Russian rouble now worth less than a penny or euro cent

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Am I the only one thinking of that scene from Euro Trip where pennies are worth a fortune?

Read an interesting article the other day which basically had a reported talking with a family in Russia and they support Putin. When it comes to the money issues lately it's an issue that needs to be dealt with by the common Russian basically at a lower government level, that they're the ones that need to fix things. Not Putin, he has nothing to do with it in their mind.

The article was from the BBC.
 
My grandmother moved from Russia almost 20 years ago. Since then the only media she's been using is Russia Channel One and she thinks Putin is the best thing that ever happend lol.

Also on that channel today was suddenly a commercial with super dramatic music and pictures of nature and cities kinda Koyaanisqatsi-esque then at the end it said Putin's gonna have a big press conference Thursday lol.
 
ePHceJO.gif

I recommend Moscow, where the American dollar buys seven rubles.
[ Pager Beeps ] Twelve rubles.
[ Beeping Continues ] Sixty rubles.
1 ,000 rubles! I must go!

edit: ah, beaten!
 
Bwahaha it means my company is up shit creek with all their biggest clients coming from Russia. Good riddance. Hope we go out of business. Real talk, i fucking hate this place.
 
Amory said:
I consider myself to be a pretty smart guy, but when it comes to economics I have no idea what's going on. Who decides "oh the ruble is worth way less today than it was a month ago"?
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In this case, historically low oil prices are deciding.

They're costing Russia billions and that hit to their economy is driving their currency into the ground.

Couldn't happen to a bigger dickface than Putin.
 
Brerlappin said:
Bwahaha it means my company is up shit creek with all their biggest clients coming from Russia. Good riddance. Hope we go out of business. Real talk, i fucking hate this place.
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I wonder how my company's Russian sales rep is doing. He gets paid in TWD but I doubt there'll be much use for the guy if the Rouble stays like this for a prolonged period of time.
 
Don Chalupa said:
I would disagree with this notion. With our artificial "recovery" (aka real wages going nowhere or down for almost half of Americans) drive by our energy boom, oil states already projecting slowdowns for next year, and with even more companies relying on junk debt (a market that is now crashing), 2015 will be a year of reckoning now that the Fed has pulled QE and has to stand by their rate hike talk (before they lose even more credibility).

I think this oil drop will be the catalyst for the next major market downturn, ala 2008, made worse by reckless money printing by most central banks in the world in the last 5 years.
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1) Recent wage data is showing wages are finally creeping upward. I was skeptical as well of growth projections until wage data began to sweeten. Jobs numbers are north of 200k a month now (most recent over 300k), which means we are hitting the point finally where workers can be more picky about the job they select and demand higher wages. As for the people that would be affected by the wage crunch of the past decade, the additional savings on gas should help amplify consumer sentiment that conditions are improving.
2) The sub-prime loan is back baby. You can argue whether these are good or not, but it indicates we have gotten past the worst of the stagnant housing market. Additionally, mortgage originators now actually have far more forcing them to be honest when filling out an application for a potential borrower.
3) M&A activity is back. That 'junk' debt is better thought of as high yield. Increases in its use mean private equity firms think this is a great time to buy companies and make them more efficient. PE firms fund their purchases with high yield debt, and they lever up their purchase as much as banks allow them at the high borrowing rate. PE then pays off that high rate with the savings from making the purchased company more efficient. More high-yield lending means banks are in a healthier state, and investors are hungry for high-yield opportunities. Strategic buyers (in more than just the tech sector finally) are now also getting in on the game.
4) Much of the money printing in the US has been contained by banks meeting new regulatory requirements. Its been a nice gift by the government to the banks to boost their balance sheets, trying to get them to the point where they will lend again (given the new rules), and we have finally hit that point. QE never released significantly to the greater market, otherwise we would see far more damage to the system already. We're still fighting deflation non-stop. Even if the Fed doesn't renege on its promise (I expect them to renege) and raises the rates, most of the bounce in rates should be handled effectively by general health of the US. Most growth expectations factor in some element of fed rate hikes.
5) To give some perspective, a $10 drop in oil leads to a 0.8% shrink in GDP....in Russia. We are no where near as reliant on oil profits. The current drop won't be a significant blow to the US economy. Growth won't be as rosy as the initial 3.5% real GDP estimates, but likely still north of 2.5%.

