Should Russia be defending the Rouble or should the government simply recognise changed economic circumstances and let it slide?


Enrique 3 December, 2008, 15:50	Russia only can let the Ruble to slide if inflation falls under 5% because with inflation over 12% it can only lead to more inflation. permalink quote 0 Enrique
Vijay Singh 5 December, 2008, 12:06	A wholly convertible currency means just that - 'Wholly convertible' Therefore the Ruble should be allowed to find its own strenght and/or weakness as the case may be. However, the competitiveness and the attraction of Russia should not diminish as a result of 'over correction' or too fast a devaluation!! Other than that a gradual devaluation can be allowed temporarily till such time as it starts on the Reverse course again.whenever. permalink quote 0 Vijay Singh
Johnny 8 December, 2008, 13:42	Don’t really have much of a choice, if your reserves are getting eating up, you have to let is slide (slowly). This may not be as bad as it sounds because the world is becoming deflationary, so the effect may not be as bad as expected. Plus every other country in the world is probably going to have to take on inflationary policy, as well. What should be done with this is to try and make manufacturing in Russia extremely attractive, even going as far as thinking about things like free trade zones, tax incentives for manufactures, and the like. Those little islands you have off the east coast are perfect locations for Casino’s, free trade zones, and the like. Perhaps Japan also needs a little more space, and that could be very beneficial to both. Of course here we talking normal economics, and the world is in a very unusual place right now. I believe the only thing that will fix this financial crisis is a new global central bank sitting under every country’s central bank. A new global reference currency is the only way to now kick-start a whole planet that has died. This is not a normal recession, money is now broken! Governments now have to spend money, but it has to be well spent on sustainable job creation, it has to be well spent. I think an inflationary policy is unavoidable, but the real trick is to try and do it with other countries together. Remember, they hurting as well. Have a little think about those islands of yours, make the land work for you. permalink quote 0 Johnny
mounir el-debs 15 December, 2008, 08:19	the pressure on russia to devalue???a curious thing,to say the least. 1-the whole fx system is free float.the path of the dollar against the yen ,and the euro is breathtaking.there are 5%shifts in a single day in those currencies,yet nobody is astonished.the USA is in default on its debts,and the deficits keep mounting. 2-the talk of devaluation is wrong,and politically motivated.russians do not need to keep savings in dollars.their business needs are mainly with europe,and asia. 3-the citizens faith in the currency,is a vote of confidence in a country,in its future.if russians want to go back to the yeltsine years,all they need to do is dump their rubles,for dollars. permalink quote 0 mounir el-debs
Stan 16 December, 2008, 10:29	I think the suggested by Johnny "new global reference currency" is the only long-term solution for Russia and the global economy. Invite the best minds to create some models of it for global discussion to find the best. permalink quote 0 Stan
Johnny 17 December, 2008, 13:44	Hi Stan, I permalink quote 0 Johnny
Johnny 17 December, 2008, 15:38	This thread on monetary and fiscal policy is by far the most important thread but it permalink quote 0 Johnny
Bianca 18 December, 2008, 05:30	I think that the current process is just about right. It is a good idea to let it slide a little, as it discourages imports and helps exports -- exactly the kind of stimulus needed at this time. So far, all the moves of the government look really good. They are now cleaning up the last vestiges of Jeltsinizm, as the followers of the liberal capitalism sect got themselves overextended. The funds set up for selective bailouts will remedy that, if called for. No, I cannot find a fault with the moves of the government yet. Much of the problem seems to be with the prophets of doom and gloom. All those that are hoping to see Russian economy hit, are out praying with shamans, and reading the enthrails of a pig. But those who hope for the end of the world, may really unnerve the public. The idiocy of buying dollars at this time, is mindbogling. The short-term boost is caused by the biggest margin call in history, and the resulting repatriation of dollar, shooting up the demand. Hope these folks will not hold the dollars for too long, though. As it is evident already from the several weeks data, that the reserves are being increased. Still, the "rainy day fund" is diminished by only one third, and that is reasonable. The development fund is not impared, and with the exception of car industry, Russia does not have much production that is very exposed to the consumer purchase contraction. So, all is well, even though in reading papers such as the British Economist, or FT, you would really get the wrong impression. If the Russian GDP growth will be impared next year, that will be a picnic compared to the negative growth in US, Japan and most EU countries. In Italy, the debt is 104% of GDP, and in US the foreign debt is at nearly 12 trillion dollars, while GDP officially stood at 14 trillion. However, the elimination of paper wealth both in banking and the stock market, will definitely bring GDP bellow 14 trillion. However, with ALL obligations counted, the debt is really 54 trillion. Even though US has the advantage that the dollar is the reserve currency, so it does not have to cover its deficits with exports --- too much is still too much. Russia by comparison has no government debt, has mutiple currency and gold reserves, and the exports that are not too dependent on US consumer. Raw materials are fungible, and will find markets in many world's economies, as the era of easy finished product imports may be over for many countries and for a foreseeable future. permalink quote 0 Bianca
Regular_John 18 December, 2008, 12:27	I know every country has its own problems due to this global down turn but as this a forum about Russia lets look at some of the problems this country faces now and in the future. Russia has an economy that is commodities driven (66% oil/gas) Medvedev stated this himself only a few days ago. Russia has set a budget for next year that is based on oil priced at $95 currently the price is $45 even with OPEC cutting production the price is unlikely to go beyond $60.Russia will have to use its stabilisation fund to meet its budget commitments for 2009. Russia has already cut production by 300 thousand barrels a day this is not a planned effort to help prices but based on the fact that many of its oil field are not economically viable if the price falls below a certain level ($70) and have already stopped pumping. Most of Russia permalink quote 0 Regular_John
