Saturday, November 08, 2014

Ah, Poor Vlad /sarc

Russia's Currency Is Plummeting and Putin's Billionaires Are Cannibalizing Each Other

He must be longing for the days of the centrally planned economy handled by the politburo.
"The ruble has been nosediving for weeks, despite the fact that the Russian Central Bank has spent some $40 billion over the last two months to prop it up. In January, you would have to shell out 32.86 rubles to buy one U.S. dollar. Through October, that number edged higher and higher into the thirties, prompting nervous jokes from Russians as they watched their national currency lose value before their eyes. By November 1, a Russian would need to scrape together over 43 rubles to buy one U.S. dollar, a drop of over 30 percent.

Every day since November 1 has brought new lows for the ruble. By Wednesday, the Russian Central Bank, which had been spending billions of its reserve dollars every day to prop up the Russian currency, announced it was no longer going to do so. It was going to let the ruble float. (Technically speaking, it said that it would “only” spend $350 million a day to prop up the ruble.)

The ruble promptly nosedived."
[---]
"On Friday, the exchange rate was being tracked not by the day, but by the minute. The ruble had collapsed to a historic low: nearly 49 rubles to the dollar, nearly 60 rubles to the Euro."
[---]
"This isn’t a theoretical currency game. Much of what you see in Russia is imported, especially what the Russian middle class eats, drives, and wears. And the weaker the ruble, the fewer dollar-denominated iPhones you can buy with it. A crashing ruble makes prices do the opposite. According to the Russian government, projected inflation will hit somewhere between nine and 9.5 percent. Last year, it was 6.5 percent. In the U.S., for comparison, inflation is just 1.7 percent."
[---]
"There are several factors that have caused the ruble to disintegrate before our eyes.

One is the ongoing stagnation of the Russian economy, whose growth rate has been hovering near zero for a year. And before that, it was already in decline.

Second is the falling price of oil for reasons that have nothing to do with Russia(Emphasis mine): OPEC trying to undercut its American competition. This is a problem for Russia, which is so heavily dependent on oil that every year’s federal budget is pegged to an oil price.(Emphasis mine) This year’s was $97 a barrel. Next year’s will be $96. Meanwhile, oil prices have been far lower than that, hovering in the low eighties.

Third is Russia’s Ukraine adventure and Western sanctions. “Sanctions closed access to foreign capital for five or six Russian companies, but the result is that it’s now closed for everyone,” says Sergey Aleksashenko, a former Russian deputy minister of finance. The result is that, to pay off their debts, Russian companies now have to buy a large amount of dollars to fork over to their creditors. And with that comes the psychological factor: panic."
So...what if Canada's Energy East pipeline is meant to do what I think it's meant to do - steal Russia's oil market from under their feet? Better have our northern border well guarded.

RTWT

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