Business abroad will suck, but the US has a good thing going right now.
 
Statement from Putin's office:

"It is true that there is turbulence on the market, which can be largely explained by emotions and a speculative mood.”
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analysis regarding fallout:

With the rouble crashing and Russia in crisis, other global markets must be tanking, surely?

Actually, no. The FTSE 100 is up around 0.58%, thanks to weak UK inflation figures which hit their lowest level for 12 years and pushed any prospect of an interest rate rise even further into the distance.

In Europe, the ZEW German confidence index showed its biggest monthly increase since January last year, while the latest snap purchasing managers indices seemed reasonably stable, given the recent turmoil in Greece and Russia.
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http://www.theguardian.com/business/live/2014/dec/16/uk-bank-stress-test-results-live
 
Amory said:
Yes, thank you! Thanks as well to others who provided insight.
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I'd like to highlight these two posts as well:

marrec said:
American shale oil. Normally if any one nation drastically increases oil production, OPEC (a group of oil producing nations that try to manipulate oil prices, mostly unsuccessfully) decreases production to keep prices artificially high but Saudi Arabia decided to use this as an opportunity to bring the economic pain to Iran and Russia and also try to drive US shale oil out of the market.
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Snowdrift said:
Multiple factors affect the exchange rate.

  • Capital flows
  • The domestic savings rate
  • Interest rates (Interest rate parity)
  • Inflation. This will be tied with interest rates to a degree.
    [*]Perceived risks of allocating capital within a country
  • Labour/Capital efficiency
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To summarize: the drop in oil prices has been driven by Saudi Arabia's attempt to drive the American shale producers out of the market and harm its other competitors. This has been disastrous for the smaller poorer OPEC countries (like Venezuela and Ecuador), and for nations like Russia which rely on oil to sustain their economies. This happened at a bad time for Putin, because Russia is already suffering from the consequences of international sanctions.

The resulting damage to the Russian economy has reduced the demand for rubles, and Russia's central bank has taken certain panicky actions over the last 24 hours which have reduced confidence (see the bold above). Fear breeds fear.

Russia's best option right now: capital controls. This is a bit like like chaining people to their seats to keep them from rushing to the exit. They cannot stop the fear, but they can stop people from acting on it.
 
Randam said:
So how much is a rouble supposed to be?
Around the same as dollar and euro?
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When I was a child in Russia in 1990 1R = $1USD

When we left the country in 1992, I believe 1R = $0.10

A little square of chewing gum used to cost me 10-kopeks (10 cents) in 1990. By 1992 it cost me 1R.

A loaf of bread would cost about 2R, that skyrocketed to 10R in 1992.
 
mellz said:
My grandmother moved from Russia almost 20 years ago. Since then the only media she's been using is Russia Channel One and she thinks Putin is the best thing that ever happend lol.

Also on that channel today was suddenly a commercial with super dramatic music and pictures of nature and cities kinda Koyaanisqatsi-esque then at the end it said Putin's gonna have a big press conference Thursday lol.
Click to expand...

My grandma also watches only the Russian channel, but she loves America. Not sure about her feelings on Putin though. Maybe our grandmas are friends lol?
 
Russia could fix this by normalizing its politics and forgetting Putin's weird fever dream version of tsarist Russia.
 
Anywhere i could read, what Putin's party/followers are saying on the mattter? As far as i know, they are very nationalistic and would like to see how they see this situation.

Also, Saudi Arabia played all the right hands.
 