Johnny 18 December, 2008, 15:40	Hi Bianca, I agree with your assessment, Russia does seem to be following excellent policy, in very hard times. I can permalink quote 0 Johnny
Howard 20 December, 2008, 11:13	Further to comment on possibilities of joint initiatives between the USA and China to stabilise world financial and economic conditions, it seems necessary to observe that many people do not seem to know that the USA does not to this day regard the government in Beijing as the legal government of China. When President Nixon made his historic visit in 1972, he only recognised them as de facto the government, and the USA took another seven years actually to send an ambassador to Beijing (who happened to be President George HW Bush as he was to be). This is also necessarily the case as large forces are stationed by the USA in Taiwan, regarded by Beijing as a "rebel province", which are only there legally because the "rebels" are recognised by the USA and various other nations around the world as the legal government of the whole of China!! Of course we are waiting and waiting for initiatives of the kind suggested by your previous correspondent Johnny, but not hearing anything, and it would seem that under the circumstances outlined above, it will be a long time in the making!! But I would not want to discourage people from working and hoping for it. permalink quote 0 Howard
Johnny 21 December, 2008, 05:29	It permalink quote 0 Johnny
Johnny 5 January, 2009, 06:20	The more I watch this crazy world starting to pull itself apart, the more I know that the greatest gift the BRIC’s could give humanity, is a new honest transparent uncontaminated global reserve currency. I don’t think humanity will make it without one. permalink quote 0 Johnny
Johnny 16 January, 2009, 13:43	Let me try making this very simple, if your BRIC currency is not ready in 3 months time, you have LOST. Do you understand that at this level the BRIC is not financed by the dollar it’s nothing more than a journal entry that countries will honor! What are you waiting for, you missing the biggest opportunity ever, you are sleeping! Here’s an example, in my country the finance minister is already going from, “we are the third best banking system in the world, and we are immune, to oh sherbit herbit, we are in deep do-do”. Now because your BRIC is not ready, we have no other choice, we have to refinance and in effect we now bail out the crooked bankers that did this to us. If you make the BRIC after that, too late she cried! Ask yourself why the Arabs are all procrastinating over the crisis, yes because you have not given them an alternative, there is no BRIC! Damn, I wish I were running China, I’d have a complete new clean alternate global financial system running already. They are buying time, and you are losing, cant you see that! You are losing! You have not given the world a choice, bad mistake! permalink quote 0 Johnny
Johnny 16 January, 2009, 14:08	We don’t need the dollar, we need the BRIC and we don’t care if Europe or the USA doesn’t honor it, we buy nothing from them! We do send them taxes and pension funds that are now absolutely worthless! Give the world the BRIC! The BRICs are sleeping! permalink quote 0 Johnny
John 17 January, 2009, 14:39	I can't believe no one has posted on this issue since January 5th!!! Is anyone watching the continuous and incremental devaluation of the Ruble by the Russian government??? SELL YOUR RUBLES!!! You have to exchange them for dollars or euros. Take a look at the receent Ruble value in detail and you will throw up your breakfast. permalink quote 0 John
Enrique 20 January, 2009, 03:27	John, The Pound Sterling has fallen even more than the Rouble, about 30% during the last year. And there is a clear difference between the Rouble and the Pound: a) The Pound is next to the Eurozone and attracted by the gravity of the Euro. b) The UK now imports an increasing quantity of oil when it used even to export oil from the North Sea. Experts agree that in a couple of years oil price will increase again because it is becoming an scarce resource and as a consequence of some, even if weak, economic recovery. So the ones keeping Roubles now will be better placed when the price of the Rouble starts rising again... permalink quote 0 Enrique
Enrique 20 January, 2009, 23:40	correction: "The ones keeping Rubles will be better placed when the price of OIL starts rising again" permalink quote 0 Enrique
Johnny 21 January, 2009, 11:49	It is a war, it could well be a bloodless war, but there are going to be a great many casualties on a global scale. It’s a war between those that want to control money and those that want to emancipate money. Those fighting for the liberation of money, a currency by the planet for the planet, will win, because the truth is on our side, nothing more than honesty is enough to recruit soldiers on this march to our last final freedom. If good men start the BRIC by nations, for nations, we not only gives ourselves a lifeline, we give countries with two heads a way to choose morality over servitude and eliminate their evil twin, a disease now very apparent in the USA. Remember that no good man can win, unless you have give him another life jacket, because his war is with the very vessel that now carries him. If Obama is for real, and you don’t help him, do not be surprised if he is defeated, he becomes his enemy, and the devil then knocks on your door. permalink quote 0 Johnny
Johnny 23 January, 2009, 12:00	No, don’t buy dollars! The weak Ruble is not a true reflection of the state of Russia, the underlying problem is a broken dollar and the dynamics are complex, the dollar is currently way over valued. Whatever you do, don’t do something silly like put your whole pension into the dollar, it’s very likely that you wont get back 2c on the dollar later. This is not the same thing that you had before; this is very different! There are strong rumors on the web that the USA will introduce the Amero, because the dollar is in so much trouble. If Russians panic, this is what will happen, you all rush out and buy dollars, that then weakens the Ruble even more, which makes life tougher at home, it make everything worse and more expensive. Rather buy Russian gold bars or Russian gold coins, that will keep its value, and it helps inflation. The problem now is that money all over the world is broken, not just Russia, no currency is safe! In fact what seems to be happening is that pretty soon, only the currency of a country will work in that country. These bankers now don’t trust each other at all, and the world is islanding! Yes, I know, they too stupid to fix it, and that’s the real problem. In Russia, its Ruble, or Gold… there is no other choice. The Yen is taking off, but that wont last either. Only buy something you can touch and hold. permalink quote 0 Johnny

