Publication in Russian on the Zen blog
https://dzen.ru/a/Zo_MH3UVPUOzfH-N
If the ruble is not money, why is it rising in value compared to the US dollar exchange rate? Is the ruble really strengthening? The answer can be found in economic theory, in Austrian and Swedish economists, classical economists and in the quantity theory of money, as well as from the point of view of currency traders or stockbrokers.
Почему российский рубль не деньги?
I want to talk about the Russian ruble again. I want to talk about that and what's happening day in and day out. There was a recent publication that the Russian ruble is not a currency, it's not money. Based on the 1871 book "On Money" by the Austrian economist Carl Menger, which states that money is a generally accepted medium of exchange, when all people in the collective unconscious are unanimous throughout the world to trade using a certain currency. And by that definition and by any definition, the ruble is not a generally accepted currency, it's not money.
You wake up this morning, and what happens: you hear on the radio or see on the Internet that the ruble is strengthening, the value of the ruble has increased against the US dollar. What is going on here? This is exactly what is happening, we will talk about in this publication.
People who are related to finance, for example, traders or stockbrokers, can often meet in their practice eccentrics who may think that if a currency is officially growing, then it is worth investing in it. Such people can keep their own savings in a bank, in a current account, and if the exchange rate of a currency rises and another currency falls, they can start to panic, selling the currency. As a result, such people cannot earn money, and most often, at best, simply return to their original current account. Professionals understand and see the currency market more sensitively, such people are difficult to confuse with statistics, the official rate, and so on. For example, any stockbroker knows the term "dead cat bounce". This phrase about a dead cat bouncing if it falls from a great height applies to any case where the subject experiences a short-term rise during or after a strong decline. In finance, a "dead cat bounce" means a small, short-term recovery in the price of a falling stock. A professional will never take such a "dead cat".
So, as far as the ruble is concerned, this is primarily an artificial rate. If you look at the real rates on the free market, it is 500ths of a cent. But if you look at the official rate, this is the same "dead cat bounce" that pounces on people heading to the dump for this currency. The same thing happens with stocks, when people try to make pennies on penny stocks. And it does not work like that. You will lose if you believe in the ruble. Did you know that Russian oligarchs don't use rubles? They use US dollars, Euros, British pounds. They might have gold or cryptocurrency. Look at Russia as a whole, pay attention to the two really elite cities - Moscow and St. Petersburg. It's a kind of Panem, like in the Hunger Games, where 12.42% of the population lives in really comfortable conditions. And the majority of the population lives in concrete blocks with aluminum nickel-plated frying pans and a pathetic disposable income. You can see a lot of Instagrammers showing us how they preen themselves and show us the best grocery stores of the level that you can see in London or San Francisco. But this is not the reality of Russia. Russians have no disposable income. And the ruble is basically not even a domestic currency now. Existing in Russia, it is better not to invest in the ruble, but to buy something material, well, what do we have of our own production, hammers, sickles, a piece of concrete, potatoes, and all that. Yes, people in North Korea are starving, and if you say: "Oh, this can never happen in glorious Russia" or if you are reckless with your poison from anger at what I am saying now, then go back to the ruble again. And going back to the ruble, we stopped at the fact that the garbage man, coming to the dump, does not trade, and the oligarchs do not use the ruble. Only professionals can use the ruble, but very quickly. But do not use the ruble as a savings. An internal economy that does not create any value, in an economy in which everything goes to some non-constructive goals, in such a country there will most likely be an acute shortage of food or other material values. Do not hold the ruble, hold potatoes, because the ruble exchange rate is a well-known phenomenon, it is a "dead cat bounce", it is a rally for losers. Even if you see that the price of the ruble will grow even more, even to a dizzying height from which you want to run away, relax, this is a temporary recovery of prices after the fall, there is no point in checking the ruble rate every day, there is just such a phenomenon as a "dead cat bounce", this is a prank of losers, this is a sign that this is the last breath of life in the ruins of a collapsing economy, and many analysts predict this. And personally, I do not make any dire predictions, on the contrary, I am an optimist. I believe that every person and any form of life deserves a chance in this life, so if you are a Russian and you have a warehouse of rubles, go stock up on wood, concrete, lumber, tools, potatoes. Because all this is more real than the ruble in Russia.
