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Collapse of the Russian Economy
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teacher X



Joined: 13 Feb 2013
Posts: 168
Location: Super Sovietsky Apartment Box 918

PostPosted: Tue Dec 10, 2013 8:56 pm    Post subject: Collapse of the Russian Economy Reply with quote

Have any of you heard such rumours? The rumour monkeys are advising me to change my roubles into dollars before the new year as they foresee an economic collapse occurring in January or February.

I don't know how much trust to put into such whispers.
Indeed, the rouble has become very weak recently, but it does appear to be slowly strengthening. Honestly, this is no worse than the Euro was last year (in it's fluctuations)
While Russia has seen a real slowdown in GDP growth, it is still better than most other countries.

What do you guys think?
Should I be stocking up with tins of meat and dried fish in preparation for the apocalypse, or has this sort of thing happened before?

I'm more inclined to ignore such people (who tend to be doomsayers at the best of times).
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ecocks



Joined: 06 Nov 2007
Posts: 886
Location: Gdansk, Poland

PostPosted: Tue Dec 10, 2013 10:15 pm    Post subject: Reply with quote

In times of instability, stable currencies hold up well.

That said, the world is pretty screwed up right now so predicting stability may be more difficult than some think. I mean the world "leaders" are doing selfies at Mandela's funeral so I'm not sure anyone is even trying to figure out the economic situation.

I wouldn't be in Gryvnia (Ukraine) and it seems the Chinese may have some instability ahead. Russia sells a lot of oil and gas but taking on the sinking Ukrainian ship will have them selling more gas below cost (not that they would EVER renege on that though!) and the Sochi Olympics will strain the security apparat's budget a tad. I'd be holding most of my loose change in Dollars or Euro if it was me, but....opinions, everybody has one...or two...or three....
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expatella_girl



Joined: 31 Oct 2004
Posts: 224
Location: somewhere out there

PostPosted: Wed Dec 11, 2013 11:58 am    Post subject: Reply with quote

I do not think the Russian economy is on the brink of collapse. I also do not think the Russian ruble is immediate danger of extreme devaluation (a la 1998 and Perestroika).

In fact (as a non economist) I think Russia is well poised for strong financial dependability in the first half of the 21st century. So that's a more long term outlook than the next two quarters, which could be more violable.

Russia has made some very good economic decisions in the last few years.

-They have paid off their international debt.
-The Russians have been buying up large quantities of gold (to underpin their currency)
-They are the world's largest holder of a number of important natural resources (oil, natural gas, water, minerals)
-They have entered into international agreements with the other BRICS countries to trade within their own currencies without having to buy US dollars.

These are all very much in Russia's long term favor.

Short term, the ruble may lose value. I've seen the ruble in the last ten years go from 30 rubles to the USD, up to 23 rubles to the USD, and a month or so ago down to nearly 34 rubles to the USD.

The US dollar is in jeopardy as is the Euro, the Japanese yen, the Chinese renimbi, and many other fiat currencies.

If you really wanted to exchange your rubles for a fiat currency with some [current] reliability, the better bet would be Swiss francs.

Just IMHO.

The biggest problem with the RR from my point of view, is that they are extremely hard to convert into cash currencies outside of Russia (no matter how schittezous the other currencies may be as well). But that is more international politics than currency weakness. The western money markets love nothing better than to punish Russia for its failure to allow them to plunder Russian wealth after Boris Yeltsin was run out of town.....

Anyway, if you wanted to convert your rubles into something else, gold coins and Swiss francs are pretty good bets.

{I wouldn't touch Euros with a 10 foot barge pole}

In the end, you earn rubles, you're spending rubles. The only real problem occurs if you try to exit Russia with rubles, convert them, and spend in a different currency. As long as you're not going anywhere all is good.
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Sashadroogie



Joined: 17 Apr 2007
Posts: 9353
Location: Moskva, The Workers' Paradise

PostPosted: Wed Dec 11, 2013 12:09 pm    Post subject: Reply with quote

The Euro is here to stay. So is the ruble. I too have heard these rumours, but then again I hear every couple of months or so.

