by Aleksei Kettunen
Translation to English: Petri Krohn
Russian ruble exchange rate changes have all the ingredients of success detective story. On Monday, 15.12. 2014 ruble weakened to a record low since 1998: the dollar cost 64 rubles and 79 rubles to the euro. In recent years, the price of an euro has been hanging around 50 rubles, or 5 000 rubles withdrawn from an ATM for a night of adventures in St. Petersburg would cost around 100 euros.
Last night, the Russian Central Bank raised its base rate drastically from 10.5 per cent to 17 per cent to curb currency speculation. The price of an euro during the day momentarily exceeded the limit of 100 rubles or 80 rubles for a dollar. Now at the end of the market day the ruble has slightly appreciated: $ 1= 72.60 rubles and 1 euro = 90 rubles. The official rates of the Russian Central Bank before tomorrow’s market day are $ 1 = 61.15 rubles and 1 Euro = 76.15 rubles
What is this about?
The economic sanctions imposed by the US and the EU prevent granting of loans to Russian companies with a payment period of more than 30 days. As Russian companies have been borrowing money from the West the entire post-Cold War period at a lower rate of interest and the penalties now prevent loan restructuring and follow-up funding, these companies must now get euros and dollars to take care of their loans, thereby creating more demand for foreign currency in the Russian market and thus weakening the ruble.
Also, the fall in the price of oil reduces Russia’s foreign exchange earnings, which in a situation of high demand for currency weakens the ruble.
The Eurasian Economic Union comes into force on January 1, 2015. Most likely at the same time the Russian ruble and foreign exchange markets will change drastically, and the Russian economy will take a distance to the dollar and the euro. Now the West is doing its best to weaken the ruble and thus destabilize the Russian economy and the political system before the end of the year. The maxima of the West is to prevent the emergence of the new economic union and closer cooperation within the BRICS. Taking into account the Christmas holidays, the West has little more than a week to succeed.
What are the Russian authorities doing? Trying their best to defend the ruble and the Russian economy. Their actions are limited by two factors: first, in this battle Russia’s foreign currency reserves may be used only minimally (for which there are far better uses), and, secondly, the entire process must take place under the rules of the dollar-based global liberal economic model (because Russia will disconnect from the dollar system only later).
For the rest of the year the going will only get tougher. Even under the liberal economic model the Central Bank of Russia and the government have much stronger measures to stabilize and strengthen the ruble, which they probably will introduced as needed.
Russia will detach itself from the global dollar economy according to earlier plans .Until then it will continue defending the ruble. The West on its part will make every effort to weaken the ruble. What will be the end result? Time will tell – or the stars. I predict that next year will see a surprise!
What might this 2015 surprise be?
The Russian government has already informed Russian banks that the amounts of reserve currency deposits placed by various ministries in Russian banks will be drastically less than during previous years. These funds will instead be used to finance various domestic infrastructure projects. All this means that the Russian government obsessed with saving during all the 2000s and 2010s will become a big spender investing in strategical domestic projects. This will considerably strengthen Russian economy.
Another factor will be the Eurasian Union.
The third factor is a combination of recent Russia-China, Russia-Iran and Russia-India megaprojects and financing from the New Development Bank NDB (formerly referred to as the BRICS Development Bank). Russian President, Government and Bank of Russia have consistently informed the market players that now is the time to concentrate on domestic markets and domestic financial resources. All this will probably mean the unlinking of Russian economy from dollar-dominated Western economy.
Enjoy the cliffhanger!
Rouble vs. Dollar Games – From a Perspective of a Russian Businessman
Zems – Live Journal
Only the lazy are not writing about this subject today. But everyone for some reason is looking in the wrong direction. Let me explain:
– Our country has a stock of dollars
– The currency of our country – roubles – is held by other countries
– We – Russia – are planning to sell oil for roubles in the future
– Everyone who buys oil from us in the future will have to look for these roubles to buy oil
– The harder it is to look for them, the more expensive they will be
Naturally, the task is simple – we need to drop the rouble to the bottom, and then buy all the roubles that we can, giving away the dollars that are no longer needed and not guaranteed by anything. This will help concentrate all of the roubles inside the country and to assign their price independently, while holding and releasing more money to the market.
