Topic: Unusual Situation as Russia’s Ruble bounces back as world best per fiat currency (Read 315 times)

A little earlier, I already wrote how Russia drove itself into a stalemate with the ruble.
Russia's problem is that Russia, due to a rather backward economy, is highly dependent on the import of technology, goods and services. To buy all this, you need a huge amount of currency. And the main inflow of currency gives only gas and oil. This creates a paradox:
- a strong ruble is more a game for the public, they say, that's how stable we are. At the same time, import prices should also decrease, but this is not happening. And it won't happen. Because this "stability" is also fake. But at the same time, a severe drawdown of budget revenues begins, which is drawn up and counted in rubles. More expensive than the ruble - the budget will receive less than the ruble, after the sale of foreign exchange earnings. I have already cited data from the Russian budget, which export-dependent income items have decreased and by how much due to the "stability of the ruble."
- real ruble, i.e. cheap - of course, it will make the budget not only not in deficit, but even in surplus! But this means wild inflation, rising prices, falling incomes. The need to receive even more currency, despite the fact that there are no additional sources, and the existing flows are already decreasing, i.e. oil that has fallen under sanctions is bought by China and India at a dumping price of about $40 per barrel, but not $100+ on the market or $70+ as it is budgeted for in Russia!

Although Putin, with his own mouth, voiced the "new economic theory" that the cheap ruble is a net benefit to everyone, and by itself speaks of the stability of the economy

No, I understand that Putin and the company are not idiots, and do not store their stolen wealth in the ruble. Dollar, euro, and of course in European or American banks. But what about 100+ million people? As always, "you have to be patient! you need a breakthrough! There is no money, all the best to you"?

Sanctions coming from the US will surely affect Russia and is doing the same currently. However, how many of them really against Russia? There is still eastern hemisphere whose relying on the Russian resources such as crude oil, grains, vegetables and few other things. This means huge income still flowing into and outside Russia irrespective of sanctions imposed by westerners.

Ruble recently dumped, but it was getting stronger since a week. The money is still getting exchanged like old days and even though they are at war, they have money and they are more than surviving.

I find this thread interesting because at the time I created one that I titled: "The ruble is going to hell" and ended up editing the title:

The ruble is going to hell (not anymore?)


Doing a search I see that, indeed, today the ruble is stronger against the USD and the Euro than before the conflict.

It can't be all joy, however, as it is not in the interest of an exporting power to have a currency that is too strong, as Sithara007 comments, but it seems that the move has not gone completely wrong for Putin.

The currency I do not see a very bright future for is the Euro, with the fiscal deficits of some countries, especially in the south, the energy policy, the insatiable voracity of regulation, etc.

The other day, the head of the Central Bank of Russia, Elvira Nabiullina, gave a big press conference, and I got the impression that Russia, under the pressure of strong external circumstances, has taken a trend towards a serious structural restructuring of its economy in order to stop unsuccessfully fighting the rapidly strengthening ruble, but rather try to benefit from it . The Russian economy has a chronic lack of money supply and it seems that now this can be corrected without the risk of a surge in inflation. Let's see, at least now we can confidently say that Russia successfully withstood the sanctions shock and was able to withstand the blow, which, according to the West, should have destroyed it. Of course, there are difficulties and the negative consequences of the sanctions will still manifest themselves, but in fact the reality turned out to be much better than the most optimistic expectations.

The Russian central bank is now desperately trying to stop the Ruble from going up any further. For the federal government, the expenses need to be spent in Rubles and most of the revenues are in the form of Euro or US Dollar. If the Ruble goes up any further then the cushion that they enjoy as a result of the rising oil and gas prices will be lost. As of now, Ruble is trading at a rate of $1 = ₽57.50. I would say that a more acceptable exchange rate for the government would be somewhere between $1 = ₽65 to $1 = ₽70.

Are American economists really baffled by this? Who are these American economists that the article is talking about?

Actually, this doesn't speak much of Russia's economy. Neither does it really speak much on the ruble. But this speaks a lot of how far Putin can go in order to make it appear as if the ruble is not falling down. There are extreme capital controls and other authoritarian steps that are currently being implemented by Kremlin in order to stop the freefall of the ruble.

Well, it's not so hard to implement knowing that power in the country only resides in a single person. But how long could this last? Surely, this isn't the sustainable way to have a working currency.

There's actually a similar discussion here.

This is one of the issues that is fueling inflation in the EU Zone. The Euro has lost more than 15% of its value against the USD during the last 12 months. And I don't believe that the European Central Bank has the resources available to strengthen the Euro. After Brexit, the EU is too much dependent on Germany, and even that country is in bad shape right now due to high prices for energy. In the long run, I foresee the Euro getting devalued even more against the USD. And it is not just the Euro. Even JPY and GBP have gone down against the USD recently.

Increasing the interest rate doesn't make it more valuable, it just makes it more "rare" compared to when it's low interest rate. However, it is not fully gone, it's there, the moment you drop the rates, the money will flood the markets all over again.

It's much better to not print more and more, that's what nations do and if you could stop doing that for a while, then other nations will keep doing it and yours will become more valuable, that's a bit more long term approach that would be better for every nation and would not have a bad side effect. The other parts I agree with, specially the EU one, they need to increase the rates very very quickly, 10% would be lovely and help everyone out.

Yes, 10% is high, they'll have devaluation and inflation. I agree on your analysis but not in the conclussion about the European Central Bank: the interest rates should be closer to zero to stop the climb on the prices and give back the purchase power to the people and companies.

