃƒÂ¢Ã¢â‚¬Å¾Ã‚Â¢s mentality and their modi operandi bear evidence to this.
The resident agent of the IMF Koshy Mathai could not hide his delight when he declared: ÃƒÆ’Ã‚Â¢ÃƒÂ¢Ã¢â‚¬Å¡Ã‚Â¬Ãƒâ€¦Ã¢â‚¬Å“We think that the exchange-rate adjustment was a step in the right direction and should help support Sri LankaÃƒÆ’Ã‚Â¢ÃƒÂ¢Ã¢â‚¬Å¡Ã‚Â¬ÃƒÂ¢Ã¢â‚¬Å¾Ã‚Â¢s export competitiveness and safeguard its reserves over the medium termÃƒÆ’Ã‚Â¢ÃƒÂ¢Ã¢â‚¬Å¡Ã‚Â¬Ãƒâ€šÃ‚Â: this is not surprising.
According to one of the most widely quoted pieces of research in macroeconomics from the book Currency devaluation in developing countries: Essays in International Finance (1971) by the Harvard professor Richard N. Cooper, nearly 30 per cent of developing country governments who had presided over a ÃƒÆ’Ã‚Â¢ÃƒÂ¢Ã¢â‚¬Å¡Ã‚Â¬Ãƒâ€¹Ã…â€œcurrency devaluation episodeÃƒÆ’Ã‚Â¢ÃƒÂ¢Ã¢â‚¬Å¡Ã‚Â¬ÃƒÂ¢Ã¢â‚¬Å¾Ã‚Â¢ of 10 per cent or more fell within 12 months, compared to just 14 per cent in a control group.
A slightly relevant, but un-publicised fact is that Cooper was also the chairman of the US National Intelligence Council between 1995 and 1997!ÃƒÆ’Ã¢â‚¬Å¡Ãƒâ€šÃ‚Â Based on the fact that the IMF, the World Bank and other money lenders always preach that path to economic salvation for developing countries is paved with devalued currencies, a cynic may come to the conclusion that Cooper probably sent a subliminal message to his masters of the potency of currency devaluation as an instrument of regime change!
The reason is, becausethe dud-orthodoxy the IMF imposes on the developing world that currency devaluation can help them achieve beneficial economic outcomes by increasing demand for exports (tea, rubber in our case), leading to more desirable balances of trade and to lower unemployment rates in turn, cannot withstand the common-sense test.
The theory that currency devaluation can help economic recovery is based on experience in the rich world prior to and during the Great Depression of the 1930s, under a totally disparate set of economic, technological and social conditions to those in the developing world; under Globalisation now they are cynically selling this sinister theory to the developing world where causes of poverty and conditions for growth are totally different.
In richer countries with high wage levels, currency devaluations by governments could possibly lead to reductions in unemployment by lowering real wages, providing an incentive for the business owning class to employ more labour. But in developing countries, where subsistence level or lower wages are the norm, it is not the primary factor limiting employment, and wages lower than the current levels can only lead to starvation of the workers! They know this.