Enrique 3 December, 2008, 15:50

Russia only can let the Ruble to slide if inflation falls under 5% because with inflation over 12% it can only lead to more inflation.

permalink quote Enrique

Vijay Singh 5 December, 2008, 12:06

A wholly convertible currency means just that - 'Wholly convertible' Therefore the Ruble should be allowed to find its own strenght and/or weakness as the case may be. However, the competitiveness and the attraction of Russia should not diminish as a result of 'over correction' or too fast a devaluation!! Other than that a gradual devaluation can be allowed temporarily till such time as it starts on the Reverse course again.whenever.

permalink quote Vijay Singh

Johnny 8 December, 2008, 13:42

Don’t really have much of a choice, if your reserves are getting eating up, you have to let is slide (slowly). This may not be as bad as it sounds because the world is becoming deflationary, so the effect may not be as bad as expected. Plus every other country in the world is probably going to have to take on inflationary policy, as well. What should be done with this is to try and make manufacturing in Russia extremely attractive, even going as far as thinking about things like free trade zones, tax incentives for manufactures, and the like. Those little islands you have off the east coast are perfect locations for Casino’s, free trade zones, and the like. Perhaps Japan also needs a little more space, and that could be very beneficial to both. Of course here we talking normal economics, and the world is in a very unusual place right now. I believe the only thing that will fix this financial crisis is a new global central bank sitting under every country’s central bank. A new global reference currency is the only way to now kick-start a whole planet that has died. This is not a normal recession, money is now broken! Governments now have to spend money, but it has to be well spent on sustainable job creation, it has to be well spent. I think an inflationary policy is unavoidable, but the real trick is to try and do it with other countries together. Remember, they hurting as well. Have a little think about those islands of yours, make the land work for you.

permalink quote Johnny

mounir el-debs 15 December, 2008, 08:19

the pressure on russia to devalue???a curious thing,to say the least. 1-the whole fx system is free float.the path of the dollar against the yen ,and the euro is breathtaking.there are 5%shifts in a single day in those currencies,yet nobody is astonished.the USA is in default on its debts,and the deficits keep mounting. 2-the talk of devaluation is wrong,and politically motivated.russians do not need to keep savings in dollars.their business needs are mainly with europe,and asia. 3-the citizens faith in the currency,is a vote of confidence in a country,in its future.if russians want to go back to the yeltsine years,all they need to do is dump their rubles,for dollars.

