Dollar to Ruble F/X Rate About to Go Parabolic

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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Putin Can Teach West A Thing Or Two About Capitalism

CEO of Russia in Perpetuity, Vladimir Putin, was faced Monday with the tough truth of plummeting oil prices. Oil, of course, has been the lifeblood of Russia's renaissance in recent years. Instead of running to congress, or in his case the Duma, and begging for zillions of rubles in bailout funding without acknowledging the deplorable state of affairs, the Judo black belt ordered his finance minister to rebase Russia's new budget on a price of $41/barrel, or less than half the $95/barrel that was factored in the existing budget. While this will probably have a dramatic adverse impact on both Russia's GDP and its existing Reserve Fund surplus of $137 billion, Yelena Lebedinskaya, a budget analyst, said "there will be borrowings, but they won't be large." What, there is a way out of a crisis that does not involve printing $5 trillion in new money?

Well, if all else fails, Russia can always default like in 1997. But at least Karl Marx is happy... with what is going on in D.C. and London.

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