What's that you say, Pyotr? A wolf?
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expatella_girl



Joined: 31 Oct 2004
Posts: 224
Location: somewhere out there

PostPosted: Wed Dec 11, 2013 12:20 pm    Post subject: Reply with quote

I'm not so sure about the Euro, Sasha. It's only been in existence for less than 20 years, and it's been in trouble for 10 of those 20.

I'm no soothsayer, but I can see Germany going back to their Deutschmark for economic self preservation. If they did, the Euro wouldn't be worth two cockroaches rubbed together in the summertime.

I'd believe in the Russian ruble long before I would put any long term faith into Euros.
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jonniboy



Joined: 18 Jun 2006
Posts: 693
Location: Riga, Latvia

PostPosted: Wed Dec 11, 2013 2:21 pm    Post subject: Reply with quote

expatella_girl wrote:
I'm not so sure about the Euro, Sasha. It's only been in existence for less than 20 years, and it's been in trouble for 10 of those 20.

I'm no soothsayer, but I can see Germany going back to their Deutschmark for economic self preservation. If they did, the Euro wouldn't be worth two cockroaches rubbed together in the summertime.

I'd believe in the Russian ruble long before I would put any long term faith into Euros.


The disappearance of the Euro is highly unlikely. Reintroducing national currencies would cost far too much both in economic and political terms and Germany isn't going to retreat from a position in the heart of Europe into isolationism. Commentators, often stateside based ones, have been making doom and gloom predictions about the Euro for years.

For example in January 2012, Julian Jessop of Capital Economics predicted the Euro would hit $1.10 by the end of 2012, while the head of the Pacific Investment Management Co suggested parity with the dollar was likely. Around the same time, Deutsche bank said they expected a figure of $1.20~1.25 for the Euro by the end of the following year (i.e. this month.) Epic fail methinks as the Euro has been around the $1.35 mark for most of this year and most economists think that the worst of the crisis is over.

If any changes take place, then, in all likelihood, it'll involve kicking some of the slackers like Greece or Portugal out and even that isn't very likely. Still, keeping all your cash in any one currency is always dodgy. Economists might disagree on the future of currencies but you'll be hard placed to find any decent economic adviser who would disagree with the notion of diversifying your assets.
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teacher X



Joined: 13 Feb 2013
Posts: 168
Location: Super Sovietsky Apartment Box 918

PostPosted: Wed Dec 11, 2013 7:20 pm    Post subject: Reply with quote

Actually, I would have simply transferred money to my UK bank account. The pound is somehow always fairly stable.
But I transferred some cash just a couple of months ago to pay off my remaining UK debt, so I don't know if I can do it so soon (I have a vague inkling that there is a cap of some amount). Mainly, I am reluctant to transfer money as I need to drag one of my Russian colleagues with me to help with the bank procedures (give me 2 more years of Russian class and I might be able to do it myself)

But I'm going to listen to you guys rather than the doomsayers. Smile
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coledavis



Joined: 21 Jun 2003
Posts: 1837

PostPosted: Fri Dec 13, 2013 8:35 am    Post subject: Reply with quote

Well, if the western economies tank further, then that may affect Russian oil prices and in spite of talk, the Russian economy does not seem to have diversified much. Having said that, all the points about staying relatively debt free etc suggest that it is in better shape than many. It is more the instability of legislation that bothers me. See the latest proposal on Russian only in the workplace:

http://en.ria.ru/russia/20131212/185501983/Russian-Deputies-Propose-Bill-to-Ban-Foreign-Languages-at-Work.html

http://www.reuters.com/article/2013/12/12/us-russia-language-ban-idUSBRE9BB11520131212
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JustinC



Joined: 15 Mar 2013
Posts: 138
Location: The Land That Time Forgot

PostPosted: Fri Dec 13, 2013 8:43 am    Post subject: Reply with quote

If you're so sure the Euro will be worthless you must be making millions shorting it.