permalink quote mounir el-debs

Stan 16 December, 2008, 10:29

I think the suggested by Johnny "new global reference currency" is the only long-term solution for Russia and the global economy. Invite the best minds to create some models of it for global discussion to find the best.

permalink quote Stan

Johnny 17 December, 2008, 13:44

Hi Stan, I

permalink quote Johnny

Johnny 17 December, 2008, 15:38

This thread on monetary and fiscal policy is by far the most important thread but it

permalink quote Johnny

Bianca 18 December, 2008, 05:30

I think that the current process is just about right. It is a good idea to let it slide a little, as it discourages imports and helps exports -- exactly the kind of stimulus needed at this time. So far, all the moves of the government look really good. They are now cleaning up the last vestiges of Jeltsinizm, as the followers of the liberal capitalism sect got themselves overextended. The funds set up for selective bailouts will remedy that, if called for. No, I cannot find a fault with the moves of the government yet. Much of the problem seems to be with the prophets of doom and gloom. All those that are hoping to see Russian economy hit, are out praying with shamans, and reading the enthrails of a pig. But those who hope for the end of the world, may really unnerve the public. The idiocy of buying dollars at this time, is mindbogling. The short-term boost is caused by the biggest margin call in history, and the resulting repatriation of dollar, shooting up the demand. Hope these folks will not hold the dollars for too long, though. As it is evident already from the several weeks data, that the reserves are being increased. Still, the "rainy day fund" is diminished by only one third, and that is reasonable. The development fund is not impared, and with the exception of car industry, Russia does not have much production that is very exposed to the consumer purchase contraction. So, all is well, even though in reading papers such as the British Economist, or FT, you would really get the wrong impression. If the Russian GDP growth will be impared next year, that will be a picnic compared to the negative growth in US, Japan and most EU countries. In Italy, the debt is 104% of GDP, and in US the foreign debt is at nearly 12 trillion dollars, while GDP officially stood at 14 trillion. However, the elimination of paper wealth both in banking and the stock market, will definitely bring GDP bellow 14 trillion. However, with ALL obligations counted, the debt is really 54 trillion. Even though US has the advantage that the dollar is the reserve currency, so it does not have to cover its deficits with exports --- too much is still too much. Russia by comparison has no government debt, has mutiple currency and gold reserves, and the exports that are not too dependent on US consumer. Raw materials are fungible, and will find markets in many world's economies, as the era of easy finished product imports may be over for many countries and for a foreseeable future.

permalink quote Bianca

Regular_John 18 December, 2008, 12:27

I know every country has its own problems due to this global down turn but as this a forum about Russia lets look at some of the problems this country faces now and in the future. Russia has an economy that is commodities driven (66% oil/gas) Medvedev stated this himself only a few days ago. Russia has set a budget for next year that is based on oil priced at $95 currently the price is $45 even with OPEC cutting production the price is unlikely to go beyond $60.Russia will have to use its stabilisation fund to meet its budget commitments for 2009. Russia has already cut production by 300 thousand barrels a day this is not a planned effort to help prices but based on the fact that many of its oil field are not economically viable if the price falls below a certain level ($70) and have already stopped pumping. Most of Russia

permalink quote Regular_John

Johnny 18 December, 2008, 15:40

Hi Bianca, I agree with your assessment, Russia does seem to be following excellent policy, in very hard times. I can

permalink quote Johnny

Howard 20 December, 2008, 11:13

Further to comment on possibilities of joint initiatives between the USA and China to stabilise world financial and economic conditions, it seems necessary to observe that many people do not seem to know that the USA does not to this day regard the government in Beijing as the legal government of China. When President Nixon made his historic visit in 1972, he only recognised them as de facto the government, and the USA took another seven years actually to send an ambassador to Beijing (who happened to be President George HW Bush as he was to be). This is also necessarily the case as large forces are stationed by the USA in Taiwan, regarded by Beijing as a "rebel province", which are only there legally because the "rebels" are recognised by the USA and various other nations around the world as the legal government of the whole of China!! Of course we are waiting and waiting for initiatives of the kind suggested by your previous correspondent Johnny, but not hearing anything, and it would seem that under the circumstances outlined above, it will be a long time in the making!! But I would not want to discourage people from working and hoping for it.

