Where We’re Heading
The present generation is used to losing all its savings. First “shock therapy” with price liberalization, then quick exchange of old denominations for new (restrictions apply), then default. As a result of these humiliations, citizens came to believe in only one value—the US dollar. Alas, we lost this last reference point in the unstable world of the Russian economy last year. Although fluctuations of the dollar to euro rate were tolerable, the drop in the dollar to ruble rate became the event of the year; it was an unexpected event with unpredictable consequences.
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| Photo: Sergei Mikheev |
| In these difficult times for the American dollar, even the dollar sign is being perceived differently: the $ seems to be hunched up and leaning on a stick to keep from falling once and for all in the battles with the second world currency, the euro, and an unexpectedly strong ruble |
Even Russians with little knowledge of currency market problems understood very well for a long time that the rate of the Russian ruble to the American dollar could move in only one direction—down. Whether faster or slower, the dollar always rose and the ruble always fell. So why did the world turn upside down? No one knows.
Since many prices and wages were traditionally measured in American money and this same money went into savings, it turned out that savings and wages decreased and prices were also supposed to decrease, but for some reason this did not happen.
Clever citizens decided that the euro had simply taken over as the eternal value. However, by the time the broad masses realized this and bought up the new bills, these wretched bills stopped rising against the ruble. There were a lot of questions, the main one being which currency would rise now. The ruble? The ruble depended only the price of a barrel of oil, which could fall on a whim. The dollar? No one trusted it anymore. The euro? There were so many dollars in the country that a mass conversion to the new currency would have been worse than a Pavlovian exchange of hundred-ruble bills. We immediately turned to a number of specialists to help us choose.
It would not be fitting for a publication called First Rating to overlook one more event, that is, Moody’s upgrade of Russia’s investment rating. What could change the new rating is the subject of other material of the heading.
All the Article in Russian as of Jan. 12, 2004
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