Meanwhile there will be a short-term increase in prices and a reduction in living standards, but it’s like an incision by a surgeon – a little painful at first, but then you will be healthy and strong for the rest of your life.
I am sincerely surprised by the hysteria and resentment against the government regarding the devaluation of the rouble. Is it so hard to look more than a month into the future? Everything is done correctly and wisely, so everything will be all right, guys =)
Reposts welcome =)
Translated by Krisitna Rus for FortRuss.blogspot.com
I am expecting a big announcement around the New Year. Putin himself was appointed on the turn of the Millennium if I recall correctly. Russia’s relationship with the west is now officially done and dusted.
Regarding the final sentence (All this will probably mean the unlinking of Russian economy from dollar-dominated Western economy.):
About 90 minutes ago at ZeroHedge, Jack Burton wrote:
Here is one perspective from inside Russia…
We – Russia – are planning to sell oil for roubles in the future…
…Naturally, the task is simple – we need to drop the ruble to the maximum, and then buy all that we can, giving away the dollars that are no longer needed and not guaranteed by anything. This will help concentrate all of the roubles inside the country and to assign their price independently…
Watch this htpp//www.youtube.com/watch?v=qqOykF2mHgQ.
Interesting. They will collapse the petro dollar and blame Russia for it.
Dave
Your link doesn’t seem to be working.
Dave, your YT link said “the video is unavailable” which has made me even more interested. Do you have another link or title of the video?
Thank You,
Stepping Razor
Thank you Petri Kohn for translating this hopeful article. Yes, all Putin can really do is to do what he’s been doing for a year now…get out of the dollar. This is the only way to get the US under control…and it will…
Article 1 of the law governing the CBR: ‘The functions and authorities specified in the Constitution of the Russian Federation and this Federal law, are exercised by the Bank of Russia independently from any other federal bodies of state authority, bodies of state authority in subjects of the Russian Federation or local government bodies’. p32 Starikov
Article 12: ‘The Chairman of the Bank of Russia can only be dismissed from the position in the following cases: 1) expiry of term in office; 2) disability which makes performance of duty impossible and which is confirmed by a state medical commission; 3) there is a personal resignation letter; 4) the person in question committed a penal offence and was found guilty and sentenced; 5) if federal acts regulating issues related to the activities of the Bank of Russia have been violated. p32-33 Starikov
Article 7: ‘Drafts of federal law and regulatory documents of the federal bodies of executive power concerning duties of the Bank of Russia and it performance shall be submitted to the Bank of Russia for approval’. Starikov p 36
In the early 90s CBR set interest rate at 210%! When Putin came to power in 2000 it was 55%.
8/2002 – 2/2003 20%.
[pdf] Rouble Nationalization – the Way to Russia’s Freedom by Nikolay Starikov
Copy the above link to a temporary file, then click on it to access this online book. Read an extremely easy section p24-40 to understand Putin’s difficulties in getting rid of the CBR.
Saker, a little off topic. doe orthodox Christians believe Jesus is a messenger or literal son of god. i’m new to your site. THANK YOU KINDLY!!
The answer is Christian Orthodox faith is based upon the belief that Jesus Christ is Lord (son of God and second person of Holy Trinity) and Saviour.
Anonymous @ 00:09: It wd be far wiser to nationalize the rouble, removing control of its quantity from the the CBR, then simply printing the needed roubles. The Russian nation was de-monetized (the normal quantity of rubles decreased) by Western advisers in the 90s & has never recovered. Needs to, for the sake of liquidity.
If you rely upon a scarcity of roubles to raise the valuation of Roubles against the dollar you businesses will die for lack of credit.
http://fortruss.blogspot.com/2014/12/naf-intel-kiev-is-preparing-false-flag.html
Looks like war very soon, possibly preceded by false flag.
I’m going to rant a bit about one of my pet peeves since I’m a hard money type of guy. I won’t go into the international banking system, etc. because I don’t want to write a book.
