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Russian lawmaker seeks to ban US dollar, predicts 2017 collapse

Published time: November 13, 2013 19:53
Edited time: November 18, 2013 09:36
RIA Novosti / Mikhail Mordasov

RIA Novosti / Mikhail Mordasov

To protect Russians against the “collapsing US debt pyramid”, a Russian legislator has filed a draft bill to ban circulation of the currency in Russia.

Once a Moscow mayoral hopeful, Mikhail Degtyarev, 32, likens the US dollar to a worldwide ponzi scheme which he says is scheduled to end in 2017.

“If US national debt continues to grow at its current rate, the dollar system will collapse in 2017,” the submitted draft legislation says. 

“In light of this, the fact that confidence in the US dollar is growing among Russian citizens is extremely dangerous,”  Degtyarev wrote in his explanatory note attached to the bill. 

The bill would impose a ban on dollars within a year of its passage, and any private citizen holding accounts in dollars would either need to spend the money or convert it to another currency. There is no proposed ban on the euro, British pound, yen, or yuan.

If one doesn’t exchange or transfer dollars within a year, the dollars will be seized by officials, and reimbursed in rubles within 30 calendar days.

Under the proposed legislation, Russians would still be able to use dollars abroad and have foreign bank accounts, as well as buy goods on the Internet in dollars.

The Russian government, Central Bank, Foreign Ministry, Federal Treasury, Federal Security Service, and other state branches would be exempt from the law.

To protect Russian nationals, Degtyarev proposes to end dollar transactions and deposits at Russian banks, which would give rise to the ruble, and end dependence on the world’s dominant currency.

Part of the bill aims to restore the prestige of the ruble, which has weakened as the Russian economy battles inflation and slow growth.

Raising the prestige of the ruble by nixing foreign currency isn’t a novel idea- it was practiced during the Soviet Union when holding foreign currencies was illegal. A similar ‘anti-dollar’ proposal was filed by Duma deputies in 2003, but completely flopped.

Moscow, a developing financial center, is home to several international corporations, and many companies pay their employees in dollars, or ruble salaries pegged to the dollar.

If the bill garners enough support, it will continue onto as many as three preliminary hearings before being passed into law.

Degtyarev has made a name for himself with his outlandish proposals- from giving women extra holidays during menstruation, to his declaration Russia would lead the fight in defeating the antichrist. He serves as the head of the science and technology committee in the lower house of the Duma.

The populist Liberal Democratic Party (LDPR) is a political platform for Vladimir Zhirinovsky, who is famous for political antics.

On the same day, November 13, Belarus issued a statement denying rumors they were mulling a similar currency ban, after an opposition group reported a currency circulation ban that would get rid of dollars and euros in two months. 

Citing Alexander Timoshenko, a representative of the Belarus National Bank, Interfax reported the rumors were “absolute nonsense” for a country with an open economy.

Dollars in demand

Public demand for foreign banknotes in Russia, especially dollars, has greatly increased as the ruble continues its slow devaluation. 

The Russia’s Central Bank (CBR) said they believe the ruble has stabilized, but that hasn’t curbed investors, both private and public, to not put all their rubles in one basket.

The aggregate demand for foreign currency in September 2013 increased $9.1 billion, up 7 percent from August, according data from the the Bank's September 2013 Review of State and Domestic Foreign Currency Market report, available on its website.

The Bank has allowed the ruble to flow more freely to accommodate foreign investment and financial markets, but this has created a tough inflation balancing act for the CBR.

Demand for dollars in September 2013 rose $5.9 billion, up 11 percent from August. Over the last year, aggregate demand for dollars has dropped 1 percent, but has jumped 12 percent by individuals' purchase and conversion of greenbacks.

The ruble’s daily trade range is 32.45–39.45, which the regulator increased on Tuesday. The bank buys between $200 and $400 million in rubles per day to counter losses. At 20:15 Moscow time, the ruble was trading 32.7643 per one US dollar.

Consumer prices rose 6.3 percent from October, year-on-year, which is within the bank’s target inflation range of 5-6 percent. Inflation fears have prevented the bank from cutting the official interest rate for the last 14 month.

Over $13.3 billion in foreign currency flowed into (bought, acquired) authorized Russian banks in September, and nearly $13.1 billion flowed out.

In foreign currencies, total demand for the dollar in September was 65 percent, and 34 percent for euros.

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