When a country has a non-capitalist economy, it's not even a problem of production itself, it's a problem of distribution. The economy has serious problems with distribution to non-productive sectors, there is a labor shortage. Labor shortage, because everything goes to the non-productive sector, as a result, at the output we get the personification of the economy in the form of the ruble, which is essentially debris and ruins, turning into steam, which no one actually uses. The oligarchs do not use this steam, they use the dollar in their wallets, they buy BMWs and buy yachts, and their children study in elite schools in the West, they themselves do not believe in Russia. Russia will soon become a footnote in history. And people will say: "Russia, what was that? Oh, yeah, those were the dark times in the world, when the world became better." I just want to give you confidence that if you see the ruble falling, I mean rising, don't worry, it's a rally of losers. And if you don't believe me, just look at economic theory, quantity theory, monetary inflation. Every country has official inflation, natural interest rates, long-term value of currency. And all of that depends on the underlying economy. Russia doesn't have an underlying economy, maybe it had something before 2022, but now it's nothing, the dummy currency is getting cheaper, just grab some popcorn and watch the situation. But don't get upset about the "dead cat" from the Russian economy. Have a nice day and thank you very much for reading the publication.
In the 1920s, when Germany was hyperinflationary, people were paid several times a day so that they could buy goods before prices rose again. Obviously, the great-grandfathers of today's Germans could wallpaper their houses in the form of 1,000 and 10,000 mark notes, because it was cheaper than real wallpaper.
What needs to be done to collapse the Russian economy?
1) a planned economy 2) a currency that creates systemic effects in the real sector 3) an economy that directs production to unproductive goods. 4) feudalism and conflicts. This is the beginning.
Indeed, the ruble will fluctuate depending on many daily factors, such as the feeling that Putin had a good day with his army, or the bombing of Kyiv or Kharkov, etc. Ultimately, the ruble will fall, because the government cannot win this war, since too much money is spent on it, and the GDP does not produce real assets and products. Production of tanks, weapons, missiles, bombs, etc. is not a real indicator of GDP. Paying soldiers' salaries and death benefits does not increase GDP. In this scenario, Russia eventually reaches a day of reckoning when the facts in the table show that the war is lost and defeat is the only final scenario. Then all hell breaks loose. The house of cards, smoke and mirrors collapse, the financial disaster is revealed in a dramatic way, and panic sets in. The Russians will face another 1991 crash scenario. They will need a new government and leadership to recover from another 1991 scenario.
No statistics come out of Russia anymore. The black market rate reflects high inflation, so the government lowers food prices on certain items to create the illusion of stability. Russia stops borrowing. The biggest problem is the shortage of machining tools, Russia tries to get them from China, but there are secondary sanctions, so used machines are purchased.
It's so bad that Putin is looking for various tools and components around the world, through third-party deals, after the latest sanctions made it difficult to get parts through traditional middlemen, that's one of the reasons he's visiting Vietnam now, it's gotten better there. Chinese tools than he can get from China itself, he's trading technology transfers along with military know-how to countries that are willing to accept these weird last-minute barters. He also wants to offer nuclear power generation technology, as well as military technology, especially satellite technology and the like... but Vietnam has a lot more American investment and doesn't want to be hit with secondary sanctions, so we'll see how that goes...
What allows Russia to survive is selling resources like oil and gas. Imagine Russia still selling as much gas to Europe as it did before the war, despite the sanctions. Gas sales are not directly sanctioned and find their way. But in the long run, Russia is in deep decline... Europe is restructuring, Asia won't pay the old European prices, and the distribution networks don't exist.
I can imagine Putin asking his economists if there's any good news about the ruble, and them telling him that they've driven the counterfeiters out of business. Maybe it's cheaper to buy rubles for board games than to print money for games.
The Russian economy and ruble are going down the drain. However, with tight control of society (i.e. terror), you can keep a country afloat for a very long time. Just look at Iran, Cuba, and North Korea.
Just open a textbook on monetary economics. If your economy doesn't export products, then no one will want your currency - that's pretty much the first thing we learn when we study the subject. And I think the second thing is how dictatorships use completely fictitious exchange rates to make it look like their economy is normal. China has always been the example, but now the ruble is rapidly following this path. Whether it is the South African rand, the Zimbabwean dollar or the Venezuelan bolivar, dictatorship is 100% destructive to monetary economics because it replaces economics with ritual.
"My opponents may disagree, but those fundamentals - American workers and their innovation, their entrepreneurship, small business - those are the fundamentals of America, and I think they are strong." John McCain.
What are the fundamentals of the Russian economy?
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Publication in Russian on the Zen blog
https://dzen.ru/a/Zo_MH3UVPUOzfH-N