As I see it, Russia (a number of other countries as well, but we’ll confine this to Russia for the sake of this rant) wants to have their cake and eat it to. But I would put to them that the US is eating most of their cake. The cake I’m talking about is the usage of US dollars as emergency savings (often even normal commercial exchanges) against the risk of their own government blowing the shit out of their own currency.
Russia (basically their central bankers, etc.) sees how they can play around with fiat currency and generally screw their own citizens by currency debasement. But I figure they seem to be blind to the fact that they are not providing their own CITIZENS a safe emergency fund outside their own currency.
They have let the US (and other countries) be the reservoir of this savings. And understand quite clearly that these fiat US dollars are IOUs from the US to Russians. This may be economically theoretical but the fact is that Russian savers put up the equivalent of hard work in exchange.
Now if Russia is not willing to provide their own citizens a safe store of value for their work they should at least not let the US syphon off this value with the use of US dollars. Give their citizens an alternative because the citizens will use something no matter what some doofus bureaucrat decrees (I think China is going in this direction by slowing encouraging gold savings with kilo gold bars, though their taxation leaves something to be desired). I firmly believe in gold and silver bullion coins that are treated as money. Even an old Babushka understands gold.
For God’s sake, the Rouble price of gold in the last month or two has gone from 50,000 to 80,000 but if a citizen wanted to change a gold troy ounce they would be subject to taxation and investigation up the ass. If the citizen brought in a few hundred US dollars there wouldn’t be any of this (please correct me if I’m wrong since I haven’t made an intense study of this) bullshit.
Putin declared an amnesty for money being brought back to Russia (no questions asked). So why can’t Russian banks provide exchange services for accepted gold and silver bullion coins under the same idea. I understand not liking the US dollar system since the US bankers are abusing the Hell out of it, but do something about it and quit whining. But you’re going to have a close look in the mirror when you do it.
I appreciate the translation from Petri Krohn, it’s always good to see his name, in my experience it usually accompanies some common sense. I like this article, it’s very macro. Some people love tactics, some love strategy – me, I’ll take the long view every chance I get.
So Russia has been a dedicated saver for 15 years, and now it has the means to invest in an amazingly robust and yet imaginative future for itself. Lovely.
As for the battle on the ground right now – I’ve read everyone today, from Mercouris to Orlov, to ZeroHedge, Yves Smith and Fort Rus and the Frenchman, Sapir.
It seems to me that everything that’s happening right now is being handled by specialists and tacticians, around the world and including in the Russian government.
I get the impression that the rate hike to 17% was a good move, because it was surprising, and when markets are rigged the last thing people want is a surprise. Russia keeps them guessing, has them nervous – good.
The arsenal of technical possibilities credited to Russia right now range from orthodox capital controls to very unorthodox mass default on loan payments, to the vast detriment of the Western economy, citing “force majeure” from the sanctions – oh, what a lovely dream.
ZeroHedge has a story that I can’t pretend to understand fully, but I get the sense of it, that the rate hike exposed speculators shorting the Ruble so the West essentially stopped trading to give everyone time to cover their position. Rigged markets, rigged system.
There’s no doubt the Ruble is under attack, only speculation can explain all the behavior, but as our author Aleksei Kettunen points out here, there are extreme foreign currency obligations for Russian corporations this month that go away next month, and Russia has many plans for the future. So it shepherds its reserves and meanwhile still manages to take some good swings to the jaw of the opponent.
I’m reminded of the words of Lazarus Long:
“Of course the game is rigged. But don’t let that stop you playing. If you don’t play, you can’t win”
I’m not worried about Russia. I’m now convinced that Russia is playing this game fully present. This war is on the board, and the government and deep state and central bank are all gathered around, and technicians are doing what they do at the orders from Putin and the rest.
Generally, you don’t change horses mid-stream, and you don’t fire people during a crisis. You manage your way through the crisis then take stock when things calm down, and then replace personnel.
Two things are certain. The Ruble is not going on gold anytime soon. And it’s certainly not a dull Christmas season.
http://www.whatdoesitmean.com/index1825.htm
Putin Orders Feared “Samson Defense” To Collapse US-EU Economies
JohnM: You don’t understand the legal obstacles to controlling the CBR, which is currently completely independent of the govt! Read Starikov’s book p 24-40. It’s online.
