NP - The Russian Ruble Is Now Entering Free Fal

[David Morris]

Ruble Continues Its Free Fall

http://www.motherjones.com/kevin-drum/2014/12/ruble-continues-its-free-fall


—By Kevin Drum <http://www.motherjones.com/authors/kevin-drum>
| Tue Dec. 16, 2014 10:50 AM EST

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Well, We have our answer: the Russian central bank's last-ditch effort to
stop capital flight didn't work. It was indeed taken by the market as a
sign of desperation, not strength. The ruble recovered a bit right after
the surprise interest hike in the middle of the night, but by mid-morning
panic had settled back in and the ruble was once again in free fall. Even
the enticement of 17 percent interest wasn't enough incentive for
people to keep
their rubles in Russian banks:
<http://www.wsj.com/articles/russian-ruble-rallies-after-interest-rate-rise-1418715476?mod=WSJ_hpp_LEFTTopStories>

By early afternoon in Moscow, the ruble dropped sharply, reaching 80 to the
dollar, a record low and a 35% decline from opening levels when it rallied
briefly. At 1630 local time, the dollar was trading around 73
rubles....Deputy Chairman Sergei Shvetsov called the situation “critical,”
the Interfax news agency reported. “At lot of (market) participants are in
serious condition because of these events.”

“The choice the central bank made (to raise rates) was between very bad and
very, very bad,” he said, noting that the bank could yet take more measures
to stabilize the market....Economists warned that the central bank appeared
to be losing control of the market and might have no alternative but to
restrict trading. “Capital controls as a policy measure cannot be off the
table now,” said Citigroup’s Mr. Costa.

Stay tuned.

On Tue, Dec 16, 2014 at 10:51 AM, David Morris <fqmorris at gmail.com> wrote:
>
> Quote of the Day: Russian Central Bank Decides It Needs to Destroy the
> Economy In Order to Save It
> <http://www.motherjones.com/kevin-drum/2014/12/russian-central-bank-decides-it-needs-destroy-economy-order-save-it>
>
>
> http://www.motherjones.com/kevin-drum/2014/12/russian-central-bank-decides-it-needs-destroy-economy-order-save-it
>
> From Neil Irwin,
> <http://www.nytimes.com/2014/12/16/upshot/vladimir-putin-vs-the-currency-markets-what-to-know-about-the-rubles-collapse.html?partner=rss&emc=rss> commenting
> on the huge interest rate jump announced by Russia's central bank in the
> wee hours of the morning:
>
> It may go without saying, but a 6.5 percentage point emergency interest
> rate increase announced in the middle of the night is not a sign of
> strength.
>
> Roger that. Russian central bankers hope that this will be an incentive
> for people to keep their money in Russia, earning high interest, instead of
> shipping rubles out of the country at warp speed and squirreling them away
> in any safe haven that comes to hand. And maybe it will work.
> Alternatively, as Irwin suggests, it may be viewed as a sign of
> desperation, causing Russia's oligarchs to pile on the dilithium crystals
> and ship out their money even faster. You never know what's going to work
> when a currency crisis goes into panic mode.
>
> In any case, even if it works, the price is going to be high. Here in
> America, we argue about whether the Fed will choke off recovery if it
> raises interest rates to 2 percent. Russia is now at 17 percent. Even if
> this puts a halt to currency flight, it's going to kill their economy. In
> Russia tonight, there are no good options left.
>
> On Mon, Dec 15, 2014 at 6:34 PM, alice malice <alicewmalice at gmail.com>
> wrote:
>>
>>  What did you expect? Russia can shovel shit against the tide and use
>> capital controls, but in the long run, Putin has nothing and he ain't
>> no cool hand luke.
>>
>> On Mon, Dec 15, 2014 at 2:38 PM, David Morris <fqmorris at gmail.com> wrote:
>> >
>> http://www.motherjones.com/kevin-drum/2014/12/russian-ruble-now-entering-free-fall
>> >
>> > Looks serious.
>> >
>> >
>> -
>> Pynchon-l / http://www.waste.org/mail/?list=pynchon-l
>>
>
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