The market usually prices in future movements, to some extent, but I'd prefer to hold other currencies. Look to the NZD, USD, GBP and Swissie.
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Sashadroogie



Joined: 17 Apr 2007
Posts: 9353
Location: Moskva, The Workers' Paradise

PostPosted: Fri Dec 13, 2013 2:39 pm    Post subject: Reply with quote

Proposals from this party are usually just for comic relief. Weren't they the chaps who advocated criminalising snogging on the metro escalators? Very Happy
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smithrn1983



Joined: 23 Jul 2010
Posts: 320
Location: Moscow

PostPosted: Sat Dec 14, 2013 12:02 pm    Post subject: Reply with quote

Someone's always predicting the collapse of something. With as much oil and gas as Russia has to export, the economy is not going to collapse any time soon. Short-term dips in the currency value, maybe, but not a collapse. Keeping your money in rubles long-term, though, is a problem because the Ruble's inflation rate is much higher than that of the USD, EUR, CHF or GBP, as well as a number of other currencies. Here's a link to Russia's inflation rate over the last couple of years http://www.tradingeconomics.com/russia/inflation-cpi.

If you didn't follow the link, Russia's current inflation rate is 6.5%, USA 1%, Euro area 0.9%, Switzerland 0.1%, and UK 2.2%. Inflation is basically the currency losing value.

So, if you're saving money in Rubles, that savings needs to earn 6.5% interest every year just to maintain its purchasing power. By contrast, if you save in CHF, it only needs to earn 0.1% a year to maintain its purchasing power.
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teacher X



Joined: 13 Feb 2013
Posts: 168
Location: Super Sovietsky Apartment Box 918

PostPosted: Sun Dec 15, 2013 8:11 am    Post subject: Reply with quote

smithrn1983 wrote:
*snip* economic stuff *snip*


Thanks for explaining that in a real simplistic manner. Some of us (i.e. me) are unable to continue counting once they get through their fingers and toes.
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coledavis



Joined: 21 Jun 2003
Posts: 1837

PostPosted: Sun Jan 12, 2014 6:51 pm    Post subject: Reply with quote

This doesn't give a yes, there's a problem, or no, it's ok, but here are a few relevant factors:

High interest rates are a pain for businesses and people wanting mortgages. On the other hand, personal debt levels are very low, so people can hunker down rather than go bust when things are bad. But there seem to be loan sharks out there, so maybe that's a sign of economic malaise.

Oil prices may be affected by further economic decline in the west, as industrial demand may diminish further.

Russia has been injecting money into works such as refurbishing town centres (and we're not just talking Sochi). This keeps employment up, meaning continued internal demand in the economy (Keynesians will be happy, neocons less impressed).

I think Russia is trying to diversify. Amongst other things, they are succeeding in competing for inward investment. E.g. new economic zones such as the one in Lipetsk (which I know) are getting major companies from the West setting up factories. (Although again, if the West gets worse and worse...)
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jpvanderwerf2001



Joined: 02 Oct 2003
Posts: 1077
Location: New York

PostPosted: Mon Jan 13, 2014 3:36 pm    Post subject: Reply with quote

The Russian government is also trying to invest in its people:
http://www.vedomosti.ru/career/news/21197411/v-kembridzh-za-gosschet

For those of you who don't read Russian, the article basically says that the Russian government will pay for graduate students to study in Western universities...provided they return after they complete their degrees.

I have to say this is an admirable move by the government. I also think that English teachers in Russia should branch out and learn to teach GRE/GMAT/LSAT Smile
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stinkytofu



Joined: 23 Feb 2012
Posts: 104

PostPosted: Thu Mar 27, 2014 7:10 am    Post subject: Reply with quote

The BRICS nations are trying to replace the US dollar as the worlds reserve currency and in return the US is crashing the currencies of these countries and Russian Ruble is one of them. Its a currency war which will end in nuclear War(WW III)when China can't import any more gold. Yes, the situation is very serious no matter what country your living in.

Emerging Market Currency Crash
http://www.businessinsider.com/emerging-market-currency-year-to-date-2014-2

USA Watchdog
https://www.youtube.com/user/usawatchdog

USD/RUB
http://www.xe.com/currencycharts/?from=USD&to=RUB&view=1Y
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