Russian Ruble completely disintegrating

It's not a surprise given the collapse in the commodity markets but one of the hardest hit currencies is the Russian Ruble:



Things are not well in the land of the bear. However, this isn't bad per se. Russia is a country dependent on commodity exports and it will become more competitive as the Ruble collapses. The ones that are hurt are the Russian savers who own Ruble-denominated assets. The question comes down to employment vs wealth. Weakening currencies tend to improve employment prospects while you lose your wealth.

(A lot of other currencies are also weakening, with the British pound weakening over the last year to levels seen in early 2000's. My country, Canada, has a quasi-commodity currency and it weakened late last year but I do not anticipate major moves in either direction.)

Comments

  1. AnonymousJanuary 23, 2009 at 12:05 AM

    Does this mean Russia is a cheap vacation right now, or do they sell things to foreigners in dollars/euros?

    ReplyDelete
  2. Sivaram VJanuary 23, 2009 at 10:02 AM

    I have no idea but... a declining currency will benefit tourism in the long run. Even if they sell in US$ or Euros, their prices will be cheaper in the future--if not soon then within a few years. Their cost of business will drop (because the Ruble did) so they can technically lower what they charge foreigners and maintain a profit margin.

    The best vacation, theoretically, may be something like Iceland. I haven't kept up with their currency and interest rates lately, but its currency was collapsing a few months ago.

    ReplyDelete

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