Russian Ruble Is World’s Best Currency This Year
bloomberg.com
bloomberg.com
>For Boris, a doctor based in Moscow, the search got so desperate that he pondered a high-tech, and seemingly improbable, black-market scheme that a friend was pushing.
>After interacting with a bot via messenger app, his acquaintance transferred rubles electronically to receive a barcode that he scanned to access a safe storage box at a Moscow mall.
>The 1,000 euros ($1,040) he’d ordered were sitting inside.
Reminds me of Poland under Soviet occupation. Official exchange rate in 1981 1 USD = 3 zł, real black market 1 USD = 400 zł. 1988 1 USD = 300-500 zł, real 1 USD = 2000-3500 zł. In 70-80 you could only buy a limited amount of dollars when being send on official business as part of state or state company representation, the limit was between 10 USD at the start of 70ties and 130USD at the end of 80ties. Of course you couldnt just pay using official bank exchange rate, there was another special much worse rate just for this purpose :).
This is true, whether via official or unofficial means. Consider Argentina (which rootsudo mentioned), a country that for years has had its own serious economic issues. A huge skew between the official and black-market exchange rate for hard currency, such as in Argentina (the "dolar azul"), exists because a) there are capital controls but b) it's still possible to use those dollars/Euro/Swiss franc/whatever. Argentineans are free to use the US dollar to buy things, both inside and outside Argentina. This is not true for Russians.
You could also spend this money in special skips with western items (called Pewex IIRC)
1) The gov has forced companies to exchange 80% of their external income to rouble.
2) The gov has used billions (from their own war chest) to prop the rouble.
3) Inside russia, you really can only use RUB as, there is a wide ban on sales of foreign currency. (The ban might be in the form of ridiculous exchange rates)
4) The black market has a completely different exchange rate than the banks do.
5) Global trad volume is down to near zero.
https://www.poundsterlinglive.com/data/currencies/usd-pairs/...
(Scroll down for trade volumes)
And they will pay, so why not? What other sanctions can be put on Russia?
Government workers there would be paid in the local kwanza currency which at the official conversion rate would seem to be reasonable dollar-wise given local black market dollar prices for goods. However, nobody wanted kwanza at the official government rate, and instead a dozen eggs might cost a month's government worker salary at the real, unofficial conversion rate.
To make ends meet a government worker would need to leverage their access to rare goods. To maintain the fiction of the official rate the government would offer a limited supply of rare goods (eg pharmaceuticals) to government workers in special commissaries. Workers would buy these supplies at the official government store kwanza rate and then sell them for dollars on the black market for their true local demand black market value. Then they could buy eggs for fewer hours of work.
It was a very precarious, risky, and time consuming operation for these workers.
Incidentally in 2017 Luanda, Angola, was the most expensive city in the world with a 2-bedroom flat renting for US$6800 monthly. Still inefficient.
I don't understand. Europe is paying for gas in rubles at face value. You say rubles are worth less than face value. So Europe is paying for gas at less than face value. That seems like it helps Europe, not hurts it.
Even if Europe has to buy rubles at the official rate, I still don't see the problem. They use the rubles to buy oil priced using the official rate, so that just undoes the conversion.
E.g. if they signed at 1€/gal when €1=10 rubles, then rubles double in value so €1=5 rubles, the price of oil goes down from 10 rubles/gal to 5 rubles/gal.
Right now, it is more or less impossible for any Russian to a) use the dollar to buy anything from outside Russia, and b) travel outside Russia to buy anything in the first place. That greatly reduces the demand for exchanging rubles for dollars.
This is true, whether via official or unofficial means. Consider Argentina, a country that for years has had its own serious economic issues. A huge skew between the official and black-market exchange rate for hard currency, such as in Argentina (the "dolar azul"), exists because a) there are capital controls but b) it's still possible to use those dollars/Euro/Swiss franc/whatever. Argentineans are free to use the US dollar to buy things, both inside and outside Argentina. This is not true for Russians.
5 year high today for Ruble. I just don't know what to think.
It is 1 year later that matter for this kind of sanction. It is better to fight an economic war than nuclear.
It's also fraudulent, as the article states.
That’s not what the article states, it says it’s a rate that is not accessible to most traders. ie a FX desk at a Western bank probably can’t get those rates, as it probably involves dealing with the Russian central bank by having a ruble account which is against sanctions.
There’s a difference between fraudulent pricing vs. new quoted price due to supply/demand order barriers and/or mandates.
This means "fraudulent" as in, "Russia is manipulating its own currency's value."
There is a difference between fraudulent pricing and changing pricing, I agree. This is fraudulent pricing, however.
No, snake_doc is right. The black market rate is only 15-20% higher (as per the Bloomberg article from a week later mentioned elsewhere), which is a relatively small spread for this sort of situation.
Right now, it is more or less impossible for any Russian to a) use the dollar to buy anything from outside Russia, and b) travel outside Russia to buy anything in the first place. That greatly reduces the demand for exchanging rubles for dollars.
This is true, whether via official or unofficial means. Consider Argentina, a country that for years has had its own serious economic issues. A huge skew between the official and black-market exchange rate for hard currency, such as in Argentina (the "dolar azul"), exists because a) there are capital controls but b) it's still possible to use those dollars/Euro/Swiss franc/whatever. Argentineans are free to use the US dollar to buy things, both inside and outside Argentina. This is not true for Russians.
This is what people call "fraudulent".
Russian’s enacted capital controls protects the value of the ruble internally. Had they not enacted capital controls and the central bank not intervened, the Russian people’s existing ruble would depreciate much faster. These are protective measures against the effects of sanctions, with real positive benefits domestically that regular Russians enjoy.
It’s not fraudulent because domestic Russians mostly benefits from the propped up currency. Without it, domestic economics would plummet and regular Russians would face harsh economic outcomes. The central bank works hard to prevent that outcome.