In a move geared to stop the daily drainage of its currency reserve, Russia is considering "dirty-floating" the ruble. While we are not sure what dirty floating is, but sure like the sound of it, we assume the impact on the ruble will be to send it plummeting. Russia had been keeping the ruble in a dollar-euro trading band, meaning it was funding the deficit to prevent the ruble from crashing. "A dirty float would look like it was a free market but the central bank would still have a measure of control" according to Nikolai Kashcheev, head of economic research at Moscow-based MDM. Despite the existing trading limitations, the ruble still lost 29% of its value against the dollar since August. On January 19, the Russian Central Bank sold $11 billion as the ruble weakened against the dollar for the 7th trading day this year.Anyway, we love the concept of making something look like it is a free market. We have no doubt that the ruble will slowly commence its climb to attain the phenomenal exchange rate of the Zimbabwean dollar's $100 trillion/$1 US. At least this will allow the state to inflate all its problems and while a repeat of Russia 1997 is almost guaranteed, it will let the country have a fresh, post bankruptcy start in a sub-$50 oil world.
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1 comments:
That's the solution - tie the dollar (pound) to the rouble and be happy!
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