How many rubles to the dollar one year from now?

[Bruce]

 

My wife says there is discussion to peg the ruble at a rate of 16 rubles to the dollar.  I told her it just will not happen, that with the summer ending the dollar will naturally appreciate.  Once the current middle east crisis abates I expect oil and natrual gas prices to come down, at least slightly, which should further devalue the ruble.  Over the long haul I expect the ruble to appreciate somewhat.  However, in the next year I expect it to be about where it is now.  Any guesses / educated picks out there???

Results of the poll will be shown in 10 days.  @ stands for about.

[andrewfi]

You need more options!

IIRC Putin has stated that he does not want to see the dollar fall too much against the rouble, the RCB is not too happy with such a restriction. IMHO you need a couple of options north of 30 roubles.

If it were to ever hit 16 then you guys would be setting up marriage agencies to sell yourselves and your sons to wealthy Russian women. That day may come but not in the next 20 or so years. The dollar will continue its downward trend against major currencies, including the rouble, especially as oil and gas become increasingly traded in roubles. Clients of Russian energy will need to hold less dollars decreasing demand for them and leading to a degree of repatriation. Inevitably this will hasten the decline of the dollar. (Think of the Russia-China-US triad and the effect of Chinese energy contracts upon Chinese dollar requirements)

BTW - my vote was for one of the options that you presented.

[Bruce]

OK, Andrew - I added a few more.  It would be interesting, at least for I hope a few of us, to see what the board comes up with and what actually transpires.

[BillyB]

Andrew, did you vote for 40 roubles? No matter how much you smile at the falling dollar, it is not as bad for Americans as you think and much worse for the foreigners who hold dollars or nations who depend on Americans buying their products. Market forces can affect currencies but not as much as the government finance organizations and banking in control of their own national currency. Look at China for example as the Yuan isn't allowed to float against the dollar and remains nearly the same year after year. The Yuan is a slave to the government, not market forces. It remains low to so America will buy cheap goods as China's materials and labor is undervalued. China will increase their exports because we get a good deal but companies in China will be reluctant to import anything because it's too expensive to buy American. But is that good for China? They make money but it seems they are forfeiting a decent lifestyle for their people and possibly their future using up raw resources and not getting fair market value.
     The U.S. has purposely weaken the dollar to strenthen the economy at home which so far has been successful. The Euro remains high and Europes economy is sluggish. The rouble remains high and Putin is complaining that inflation can't be controlled. The biggest hurt to Americans with a falling dollar is that we will import less, afford less imports, and our international vacations will cost more so we'll end up vacationing at home, in turn keeping the dollars at home.
    Here's the article Richard posted recently about why Putin isn't happy with the appreciation of the rouble and wants it to depreciate.


PRESIDENT PUTIN IS DISCONTENT WITH SIGNIFICANT ROUBLE APPRECIATION
The Finance Ministry and the Central Bank may lose one of the most efficient tools for combating inflation. At a meeting with ministers on July 24, President Putin persistently recommended state officials not to be too keen on excessive rouble appreciation leading to dramatic growth of import to Russia. Experts presume that if the Finance Ministry and the Central Bank give up their plans to correct the exchange rate of the national currency it will be possible to forget about annual inflation of 8.09%.

This is not the first time when the President expresses discontent with the rouble appreciation being the most efficient tool of the monetary authorities in combating inflation. At the beginning of 2006, Putin attracted attention of Economic Development and Trade Minister German Gref to rapid growth of import to Russia that amounted to 28% according to results of 2005 alone. The President called rouble appreciation the main catalyst for import growth.

At his traditional meeting with ministers on July 24, Putin was more decisive. He remarked, “If this appreciation is continued the volume of import will grow and Russian manufacturers will experience certain pressure.”

The Economic Development and Trade Minister tried to sooth down the President having said that inflation in year-on-year terms would amount only to 7-9%. This argument did not persuade Putin who unequivocally demanded the Finance Ministry and the Central Bank “to keep this issue in the field of vision.”