E92 M3 said:
My grandma also watches only the Russian channel, but she loves America. Not sure about her feelings on Putin though. Maybe our grandmas are friends lol?
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I had a Russia housemate some years ago and the guy went mental when we criticized Russia. It was funny when me and other housemates ask him why was he living in Portugal and not Russia if that country was so good, he wasn't able to argue back
 
Tugatrix said:
I had a Russia housemate some years ago and the guy went mental when we criticized Russia. It was funny when me and other housemates ask him why was he living in Portugal and not Russia if that country was so good, he wasn't able to argue back
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I came from eastern Ukraine and don't care one bit about the Russian culture. Besides speaking the language and holding some basic traditions, I don't like anything else about that country. Also, refused to live anywhere that's considered a Russian area. I know some people are very nationalistic I am quite the opposite and love America, faults included.
 
Rouble has some crazy volatility today, recovering from some of the weakening now. No capital controls for now is helping a ton, as well as dove-ish talk from Sec. Kerry.
 
Tecl0n said:
Anywhere i could read, what Putin's party/followers are saying on the mattter? As far as i know, they are very nationalistic and would like to see how they see this situation.

Also, Saudi Arabia played all the right hands.
Click to expand...

Go read the comment section of any major website. They are very vocal there.

To spot them, look for the the keywords: Kiev junta, BRICS, Obama w/5 weak, NATO, Nazis, Zionists, Victoria Nuland, pipeline to China, Putin w/5 cares for the people, end of the petrodollar.

Don't get dizzy from all that spin
 
j_k_redtail said:
Exchange rates are basically driven by supply and demand. If nobody wants rubles, the value of the ruble will drop.

You need a nation's currency to buy its goods. If nobody wants Russian exports, they won't 'buy' rubles, and the value if the ruble will similarly drop.

Sanctions and a weak domestic economy will reduce the demand for Russian goods. This leads to a drop in the ruble's value.

This means that Russians have less buying power internationally. However, this also means your dollar will 'buy' more in Russia, and will buy more Russian exports. People who want a deal on a vacation might be tempted to travel to Russia (edit: see: Rocket Scientist's post on page 1). This would increase the demand for rubles. So the value of the ruble is pulled up or down by demand.

China is a special case, because their currency is pegged to a certain fraction of the dollar. Your dollars go far in China, so they export a lot. This creates Chinese jobs, but limits China's buying power. This is why currency control is an important part of Chinese policy: it has sustained their economy for years.

Does that make sense?
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Pretty much this, but also keep in mind that this only pertains to nominal exchange rates. The real exchange rate also have to factor in inflation, this is something that the Chinese have experienced on their part. Having a low exchange rate doesn't help in the longterm as the increased demand due to the low exchange rate will naturally drive up prices.
 
j_k_redtail said:
Dunno, www.reddit.com/r/russia , maybe?
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Wow...

It won't affect us no way at all. Maybe it will affect some oligarchs with whom Putin is fighting all the time, so it's not a bad thing, since Putin will be able to do more for the Russian people, and these oligarchs are non-Russian anyway.
most Russians don't have savings at all, so it's no worries absolutely. what West does not understand, that they are trying to fight with us using their corrupted minds, when thinking only about money.
thing is our belief in Putin will only rise, because it is now more and more obvious to everyone out there, that he is the only man standing between us and bloodthirsty Western governments, who wish to destroy Russia and its economics.
this recent attempt to discredit Putin is really just a funny joke, nothing more. we buy our food and other things in the supermarkets in rubles, and not using these silly green money rest of the world are so mad about. so it's indefferent to us whatever the exchange rate is.
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In response to the question, Russians of Reddit, How is the current free falling currency affecting you? At least this post is being downvoted into oblivion.
 
Stinkles said:
Russia could fix this by normalizing its politics and forgetting Putin's weird fever dream version of tsarist Russia.
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I like to think that Russia could become a normal European country and fully integrated with us within the next 15-30 years when younger leaders emerge. Right now they're still controlled by people who were raised to fear western countries, to always assume that western powers are constantly plotting against them, and that they need to be strong and have a sufficient buffer (Ukraine, Belarus, the Baltics, etc) against western countries just in case. Which is fully justifiable considering that was the reality of Russia for around 200-300 years until only quite recently. England had the same fears regarding mainland Europe until after WW2 (and hell, some English folks still do).