Many economic functions are by law under the control of the CBR: interest rate, quantity of money. By law CBR may not invest in Russian bonds– but can in US bonds & must in IMF bonds.
I understand nothing, but maybe you will:
http://www.zerohedge.com/news/2014-12-16/russian-ruble-hereby-halted-until-further-notice
Penelope
Why is eliminating tax on gold and silver bullion coins under CBR control?
If the US dollar appreciates against the Rouble and I take it in for exchange, am I taxed in the capital gain?
What are the regulations for buying and selling (spread) gold and silver coins? Why would this be under CBR control instead of basic bank regulations?
Grieved says, “I get the impression that the rate hike to 17% was a good move, because it was surprising, and when markets are rigged the last thing people want is a surprise. Russia keeps them guessing, has them nervous – good.”
Grieved, the further rise in the interest rate wasn’t under Putin’s control. It was the CBR acting under neoliberal model; CBR is completely independent of govt by law.
@ mrPoliLiTiCTruTH
Jesus Christ is Part of the Entity of God in a different form
As in Holy Trinity.
Different part does a different job
Holy spirit is giving messages for example and Jesus explains it .
It really does not matter the precise mechanism.
The thing that does matter is the MENTALLITY of the Orthodox. And the Patriarch is Not a supreme leader just the first among equals.
The Church or Ekklissia (In Greek) is the GATHERING of THE BELIEVERS. the Building is the Temple or Naos (In Greek). The Priests are ment to be setting the order of what is ment to be done. They are not necessarily holy. Also the vicars can get married BEFORE they become priests. Not so the Bishops or Patriarchs.
It is the message that is Important.
Be good to yourself and those surrounding you.
Fecund Stench @ 0311. This article is by Sorcha Faal and therefore should be ignored.
“Many economic functions are by law under the control of the CBR: interest rate, quantity of money. By law CBR may not invest in Russian bonds– but can in US bonds & must in IMF bonds.”
And the reason for that is….it is the rules of the IMF. If a country is a member of IMF their bank is run by the IMF rules. In other words to the benefit of the IMF, not of the country.
Being in IMF and BIS also lets anyone (eg USA) look inside every transaction and know everything a country is doing…it is insider trading on a global scale. This is how IMF can enforce the austerity measures it forces onto anyone who borrows from them, loans all designed to take the value out of the country in the form of interest and repayments to IMF, in the long run the USA and other established richer countries. They can send any country broke by setting up conditions where just about all they can afford is the payments, while their people starve.
The question in this case is, why should a whole nation suffer and go hungry just so a small number of speculators can make a few trillion for themselves? how the hell do they deserve the hard-earned savings of manual labourers and pensioners in Russia?
So Russia has to get out from under. Let the central Bank do another unexpected rate rise, but let the private banks buy back those dirt cheap rubles, quietly to keep them cheap. Even is they have to borrow some dollars from China (and let them in on it, too). Then next year people can pay rubles for their oil and gas.
BRICS should fist start lending to countries being strangled by the NWO system, like Venezuela, which is collateral damage in the oil price was on Russia.
Further more, Penelope
I would direct you to this link which is from Hugo’s site http://www.plata.com.mx/mplata/articulos/articlesFilt.asp?fiidarticulo=257
This is something that is, at least, being discussed and nowhere did I see that it was subject to IMF or Central Bank rules.
It is a matter of legislation and I am sure this is doable.
Start where you can and forget about bonds, interest rates, IMF bonds and all this other noise. These things may be important but the average citizen is not the central bank so give them a viable alternative.
Having your own citizens keeping their savings in a foreign currency is stupid. Period.
If you cd use some good news, it’s here.
http://www.informationclearinghouse.info/article40487.htm
We just have to get thru this rough patch first.
70 years ago started Battle of the Bulge – last gamble of dying Third Reich. After few days of panic was obvious that game is really over. The same will take place now. Imperial fraudulent players will sit alone at their table in 2015…
Gringos and russians share one common thing: Talk about Central bank. In Gringostan it was Andrew Jackson who called central bankers den of vipers and he fired gun in congress. Then greenbacks, Louis McFadden, Ezra Pound, JFK and his Executive order 1111 and now Ron Paul.