Deputy Prime Minister Sergei Ivanov supported the demand of the President and said that contracts in the field of military technological cooperation with foreign partners signed in US dollars were getting unprofitable due to rouble appreciation. Ivanov stated, “Practically all contracts become unprofitable because they have been signed in dollars and purchase of components for this armament is made here in roubles.” To minimize losses of the military industrial complex Ivanov proposed signing all contracts only in roubles.

At any rate, experts are not inclined to dramatize the situation.

Vadim Zuev, analyst of the investment company Russian Financial Traditions, presumes, “It would be possible to call the situation catastrophic if rouble growth appreciated 20-25%. However, correction of the exchange rate by 7-9% is a normal practice.”

Analyst Danila Levchenko of Zenit bank agrees with his conclusions, “I have never heard yet that rouble appreciation harms someone very much.” In any case, Elena Trubnikova, managing partner of Finexpertiza group, believes that Putin’s apprehensions are justified. Trubnikova explains, “Continuing application of the former policy of rouble appreciation we lose our competitive advantages: both on foreign and on domestic markets Russian goods are getting less competitive than Western ones.”

Changing of the exchange rate policy towards giving up of further rouble appreciation will make keeping the promise to restrain inflation in the limits of even 9% made by the government much more difficult. Rouble appreciation by itself is not connected with growth of production volumes or labor productivity increase and these parameters are, according to Trubnikova, alternative ways to combat inflation. The expert sums up, “Thus, it will be necessary to sacrifice either rouble or inflation anyway.” The Economic Development and Trade Ministry will evidently listen to recommendation of the President. Trubnikova presumes that in this case it is almost impossible to hold full-year inflation in the limits of 10%. Levchenko agrees, “Besides the exchange rate policy we actually do not have other efficient ways to hinder inflation growth. That is why it is possible that if rouble appreciation is given up, prices will grow by more than 9%.”
<ref>Biznes, July 25, 2006

[andrewfi]

Oh Billy, Billy.

Reading ain't your big thing is it!

I already wrote that I had selected one of Bruce's original figures. It would thus be unlikely that I would have chosen one he added later. I also wrote upthread that Putin was against significant appreciation of the rouble. You find nowhere written the words that you claim for him; that he wishes to see depreciation of the rouble. He merely wants to moderate its appreciation. There are macroeconomic benefits to this, he correctly notes the major ones. BTW, the rouble is on what is called a 'managed float'. Essentially it trades freely, but the RCB is expected to step in and manage the rate if it moves outside of policy defined limits. This is not the same as the Yuan, but is essentially similar to te situation in the US - a nominally free floating currency, in practice managed by the FED.

On the economics front go back to the sources I previously referenced for your enlightenment. Learn how interest rates, exchange rates and inflation are all descriptors of the same thing - the value of money. When you have done so you will have the mental tools to understand why an appreciating rouble actually helps to reduce price inflation in the Russian economy. Thus Putin's policy choice makes it harder to control inflation, if unemployment is not to rise.

[BillyB]

Oh Billy, Billy.

Reading ain't your big thing is it!

I already wrote that I had selected one of Bruce's original figures. It would thus be unlikely that I would have chosen one he added later.

Look who's talking! Read what Bruce posted about changes before I participated in this thread. How the hell am I going to know what the original figures in this thread were? And did you take me seriously when I said you voted for 40 roubles? I know very well you'd never give the dollar that much appreciation!  By your posts here and elsewhere, you have an easy time pointing out the falling dollar's problems but fail to mention benefits. Your bias towards anything American is hurting your credibility. In this world of currency adjusting, there's a game played besides the currency being affected by market forces. A currency rising or falling has both benefits and downfalls. We'll see, as the future becomes history, if the FED's are playing the economic game better than the rest of the world. They've done a good job so far!

[Bruce]

I added approximately 35, 40 and 10 after Andrew's post.  Interesting how we as a group think.  We will see how it turns out a year from now!