IMFÃƒÆ’Ã‚Â¢ÃƒÂ¢Ã¢â‚¬Å¡Ã‚Â¬ÃƒÂ¢Ã¢â‚¬Å¾Ã‚Â¢s usual advice on currency devaluation is contrary to its avowed objective to ÃƒÆ’Ã‚Â¢ÃƒÂ¢Ã¢â‚¬Å¡Ã‚Â¬Ãƒâ€¹Ã…â€œstabiliseÃƒÆ’Ã‚Â¢ÃƒÂ¢Ã¢â‚¬Å¡Ã‚Â¬ÃƒÂ¢Ã¢â‚¬Å¾Ã‚Â¢ foreign-exchange rates, and it inevitably leads to devastating consequences for developing countries: the theory ignores the fact that most of the exports of countries like Sri Lanka are not necessarily ÃƒÆ’Ã‚Â¢ÃƒÂ¢Ã¢â‚¬Å¡Ã‚Â¬Ãƒâ€¹Ã…â€œprice elasticÃƒÆ’Ã‚Â¢ÃƒÂ¢Ã¢â‚¬Å¡Ã‚Â¬ÃƒÂ¢Ã¢â‚¬Å¾Ã‚Â¢ (demand for them is mostly independent of price) and more importantly, it increases the price of imports (exports of the rich world!). This second factor is crucial for a country like Sri Lanka currently busy trying to catch up with all the development tasks they couldnÃƒÆ’Ã‚Â¢ÃƒÂ¢Ã¢â‚¬Å¡Ã‚Â¬ÃƒÂ¢Ã¢â‚¬Å¾Ã‚Â¢t undertake over the 30 year period to 2009: this is the reason why there is a trade ÃƒÆ’Ã‚Â¢ÃƒÂ¢Ã¢â‚¬Å¡Ã‚Â¬Ãƒâ€¹Ã…â€œdeficitÃƒÆ’Ã‚Â¢ÃƒÂ¢Ã¢â‚¬Å¡Ã‚Â¬ÃƒÂ¢Ã¢â‚¬Å¾Ã‚Â¢!
The professed advantages of devaluation through foreign trade and tourism are ephemeral if they materialise at all, and disappear when the domestic prices and wage rates adjust to the new state of affairs. The final result is that producers of the devaluing country end up getting less for what they export and paying more for what they want to import; concomitantly they are forced to restrict consumption.
Moreover, the current economic crises in the US, Europe and Japan has given rise to a so-called ‘currency-war’ caused by every country aiming to achieve higher exports, and depreciation simply cannot lead to growth in exports to these countries because the relative exchange value of currencies may remain unchanged.
The net effect of rupee depreciation for Sri Lanka therefore, will be a severe curtailment of economic growth by reducing imports of machinery, equipment etc. essential for the growth process to continue; international money lenders in the meantime will grab hold of the economy further with the so-called foreign ÃƒÆ’Ã‚Â¢ÃƒÂ¢Ã¢â‚¬Å¡Ã‚Â¬Ãƒâ€¹Ã…â€œinvestmentsÃƒÆ’Ã‚Â¢ÃƒÂ¢Ã¢â‚¬Å¡Ã‚Â¬ÃƒÂ¢Ã¢â‚¬Å¾Ã‚Â¢ through the (now cheaper) government securities and purchases of businesses ÃƒÆ’Ã‚Â¢ÃƒÂ¢Ã¢â‚¬Å¡Ã‚Â¬Ãƒâ€¹Ã…â€œgoing underÃƒÆ’Ã‚Â¢ÃƒÂ¢Ã¢â‚¬Å¡Ã‚Â¬ÃƒÂ¢Ã¢â‚¬Å¾Ã‚Â¢ due to the foreign exchange burden; already, there has been a net inflow of US dollars 216 million during the period 9-29 February 2012 while the rupee was free-falling! Additionally, as it happened on 22 February, the government may be forced to purchase its own currency with foreign reserves, depleting its own assets further.
The deleterious effects of rupee depreciation will be accentuated due to the fact that it is happening on the back of higher interest rates, increased by 0.5 per cent on 3 February by the Central Bank, with a view to contain credit growth, (except by commercial banks raising funds abroad)! Foreign money lendersÃƒÆ’Ã‚Â¢ÃƒÂ¢Ã¢â‚¬Å¡Ã‚Â¬ÃƒÂ¢Ã¢â‚¬Å¾Ã‚Â¢ wishes of lower inflation (in order to maintain the value of their money) will also be met due to the particular manner in which this statistic is calculated: however, the costs of food, fuel and other basic necessities will increase significantly, increasing the pressure on the local poor.
