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Victor Ivanov Cites Glass-Steagall in Washington

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Victor Ivanov, the director of Russia’s Federal Drug Control Service (FDCS), shocked a Washington audience today with a presentation on the global financial bubble economy as the driving force behind the murderous plague of drug addiction worldwide, in which Russia is a focal point. Ivanov called for "drastic transformation of the international financial system," in order to stop this process and "liquidate global drug trafficking." He added that a part of the change could be guided by "a revival of the logic of the Glass-Steagall Act" of the United States in 1933.

Ivanov is in the USA for the fifth meeting of the Counter-narcotics Working Group of the U.S.-Russia Bipartisan Presidential Commission, held in Chicago earlier this week. Head of the FDCS since 2008, Ivanov was previously deputy chief of the Kremlin staff and then assistant to Vladimir Putin as Russian President. He gave his address today as the featured speaker at a roundtable hosted by the Center for Strategic and International Studies (CSIS) on the topic, "Global Narcotics Flows and the Global Financial and Economic Crisis."

The presentation was illustrated by a series of dramatic graphics, showing the relationship of "dirty" money and the international financial crisis, driven by a huge speculative bubble. "Assertions about the prevailing role of criminal ’dirty’ drug money in the global crisis are also confirmed by other numerous evidence," said Ivanov, "including the data at the disposal of our service. It is also obvious and analytically confirmed that the existing financial system, which operates numerous growing financial instruments like options, futures, swaps and other derivatives that fill the so-called ’financial soap bubble,’ can no longer exist without injections of ’dirty’ money."

Ivanov cited the estimates of Antonio Costa, former executive director of the UN Office of Drug Control, on the injection of narco-dollars into major world banks during their liquidity panic in 2008-2009. "It is quite symbolic that the high-ranking international official emphasized that it is not a problem with individual banks, but with the general setup of the whole financial system," Ivanov said.

The accompanying graphic showed the "financial soap bubble" as being $600 trillion in registered, unsecured financial liabilities. In the next slide, the financial soap bubble was depicted as crushing the physical economy, represented by a high-speed train. Ivanov then illustrated his statement that "drug money and global drug trafficking are actually not just valuable elements but, as donors of scarce liquidity, a vital and indispensable segment of the whole monetary system," by detailing global drug streams on a map of the globe.

The Russian anti-drug chief reported that in his Chicago meeting with his American counterparts, they had discussed the financial side of the international drug trade. He said that less than one-half of 1 percent of drug money, however, is seized: the rest of it streams into the financial bubble. While Ivanov named Wachovia and Bank of America for their already publicized involvement in drug money laundering, he said that the problem is not individual banks, but the entire system. The anti-dope fight must expand from on-the-ground drug production and trafficking, into international finance, the Russian official insisted.

Victor Ivanov’s concluding point was this: "Drastic transformation of the international financial system will be obviously required to liquidate global drug trafficking." He said that initial steps had been taken with the G20’s passage of a resolution on monitoring financial flows. "To a certain extent," Ivanov continued, "we are observing a revival of the logic of the Glass-Steagall Act adopted in the USA in 1933, at the height of the Great Depression, which separated deposit and investment functions of banks. However hard restrictions to prevent criminal money attraction are required yet more. In other words, liquidation of the financial bubble alone will not be enough. The key way to liquidate global drug trafficking is to reformat the existing economy and to shift to an economy that excludes criminal money and provides reproduction of net liquid assets, i.e., to an economy of development, where decisions are based on development projects and special-purpose credits." As an example, he cited Russia’s Rainbow-2 proposal for infrastructure in Afghanistan, to revive its economy and replace the drug trade.

In reply to a question from EIR’s Bill Jones, regarding his remarks about Glass-Steagall, Ivanov said that of course he cannot tell the Untied States to reinstate that law, but that it was fundamentally necessary to separate the dirty money flows from the real economy, to "carve them out." He described the case of a drug addict, who spends all his money and strength on his addiction, while becoming personally unproductive and sick. This is just a microcosm of what happens in the global economy, he said.

Asked about the drug-terrorism connection, Ivanov said that specific cases, such as the financing of the Madrid train bombing by drug money, are well documented, but that the problem is systemic. The drug trade engenders criminal groups, who take over entire regions, as in Mexico. These may pursue their own political agendas, or be co-opted by political agendas from outside.

Ivanov said that U.S.-Russian collaboration is crucial. Satellite surveillance to identify poppy fields, for example, is useful, he said. But, Ivanov reiterated, drug eradication and interdiction are insufficient: the problem must be addressed in the international financial markets, which must now be a major locus of law-enforcement efforts.

Ivanov blasted a pro-decriminalization questioner, saying that this person’s suggestions would overturn the purpose of the original UN Charter, and would foster more crime.