Tugatrix said:
I had a Russia housemate some years ago and the guy went mental when we criticized Russia. It was funny when me and other housemates ask him why was he living in Portugal and not Russia if that country was so good, he wasn't able to argue back
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This goes for a lot of people from a lot of countries. Irish people arguably being the worst for it.
 
This a decent list of pro's, but there is always another side of things:

Mii said:
1) Recent wage data is showing wages are finally creeping upward. I was skeptical as well of growth projections until wage data began to sweeten. Jobs numbers are north of 200k a month now (most recent over 300k), which means we are hitting the point finally where workers can be more picky about the job they select and demand higher wages. As for the people that would be affected by the wage crunch of the past decade, the additional savings on gas should help amplify consumer sentiment that conditions are improving.
While the job numbers did finally appear strong this last go-around, the reality remains that there are now less full-time workers in the economy (not due to retirement) compared to prior to the crisis, and job recovery has been disproportionate throughout the country, benefiting the oil producing states the most... or the ones that are now more vulnerable to the oil price declines. I forgot the actual percentage, but the majority of jobs in this recovery have been in the energy sector that is about to get crushed.

2) The sub-prime loan is back baby. You can argue whether these are good or not, but it indicates we have gotten past the worst of the stagnant housing market. Additionally, mortgage originators now actually have far more forcing them to be honest when filling out an application for a potential borrower.
Subprime home loans still have room to grow, even though this latest housing recovery is on the back of cheap money from China, cash from private investors, etc. Not surprisingly, home prices creeping up again has resulted in the lowest amount of mortgage applications, record number of tenants, record number of young people living at home with the parents or with room mates, etc. If we talk about other sub-prime loans, car loans, retail store financing, etc.... it is all crumbling again as default rates are increasing. Positive sales and consumer lending data has been skewed by auto sales, fueled by sub-prime lending... and that won't end pretty, as it never does.
3) M&A activity is back. That 'junk' debt is better thought of as high yield. Increases in its use mean private equity firms think this is a great time to buy companies and make them more efficient. PE firms fund their purchases with high yield debt, and they lever up their purchase as much as banks allow them at the high borrowing rate. PE then pays off that high rate with the savings from making the purchased company more efficient. More high-yield lending means banks are in a healthier state, and investors are hungry for high-yield opportunities. Strategic buyers (in more than just the tech sector finally) are now also getting in on the game.
I agree with all of the above, except now oil has crashed, and high yield bonds for the energy sector were the first to crash. Now the selling is spreading to even investment-grade bonds, so the road will be 10 times tougher for companies trying to issue bonds to either refinance existing debt, buy back shares (one of the big reasons for this stock market boom), or to pursue M&A deals. This is the contagion from the oil shock that we all should fear. Considering a large percent of M&A deals go bad, the situation just became critical as high yield bonds crashed in value in a matter of days.
4) Much of the money printing in the US has been contained by banks meeting new regulatory requirements. Its been a nice gift by the government to the banks to boost their balance sheets, trying to get them to the point where they will lend again (given the new rules), and we have finally hit that point. QE never released significantly to the greater market, otherwise we would see far more damage to the system already. We're still fighting deflation non-stop. Even if the Fed doesn't renege on its promise (I expect them to renege) and raises the rates, most of the bounce in rates should be handled effectively by general health of the US. Most growth expectations factor in some element of fed rate hikes. The problem is QE money has indeed spilled into the greater economy, in the way of higher stock/bond prices, cheaper lending, and a gross misallocation of resources world-wide. In the Fed's defense, they are not alone in fueling a massive financial asset bubble, as Japan, China, and the ECB have played their part. Money velocity has indeed tumbled (no money flowing to the real economy), but instead we have companies leveraging up to buy financial assets, and exposed now more than ever to changes in the interest rate. A small increase in rates in the "shadow banking" sector (repo facilities, money market funds, etc) will dry up much needed liquidity in our over-indebted world, and companies will begin to fail across the board. We think central bankers know exactly what they were doing, but they mismanaged the magnitude of QE, the spillover effects to financial markets, and they have no clue how to raise rates without causing a crash. Their hopes for inflation are quickly fading.