In short, the so-called improved ÃƒÆ’Ã‚Â¢ÃƒÂ¢Ã¢â‚¬Å¡Ã‚Â¬Ãƒâ€¹Ã…â€œcompetitivenessÃƒÆ’Ã‚Â¢ÃƒÂ¢Ã¢â‚¬Å¡Ã‚Â¬ÃƒÂ¢Ã¢â‚¬Å¾Ã‚Â¢ resulting from devaluation means that the citizens of Sri Lanka are now able to buy fewer real imports for a given amount of real exports, in reality meaning economic ÃƒÆ’Ã‚Â¢ÃƒÂ¢Ã¢â‚¬Å¡Ã‚Â¬Ãƒâ€¹Ã…â€œimpoverishmentÃƒÆ’Ã‚Â¢ÃƒÂ¢Ã¢â‚¬Å¡Ã‚Â¬ÃƒÂ¢Ã¢â‚¬Å¾Ã‚Â¢.
There are a few other related developments: Standard & Poor, one of the so-called ‘Ratings Services’ who gave the Lehman Brothers junk bonds an AAA rating, telling the world that everything is ‘hunky-dory’, has decided that Sri Lanka’s long-term foreign currency sovereign rating outlook is ÃƒÆ’Ã‚Â¢ÃƒÂ¢Ã¢â‚¬Å¡Ã‚Â¬Ãƒâ€¹Ã…â€œpositiveÃƒÆ’Ã‚Â¢ÃƒÂ¢Ã¢â‚¬Å¡Ã‚Â¬ÃƒÂ¢Ã¢â‚¬Å¾Ã‚Â¢ rather than ÃƒÆ’Ã‚Â¢ÃƒÂ¢Ã¢â‚¬Å¡Ã‚Â¬Ãƒâ€¹Ã…â€œstableÃƒÆ’Ã‚Â¢ÃƒÂ¢Ã¢â‚¬Å¡Ã‚Â¬ÃƒÂ¢Ã¢â‚¬Å¾Ã‚Â¢. Another such agency, Fitch, has rated Sri Lanka to ‘BB-‘, upgrading from an earlier ‘B+’! Fitch has also advocated additional rate hikes as a remedy against inflation caused by currency depreciation, and has asked the government to remove all fuel and power subsidies! Meanwhile, the IMF is completing the 7th review of the US$ 2.6 billion standby facility by the end of March 2012 and will conduct an 8th final review later.
The funny thing is that Sri LankaÃƒÆ’Ã‚Â¢ÃƒÂ¢Ã¢â‚¬Å¡Ã‚Â¬ÃƒÂ¢Ã¢â‚¬Å¾Ã‚Â¢s deficit is only around seven per cent of gross domestic product (GDP) and the comparable rates for Britain and the United States are 12.6 and 11.2 respectively: this is only a fraction less than GreeceÃƒÆ’Ã‚Â¢ÃƒÂ¢Ã¢â‚¬Å¡Ã‚Â¬ÃƒÂ¢Ã¢â‚¬Å¾Ã‚Â¢s (12.7) whom they say are close to bankruptcy. But there is no talk of the pound sterling being devalued and most of the US scheming around the globe is, at least in part, aimed at preveningt the slide of the dollar!
So why are they panicking over Sri Lanka?
Because this is the sort of mechanism through which they could achieve regime change in Sri Lanka without having to send an army of a ÃƒÆ’Ã‚Â¢ÃƒÂ¢Ã¢â‚¬Å¡Ã‚Â¬Ãƒâ€¹Ã…â€œcoalition of the willingÃƒÆ’Ã‚Â¢ÃƒÂ¢Ã¢â‚¬Å¡Ã‚Â¬ÃƒÂ¢Ã¢â‚¬Å¾Ã‚Â¢, or to shed a drop of American blood!
They are trying to turn the economically oppressed poor of Sri Lanka, currently solidly backing President Rajapkse against him, and get them to do their job for them: a tried and tested formula.