Thursday, April 16, 2015

RT — Ruble passes 50 against USD for 1st time since November


Ruble on a tear and still rising against the dollar as I write this. USD/RUB = 49.70

RT
Ruble passes 50 against USD for 1st time since November

Also

Brazil Business Today
Russia, Brazil Best Emerging Bond Markets - HSBC Specialist

7 comments:

mike norman said...

As soon as they stopped raising rates it started to rally.

And the Russian economy avoids recession, too. Even after sanctions and the collapse in oil prices.

NeilW said...

All down to those US loans the US refused to roll over IMV.

That caused a dollar pinch point.

Now the Russian companies involved are refinanced in their own currency and more stable.

Another win for sanctions...

Matt Franko said...

According to Aziz below high interest rates are supposed to be "bad".. ????????

"Bad" for U.S. but "good" for Russia ??????

Nice alleged "theory"....

Matt Franko said...

Mike probably all of those previous windfall profits from the $100 oil were just being saved external to Russia. .. the extra $50 per bbl didnt mean much to them domestically. ..

Imo the high interest rates and the small domestic program they did were enough to help via fiscal... so no recession. ..

Now oil has found a bottom here short term so their real terms of trade have stabilized too and the currency of course will reflect this within a short time....

Rsp

Ignacio said...

So now Russian national firms are better positioned (and other foreigners have occupied market share previously hold by western firms) and with stronger balance sheets.

Oh man, if our policy makers keep making those 'smart' sanctions we may end up fixing the economy because our idiot capitalist class cannot do anything else than reinvest their all tax-evaded ill-gotten gains at home because they are not able to do business elsewhere.

Now, just if other developing nations started to adopt protectionism too ...

Tom Hickey said...

Most of the so-called capital flight was Russian companies paying down USD-denominated debt. That is largely over and they are no longer borrowing USD.

The Russian government pressured companies that we net savers in USD to convert to rubles and then they used the USD to address the BOP issue from private borrowing in USD.

Tom Hickey said...

I interpret John Aziz as saying that this is Keynes's argument: High interest rates increase the cost of capital and negatively impact investment.

Other interest rates are market determined by interest rate risk (inflation) and default risk (creditworthiness). Interest rates higher than this are due to scarcity of financial capital and in a floating rate system there is not scarcity of capital operationally. The cost of capital to government is zero operationally.

This is consistent with MMT. This is why Warren advocates permanent ZIRP, which is Aziz's zero rate for the sovereign.

Governments can increase capital scarcity by increasing the through raising the interest rate. That's the basis of conventional monetary policy.

MMT prefers that government cease manipulating the scarcity of capital through cost and conduct economic policy by means of fiscal policy. Fiscalism actually much more of a market-based approach than monetarism.

Rather than create scarcity of capital it operates based on the expanding and contracting need for liquidity based on sectoral saving desire. When non-government prefers to net save at less than full employment conditions, I.e., optimal output based on efficient use of available resources, then government needs to step up fiscally with a "full employment budget" to ensure effective demand is equal to aggregate demand = aggregate supply at optimal output/full employment/price stability. With a low cost of capital, the economy can expand to meet demand as it increases.

The way to check excessive investment is not through raising the cost of capital but by controlling the credit process from the asset side of banking, and the if needed, reducing the government balance. But with good banking practice, the credit system should be able to adjust to changing conditions and regulators can step in to prevent a Minsky stage three from developing.

A JG mops up residual UE.

This is pretty basic MMT.