I'm also of the opinnion of Nigel Farage: the European Central Bank has been given too much power.

Interest rates around 10% are considered pretty high. Having high interest rates in combination with a heavily regulated and manipulated currency market means that:
1.The national currency will have high value. Countries with higher interest rates have higher valued national currencies.
2.The national currency isn't fully convertible into foreign currencies, which means that the current market value isn't the actual value of that currency. Nobody knows the actual value of the Russian ruble.
I really wish the European Central bank to slowly raise the interest rates to levels around 10%, this would definitely make the euro more expensive, which might make the gas and oil import cheaper.

Well, today the Central Bank of Russia lowered the key rate from 11 to 9.5%, let's see how effective this measure will be in order to stop the further strengthening of the ruble.

So in order words, the current market condition favours US as they still remain above the UK in terms of financial stability?

Previously, Russian citizens bought US dollars and euros to travel abroad for tourism purposes.  The family budget for such trips was very large (at least 2-3 monthly salaries). 

However, Russians have now stopped traveling abroad.  This is due to the closure of borders and a general drop in their standard of living. 

This led Russians to stop buying euros and dollars, and began to keep all their money in rubles.  This helps to keep the ruble at a high level. 

Also in Russia, the number of imported goods has sharply decreased. 

For example, the purchase of smartphones and laptops in quantitative and qualitative terms fell by 26 percent compared to the same period last year.  People prefer to repair old electronics and home appliances rather than throw them away and buy new ones. 

One can rejoice that the ruble exchange rate against the dollar and the euro has strengthened, but in fact this event is driven by the general impoverishment of Russians, the decline in their standard of living and general cultural and technological degradation.

Owh. Surprisingly OPEC members are not the top of which their currency had boost even after the gas prices are rising.  And I thought its Yuan that will  keep going but Brazilian real, Mexican and Columbian Peso after Rubles seem an interesting result. What did they do, rob US?

Unfortunately, its not something a regular citizen of these countries feel the economy to be better. Or are they just not printing their own currency?
Or it could be that US investors are seeing the future in South America so the invest here.

Point me to where I was predicting a complete economic meltdown in Russia. I'll wait. What I posted in this thread was data that literally already materialized; not something I was speculating on.

https://twitter.com/tinkoff_bank/status/1534795372815605766

Russian bank takes 1% monthly fee from accounts that hold over $1,000 in foreign currency. So, basically Russia is forcing everyone to sell foreign currency and buy rubles. This isn't a sign of a healthy economy, it's a sign of a huge economic crisis. In short term it artificially keeps their currency high, in long term the official exchange rate will be ignored, and anyone who is doing business with Russia will use the unofficial one, which will be much lower.

Thats because biden and putin have worked together to raise oil prices up and over the moon.

All this was done to boost oil prices and as prez bush used to say.

Mission Accomplished.

Russia and USA are like a coin. And the rules of the game are heads I win tails you lose.

They work hand in hand much like the hero in wrestling works hand in hand with the villian in wrestling.

LOL.. you guys have been predicting a complete economic meltdown in Russia for more than 3 months now. The Russian currency and stock market seems to be doing just fine. None of your doomsday predictions have materialized. On the other hand, the commodities that Russia export have gone up in prices by manifold. Wheat went up from $200 per tonne to $500 per tonne. Crude went up from $40 per barrel to $125. LNG used to cost as little as $50 per thousand cubic meters. Now it costs $1,000 to $1,200. If anyone is suffering, it is not the people of Russia. The hydrocarbon importers, such as EU, India and Japan are suffering.

This is a very old article from the beginning of March, the information in it is not up to date at the moment. Today, Putin canceled the mandatory sale of foreign exchange earnings for exporters, yesterday the Central Bank of Russia increased the export limit from $50,000 to $150,000. Russia is trying in every possible way to weaken the rapidly strengthening ruble, because it is unprofitable with a large positive trade balance. So far, it is not working out very well, apparently the Central Bank will again reduce the key rate in the near future.

You are reading all wrong, you are intepreting exactly the opposite of what the graph says. If comparing USD to RUB, when the line goes up it means you can buy more RUB with a dollar, so, the RUB worth less (or the dollar worth more) the higher the line. When the line goes down it means you can buy less RUB with a dollar, that's means RUB is getting stronger (or the dollar is getting weaker).

If I'm not explaining it well, imagine you are visiting Russia from USA, and you go with dollars. The exchange rate was 1 USD = 135RUB during the war, but now you only get 58RUB. The RUB is more expensive.

And yes, it is true that the RUB has recovered its value and now worth more than before the war.



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I'll add another piece of data so you guys could know if the price is "real": Check if people in that country (Russia in this case) can freely exchange RUB for USD or, in the other hand, the exchange is limited by law. If Russia limited the exchange by law, RUB will look stronger than what it actually is (as it looks right now).

For example, in Argentina (USD/ARS), the exchange rate is 1USD = 110ARS, but only private banks can access to that price. If you have ARS and want to exchage for USD, you must to pay 210ARS in a paralel market. Politicians do this by limiting the amount of dollars you can freely exchange, or/and, by taxing the exchange. Argentina does both: If you have ARS you can only exchange for 200 USD maximum, and you have to pay a tax of 65%.


EDIT: Yes, Russia limited by law the amount of RUB to USD you can exchange: https://www.washingtonpost.com/business/2022/03/08/ruble-dollar-exchange-barred/