permalink quote Howard

Johnny 21 December, 2008, 05:29

It

permalink quote Johnny

Johnny 5 January, 2009, 06:20

The more I watch this crazy world starting to pull itself apart, the more I know that the greatest gift the BRIC’s could give humanity, is a new honest transparent uncontaminated global reserve currency. I don’t think humanity will make it without one.

permalink quote Johnny

Johnny 16 January, 2009, 13:43

Let me try making this very simple, if your BRIC currency is not ready in 3 months time, you have LOST. Do you understand that at this level the BRIC is not financed by the dollar it’s nothing more than a journal entry that countries will honor! What are you waiting for, you missing the biggest opportunity ever, you are sleeping! Here’s an example, in my country the finance minister is already going from, “we are the third best banking system in the world, and we are immune, to oh sherbit herbit, we are in deep do-do”. Now because your BRIC is not ready, we have no other choice, we have to refinance and in effect we now bail out the crooked bankers that did this to us. If you make the BRIC after that, too late she cried! Ask yourself why the Arabs are all procrastinating over the crisis, yes because you have not given them an alternative, there is no BRIC! Damn, I wish I were running China, I’d have a complete new clean alternate global financial system running already. They are buying time, and you are losing, cant you see that! You are losing! You have not given the world a choice, bad mistake!

permalink quote Johnny

Johnny 16 January, 2009, 14:08

We don’t need the dollar, we need the BRIC and we don’t care if Europe or the USA doesn’t honor it, we buy nothing from them! We do send them taxes and pension funds that are now absolutely worthless! Give the world the BRIC! The BRICs are sleeping!

permalink quote Johnny

John 17 January, 2009, 14:39

I can't believe no one has posted on this issue since January 5th!!! Is anyone watching the continuous and incremental devaluation of the Ruble by the Russian government??? SELL YOUR RUBLES!!! You have to exchange them for dollars or euros. Take a look at the receent Ruble value in detail and you will throw up your breakfast.

permalink quote John

Enrique 20 January, 2009, 03:27

John, The Pound Sterling has fallen even more than the Rouble, about 30% during the last year. And there is a clear difference between the Rouble and the Pound: a) The Pound is next to the Eurozone and attracted by the gravity of the Euro. b) The UK now imports an increasing quantity of oil when it used even to export oil from the North Sea. Experts agree that in a couple of years oil price will increase again because it is becoming an scarce resource and as a consequence of some, even if weak, economic recovery. So the ones keeping Roubles now will be better placed when the price of the Rouble starts rising again...

permalink quote Enrique

Enrique 20 January, 2009, 23:40

correction: "The ones keeping Rubles will be better placed when the price of OIL starts rising again"

permalink quote Enrique

Johnny 21 January, 2009, 11:49

It is a war, it could well be a bloodless war, but there are going to be a great many casualties on a global scale. It’s a war between those that want to control money and those that want to emancipate money. Those fighting for the liberation of money, a currency by the planet for the planet, will win, because the truth is on our side, nothing more than honesty is enough to recruit soldiers on this march to our last final freedom. If good men start the BRIC by nations, for nations, we not only gives ourselves a lifeline, we give countries with two heads a way to choose morality over servitude and eliminate their evil twin, a disease now very apparent in the USA. Remember that no good man can win, unless you have give him another life jacket, because his war is with the very vessel that now carries him. If Obama is for real, and you don’t help him, do not be surprised if he is defeated, he becomes his enemy, and the devil then knocks on your door.

permalink quote Johnny

Johnny 23 January, 2009, 12:00

No, don’t buy dollars! The weak Ruble is not a true reflection of the state of Russia, the underlying problem is a broken dollar and the dynamics are complex, the dollar is currently way over valued. Whatever you do, don’t do something silly like put your whole pension into the dollar, it’s very likely that you wont get back 2c on the dollar later. This is not the same thing that you had before; this is very different! There are strong rumors on the web that the USA will introduce the Amero, because the dollar is in so much trouble. If Russians panic, this is what will happen, you all rush out and buy dollars, that then weakens the Ruble even more, which makes life tougher at home, it make everything worse and more expensive. Rather buy Russian gold bars or Russian gold coins, that will keep its value, and it helps inflation. The problem now is that money all over the world is broken, not just Russia, no currency is safe! In fact what seems to be happening is that pretty soon, only the currency of a country will work in that country. These bankers now don’t trust each other at all, and the world is islanding! Yes, I know, they too stupid to fix it, and that’s the real problem. In Russia, its Ruble, or Gold… there is no other choice. The Yen is taking off, but that wont last either. Only buy something you can touch and hold.

permalink quote Johnny

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