Russia actualy split from west years ago as russians started learning and exposing their past with western conspiraciesagainst russia. For all orientalreview.org
Is this this comming surprise?
M.Kalashnikov, “the central bank should be nationalized”
http://ru-facts.com/news/view/42075.html
Nikolay Starikov: Rouble Nationalization – the Way to Russia’s Freed
http://www.academia.edu/6622292/Nikolai_Starikov_-_Rouble_Nationalization_Central_Banks_around_the_globe_
Here in Papua we have proverb: Without wind even leaf on tree not move. In our Tok Pisin language that means if you hear talking ( as leafs sounds when wind blow) too much about something by ordinary people then the sound must have rational root ( wind).
http://www.counter-currents.com/2012/11/two-volumes-by-gottfried-feder/
Best wishes
To Anonymous 17 DECEMBER, 2014 00:55
The video is no more available… Any other address??? Thanks!
this is brilliant thanks! there is a plan beyond this skirmish and Putin knows what he’s playing to, easy to get despondent but I think there is too much at stake to panic. This had to happen at some point so why not now, get it out of the way? The west has lost Russia for good. If there is a rekindling of the flame in future it will be on Russian terms not American. Hold the course Russia
The article states that the ruble was 50 to the euro for years – that is false to my knowledge. I have been visiting Russia regularly since 1999, and said exchange rate was never above 40 to my recollection at any time, and usually in the 30s.
@JohnM 02:39
You don’t apparently have knowledge of actual practice in Russia. In Sberbank, you can open a gold or silver account in which the contents are stored as PM weight. If you do so, any gains from sales of such PMs is not-taxed; the tax paid is VAT at time of purchase.
As for redemption – why is it so surprising that volume sales of gold/silver brought from off the ‘street’ would be scrutinized? How is this different than any other 1st world nation – or the IRS for that matter?
I recommend reading Oil, Ruble, and Ideology to get a better view of Russia’s economic strength. I begin to suspect people like M. Khazin, Diogenes, etc. are unconscious actors in a narrative drama divorced from reality. This narrative is the last gasp of the decaying Anglo-Zionist Empire. The Eurasian Project just sent the first train load of manufactured products from Shanghai to Madrid in 21 days. The Silk Road will revitalize Europe and Asia and there is little the Empire of Chaos can do about it, as real economics reasserts itself over finance and media. Finance and media are tools of repression, living on the life blood of production and distribution. The parasite is being rejected by the rise of the Eurasian Project.
@Anonymous 14:35
I agree that I am not conversant with Russian actual practice.
But my view is: treat gold and silver bullion coins as money convertible to currency and not as a commodity or investment.
I don’t agree with how other 1st world countries deal with this either. Please reconsider my “having your cake and eating it too” post.
I’m just saying that playing by BIS recommendations (pressure to remove gold and silver from the traditional monetary system) should be reconsidered.
Scrutinizing financial transactions I do understand but giving equal standing to gold an silver as money would make things more “interesting”.
@JohnM 14:11
Clearly your view is different, but my view is that PMs are NOT money.
Money is intended to be 2 things: a store of value and a means to motivate(or demotivate) the overall economy.
A store of value does not equate to having value: a Picasso has value, but is not a store of value in the currency sense. Ditto bitcoin, and until gold is fully convertible as cash, neither is gold.
What you seek is to have your cake and eat it to: to be able to accumulate inflation value in your PM stores and not have to pay tax.
Well, that’s the rub, isn’t it? It is true that PMs were not taxed in the era where they were fully convertible to currency, but that is because the value of the PMs was set.
The usual rejoinder is then that all governments should make PMs convertible to currency – i.e. go back to the hard money era.
The problem with that is that hard money greatly advantages the wealthy. If you think it is bad now, just imagine what it will be like when even governments are no longer able to affect the wealth stores of what the 1% have already stolen and squirreled away.
More important than this, though, is that governments need the ability to stimulate or de-stimulate the economy. This is literally money printing, and I will be the first to agree that the money printing has gone too far – but a cure consisting of hard money is ultimately far worse than the present disease.