Business abroad will suck, but the US has a good thing going right now.
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The US is relatively ok (in the past 2 years, but I think it is about to change), compared to the rest of the insolvent nations, but it is still in the dog house.
 
A Human Becoming said:
My father believes it's a grand conspiracy to fuck Russia. I wonder if there's any truth to that.
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I wouldn't call it a conspiracy as it is fairly obvious what the US is doing and that OPEC are aiding. Oil is Russia's #1 export. If they make no money on oil and they continue to be in the midst of a war in Ukraine, they will essentially be hemorrhaging money.

The Central Bank of Russia just raised interest rates from 10% to 17% literally overnight. From the moment the clock struck 12:01AM the interest skyrocketed. For these reasons alone, this is why Russia will never become a superpower nation ever again. They rely far too much on one single export.

The whole country needs a political enema.
 
Sectorseven said:
What would happen if they joined the Euro?

Would the rest of Europe even let them?
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I suspect that the Russian federation might not quite meet the Copenhagen criteria for joining the EU.

political: stability of institutions guaranteeing democracy, the rule of law, human rights and respect for and protection of minorities;
economic: existence of a functioning market economy and the capacity to cope with competitive pressure and market forces within the Union;
acceptance of the Community acquis: ability to take on the obligations of membership, including adherence to the aims of political, economic and monetary union.
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Yeah it's hardly a conspiracy if everybody has been up front about it. Hell Putin got punked by middle power leaders at the last G20.
 
Sectorseven said:
What would happen if they were to join the Euro?

Would the rest of Europe even let them?
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Can't really stop someone from using your currency if they really want to. There are lots of places that use the USD for everyday buisness that aren't the US. I doubt Russia would officially switch to a foreign currency, but it's possible we'll see business being conducted in Euros and USD if people lose faith in the Rouble.
 
Mr.Mike said:
Can't really stop someone from using your currency if they really want to. There are lots of places that use the USD for everyday buisness that aren't the US. I doubt Russia would officially switch to a foreign currency, but it's possible we'll see business being conducted in Euros and USD if people lose faith in the Rouble.
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They can use it, failing economies often start paying people in foreign currencies. But they don't have any control over that currency and they can't print it.
 
Twisting the knife. This actually passed a little while ago, but Obama hadn't decided whether or not to sign it.

WASHINGTON — President Barack Obama will sign legislation slapping new sanctions on Russia and providing weapons and other aid to Ukraine despite White House concerns that military assistance will further escalate the conflict, the White House said Tuesday.

White House spokesman Josh Earnest said Obama continues to have misgivings about the bill, which cleared Congress with overwhelming support, but believes the legislation still gives him the flexibility he needs.

‘‘The bite on the Russian economy is only becoming stronger,’’ Earnest said.

Word that Obama would sign the measure comes as Russia grapples with a currency crisis driven both by the impact of previous sanctions and a drop in the price of oil.

Republicans and Democrats, including House Speaker John Boehner, R-Ohio, had called on Obama to sign the measure immediately.

...
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Don Chalupa said:
Russia is not isolated yet, and they are in bed with China for now... they will likely circumvent SWIFT and dollars altogether, and who knows if/when they will decide to peg their currency to something.

These are historic times in finance, and Russia being in trouble is just the start. The one certainty is that war will happen between Ukraine/NATO and Russia. Ukraine has no choice, hence Europe will have no choice.
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Europe will not go to war for Ukraine. Hell I'd be shocked if they did for Sweden/Finland (which are not Nato members). Putin would have to hit one of the big ones like Germany, France, or Italy for an actually war to start. Why? It starts with Nukes and ends with the apocalypse .
 
marrec said:
It's disingenuous to blame this on the Crimea situation. The rouble was raising, but remaining fairly stable through most of the year until the oil market flood.

This has more to do with OPEC (of which Russia is a part of) than the Ukrainian situation.
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This is itself disingenuous. Russia was able to ignore sanctions due to their heavy reliance on oil; the hit for the rest of the economy did not really impact their basic economy - it hit people but overall it was a drop in the ocean.

Now however they are unreliant on the oil sector; areas of Russia that might improve from low oil prices are being hit by sanctions.
 
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