Saturday, December 20, 2014

Ruble Plunge!

By Stephen Wilson

The Russian currency has plunged.
(Moscow, Russia) - For all of 2014, the ruble has been gradually declining from approximately 40 rubles to the dollar to 55 rubles last Friday to 58 and then suddenly to past 64 rubles on the 16th of December when people felt it had completely collapsed!

               All kinds of rumours, hearsay and reports throughout Moscow suggested it might have been fallen to 100 rubles in some places. The rumours sent a tremor through the capital which has been anxiously and alertly observing the often erratic fluctuations of the depreciating ruble.

               Although most Russians are seldom prone to panic, some of them appeared to be a little edgy and at times anxious about whether they should rush to the banks to exchange their rubles. Second City Teachers attempted to gauge the mood in the capital.

               Some people called it 'Black Monday' after the values of the ruble appeared to plummet from 55 rubles to either 62, to 64 and then in some areas 80 rubles. By Tuesday 16 Dec when rumours were in the air that it had plunged to 100 rubles, some people got really alarmed. The ruble seemed to be steering out of orbit if not utter control!

               A Russian English teacher Oksana Chebortareva told me, 'One of my bosses at the Institute of Power and Energy asked me for advice as to whether he should convert his rubles into dollars or not. I told him that the ruble was not going to get any stronger so it was not a bad idea. I also was told by a head teacher at my school that there were long queues of people attempting to spend all their rubles on real estate property.’

               When I came across Andrei, a journalist , he told me 'I'm in the process of buying a new apartment, but the problem is the cost of borrowing credit from the bank. The interest rate is too high.' Andrei seemed to be a little distraught and somber about the impending economic crisis. He told me 'If the ruble actually falls to 100 rubles, then we could have a Russian Maiden. That is there won't be enough credit to pay thousands of workers who will be laid off. If people are pushed against the wall, they will rise up. I dread to think of the horrific results.'

               The current sliding of the ruble has evoked painful memories of the drastic devaluations of 1991, 1998 and 2008.  Andrei certainly can't forget those times. He told me, 'In 1991 it was terrible. A pensioner who had worked all his life and had the equivalent savings which would allow him to buy two good apartments in Moscow suddenly found that overnight his savings were barely sufficient to buy a fur coat!'

               Many in Moscow fear those days are back. I recently discovered that my mother in law, who had kept all her savings in rubles, had lost the equivalent of 4000 Euros.  For some reason, she insisted in keeping them in rubles as the government had told people the situation would 'stabilise' after summer. Well, it has not!

               However, a world crisis where a barrel of oil has plummeted from 115 dollars  in June to a current 60 dollars , the pressure of sanctions in depriving Russians of cheap food exports and western credit, a rising inflation rate which may be 15% or more, static wages and mass redundancies has led to a mushrooming of poverty throughout Russia where it may be from anything like 33% to 40 % of the population. This is not Russia's lucky year.

               Nevertheless, people have been reacting to the crisis in many ways. Some people are just too busy to bother about it. They are oblivious to the news.While some are economizing by skipping a holiday to the west, others are purchasing some computers and gadgets 'before shops double the prices and it is too late.'

               The problem is that in Moscow, the price of a particular good can differ so sharply that it is unclear what the 'average ' price for this good is. For example, one week ago I ended up paying 150- 200 rubles for one kilogram of mandarins. Later, outside Lefortovsky market a street trader sold me the same for 100 rubles and when I visited a local supermarket in my locality the cost was even less.

                WHO IS TO BLAME ?

                It is fair to state that the Russian government has been taken by surprise by the dramatic and abrupt pace of events. They did not anticipate a war in Ukraine or taking Crimea nor the threat of sanctions. This has rudely upset their long-term   economic plans and they don't have a clear strategy of how to cope and control the new situation. In fact, they hope to just muddle and grope their way through the dark. In regard to responding to the question 'who is to blame’ they either accuse speculators, the West, and if that fails 'the natural laws of supply and demand ' which seem beyond anyone's control.

                Despite increasingly troubled times, Putin still enjoys high ratings because he is one of the few leaders who stands up to America. The Russian leaders are counting on the old celebrated Russian virtues of patiently bearing problems, enduring and adapting to the worst scenarios. This undaunted spirit does in deed exist and might well help Russia get through another crisis. Sanctions, rather than weakening Russia , is actually strengthening and fortifying a spirit
of nationalism. Anti-Western resentment has soared in Russia as Russians note the double standards of America and Europe on human rights issues such as how the
police adopt a 'shoot to kill ' policy against blacks not to mention their failure to 'condemn the glorification of Nazism' at a United Nations session.

                A few weeks ago many Russians began to flock to the shops to purchase a traditional Russian stable food called buckwheat.  Despite the fact that you can usually buy a kilo for as little as 50 rubles (just less than a dollar), some sellers increased the price to more than 100 rubles and beyond. Despite being informed of so called 'shortages' of buckwheat, I found plenty of different varieties of buckwheat available at my local supermarket at normal prices. (A soldier's saying is 'Shchi and Kasha is our fare' or 'Cabbage soup and buckwheat is our fare.)

                What might well be the most decisive factor in determining how Russians react is not the actual economic situation, but how people mentally perceive problems. I have heard Russians boast 'Unlike in the West, we have developed a strong immunity system to even the worst economic situation. We can put up with anything'. Whether this is just bravado or play acting remains to be seen.

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