@anonymous 17:35
LOL, Where to start???? I’ll keep this brief.
Yes, our views are definitely different.
To me, primarily money is a medium of exchange, a unit of account and a store of value. There are secondary properties of divisibility, fungibility, etc.
Motivating or demotivating is not on my list. Otherwise you could arguably put guns on the list.
Inflation: so gold inflates against your definition of money and that makes it NOT money. I argue that it is not gold inflating but your specie deflating because of endless money printing.
Hmmmmmmm, hard money greatly advantages the wealthy…. I nearly fell of my chair laughing when I read this. The one percent (wealthy) are accumulating “money” at such an accelerating rate in this era of fiat money (the GINI coefficient is going through the roof) and you have the audacity to say that gold and silver currency would make it worse. In answer, I would say use progressive taxation to spread wealth more equitably.
I have no problem with the productive wealthy getting wealthier but (as I read in somewhere that the ancient Greeks pointed out the wealthy became wealthier because the taxes paid made them safer and allowed them to accumulate more, thus they should pay an increasing share to maintain the state) the governments should do this through taxation policy not monetary policy.
We are straying off topic
Actually, money must meet FOUR requirements: (1) it must be a store of value, (2) it must operate as a medium of exchange, (3) it must function as a unit of account, and (4) it must be fungible.
1. Gold, the price of which was $283 in January of 2000, sells today for $1195. Obviously it has “stored its value” a whole lot better than the US dollar.
2. Until and unless laws are passed outlawing it, gold (along with silver) has functioned as a pretty much universally-accepted unit of exchange for thousands of years, more than any other medium in history.
3. As a unit of account, gold has no equal; a “dollar” today will buy about one percent of what it would buy 100 years ago, while an ounce of gold will buy just about the same as it would buy in 1914. That makes accounting very easy, through time.
4. An ounce of gold is an ounce of gold, throughout the universe. Chop it into four equal pieces, and each piece will buy one-fourth of what the entire ounce would buy. Try that with a dollar bill.
The recently-announced Russian replacement for the SWIFT system is not due to be introduced until April or May.
To be actually out of the dollar system requires much more, at least the following: Russia wd have to get out of the IMF, nationalize the rouble & Central bank, commit to using only roubles internally.
I hope the author is correct and that something can be accomplished sooner.
Money is a human invention and this invention need not function both as a store of value and a means of exchange. There are many historical examples of worthless things including paper serving as money. One of the aspects of fiat money is that more can be created easily by an honest Treasury in order to allow the money supply to grow when needed.
I know there is an attractive simplicity to a 100% gold-backed currency. And I think some of you have been bitten by this idea, but I think it is a fallacy which cannot optimize the money supply for production or investment into the health & education of the citizenry.
I will try sometime soon to find a good article on this topic. Meanwhile, do any of you know of a link to an article that points out the limitations of gold as the basis for the currency?
JohnM says, “What are the regulations for buying and selling (spread) gold and silver coins? Why would this be under CBR control instead of basic bank regulations?”
My comment to you that the matters you raised are under the control of the CBR referred to the causes of the debasement of the currency and the investment of the CBR in dollars.
I know nothing about the laws governing silver & gold in Russia.
However, I must tell you that matters which are by law under CBR control don’t have to have a good reason; they were visited upon Russia in the 90s by the West & their purpose is to prevent the development of the Russian economy.
@ Penelope at 03:42 – I understand CBR is independent by law – my surmise is that the banking establishment of Russia, the government, friendly oligarchs and corporate heads, the central bank, and actually perhaps many of the 5th column (who should be very nervous right now with all this attention to their obstructiveness) – that all these actors are talking with each other and working together. Or at the very least, staying out of the way.
That’s my surmise, because I see coordinated activities and announcements, with no daylight between actors. I know Saker’s premise is that there’s a battle in Moscow, and he knows these things far better than I do. Even so, my surmise is that much of that battle must be suspended somewhat, even if awkwardly, for the moment. I surmise this because I agree with all the actions being taken. I don’t regard it as sabotage to raise the rate, and I think it’s incredibly gutsy and brilliant – very Russian, in fact – to let the Ruble float on a par with oil.