MBS Blog

As we have been reporting on this space, the Russian and Ukrainian currencies have been declining along with their economies. While Russia has been able to stave off a complete collapse due to the foreign currency reserves it holds, it is only a matter of time before the ruble descends to much lower levels.

For now though, the Russian Government has managed a slower depreciation. When the foreign reserves decline further, and oil & gas prices continue their current trend, capital flight will accelerate in 2009. This will force the ruble lower. 

For Ukraine there are fewer options. No cash reserves or oil resources means that Ukraine is subject to the whims of a volatile market in crisis. The recent emergency loan from the International Monetary Fund (IMF) to Ukraine stabilized the markets here to a great extent, but the real stabilization will come when the market hits bottom and government reforms. The loan from the IMF in fact, was contigent on reforms. 

As for 0900 this morning of Friday the 19th of December, the Ukrainain currency-the hyrvnia (UAH) is selling at 7 to 1 U.S. dollar at local kiosks here in Odessa. Yesterday it was at 10 to 1 U.S. dollar.

As we have mentioned in an earlier post on this blog, it is a seasonal ritual.  During the holiday season or summer tourist season, the Ukrainian Government shores up the hryvnia against foreign currencies. This past summer for example, the hryvnia was at 4.6 to 1 U.S. dollar. As soon as the tourists departed, it went back up to the 5 to 1 U.S. dollar rate where it had been averaging for the past several years in a tight trading range or “peg.”

In the end, neither the Russian or Ukrainian Governments will not be able to over-rule the markets.

Technorati Tags: Russia, Ukraine, U.S. dollar, Anton Olff, currencies, Odessa, ruble, hyrvnia, UAH, International Monetary Fund, IMF, economy, foreign reserves, foreign currency, Russian Government, depreciation, oil, gas, capital flight,

This article is from one of our favorite bloggers: Mike Hewitt provides the “big picture” of individual nations relative to the global economy.  The picture is not pretty for many.

http://www.financialsense.com/fsu/editorials/dollardaze/2008/1205.html

The extreme level of public debt in developed nations in particular…and these charts don’t measure corporate and private debt…portend an almost certain re-alignment of economic power.  China for example, can be compared to the United States at the beginning of the 20^th century. The United States is now like post World War II Britain. It may never fully recover.

The  result of the changes is the full emergence of transition economies.  Unburdened by massive debt, with growth oriented economies that have incorporated  free market mechanisms,  emerging market economies could  take the lead a lot faster than previously reckoned. Indeed, that may be the “silver lining” in the current economic cloud.

Technorati Tags: China, United States, World War II, Britain, www.dollardaze.org, Mike Hewitt, Wealth of Nations, debt, transition economies, emerging markets, corporate debt, private debt, Anton Olff, Intermational Monetary Fund, IMF, G-7, Japan, Germany, UK, France, Italy, Canada, government liabilities, Foreign Reserves, Sovereign Wealth Funds, United Arab Emirates, Abu Dhabi Investment Authority, Dubai Workd, Singapore, Temasek Holdings, Norway, Government Pension Fund of Norway, Kuwait, Kuwait Investment Authority, China, China Investment Corporation, Australia, Australian Government Future Fund, Qatar, Qatar Investment Authority, Libya, Libya Investment Authority, Alaska Permanent Fund, Brunei, Brunei Investment Agency, South Korea, Korea Investment Corporation, Kazakhstan, Kazakhstan National Fund, Chile, Copper Stabilization Fund, Russia, Russian National Wealth Fund, Malaysia, Khazanah Nasional, Canada, Alberta Heritage Fund, Taiwan, National Stabilization Fund, Bahrain, Bahrain Mumtalakat Holding Company, Iran, Oil Stabilization Fund, Oman, State General Reserve Fund, Saudi Arabia, Saudi Arabia Sovereign Wealth Fund, foreign reserve holdings, India, Brazil, Algeria, Mexico, Switzerland, Turkey, Hong Kong, Poland, Nigeria, Indonesia, Argentina, Romania, Venezuela, Netherlands, Spain, CIA,