[andrewfi]

Billy, I am sure that more literate Americans would be entirely happy for me, as an Englishman and Briton to hear that I have a bias toward the US. If, as might be inferred from the context of your comment, you think I have some degree of antipathy toward your adopted homeland, you would be mistaken.

('Bias toward' meaning to a tendency to move clsosr to something.  'Bias against' or away means the opposite)

Billy, you were clearly trying to make a point in your post, unless you simply aim to emulate the room full of typewriting monkeys in the creation of sensible words.

There are very few advantages to the US in a falling dollar. It would be wrong to characterise the current situation of the US vis a vis exchange rates as 'policy' that implies a choice and a purpose. In point of fact is is a recognition of reality. The dollar was overvalued 3 years ago and remains so today. Devaluation is more of a problem for the US than it would be for most other currency issuers given the huge volume of overseas holdings of the dollar. As the dollar's value falls central banks and other holders must make choices as to which currencies to hold and in which proportions. Most major holders are reducing their US dollar holdings, putting further downward and uncontrollable pressure on the currency (supply & demand). From the more limited perspective of the US consumer there are some short term benefits. Eventually though, the US consumer - you Billy, will see higher inflation, or higher unemployment, or both.

Here among some others is an interesting piece from China, it is old, so there is a degree of perspective that we can see. We can see how the outlined situation has pretty much come to pass (economics being in some ways quite a mechanistic sort of a fellow)

http://www.chinadaily.com.cn/en/doc/2003-12/27/content_293822.htm
http://www.atimes.com/atimes/China/GE13Ad02.html
http://en.wikipedia.org/wiki/Currency_devaluation  read with http://en.wikipedia.org/wiki/Inflation

The points are clearly made. Do the reading. If you have a specific question ask it. As before I will not bother to argue the obvious. Learning involves reducing the black holes in ones knowledge not arguing about the size of them.

[BillyB]

Billy, I am sure that more literate Americans would be entirely happy for me, as an Englishman and Briton to hear that I have a bias toward the US. If, as might be inferred from the context of your comment, you think I have some degree of antipathy toward your adopted homeland, you would be mistaken.

('Bias toward' meaning to a tendency to move clsosr to something.  'Bias against' or away means the opposite)

HYPOCRITE!!!  You ridicule my usage of English when I typed "bias towards America" yet you say "antipathy toward your adopted homeland". Andrew, you need to review the definitions of "bias" and "toward" and understand I've use the words correctly in conjunction with the word "America". If you're trying to deflect the fact you're running out of arguments and having trouble debating the topic at hand by questioning my use of English, it's not going to work.

From the more limited perspective of the US consumer there are some short term benefits. Eventually though, the US consumer - you Billy, will see higher inflation, or higher unemployment, or both.

Andrew, a falling dollar makes American products cheaper to foreigners and in turn increase America's exports CREATING jobs for Americans. A falling dollar would make imports more expensive so there will be less importing to America and more dollars remain in country. Your SPIN of things is ridiculous that in short term we'll see higher unemployment which America at this time have some of the lowest unemployment in it's history. Also Putin recognized a increasing Rouble means high inflation but you say a falling dollar will mean high inflation for America. You don't see what Putin or I see with rising or falling currencies or you're spinning things.

Andrew, you have two weaknesses that are evident. You don't understand you have a weakness and you don't understand you are bias towards America. Out of over 5000 posts you've made, here and there, can you direct me to one or two favorable to America, especially when you compare America to another nation? You blind yourself to the enormous success America has become and you refuse to acknowledge what America does very well to sustain the success. You are ignoring facts right before your eyes. We can debate theories all day how a rising or falling currency can help or hurt a nation but you can't deny the current success of America's economy with low unemployment. A falling dollar may just be a small part of the recipe for success at the moment and may rise as needed in the future. Because of your bias everything you say pertaining to America is suspect.

While I commend you for self educating yourself on many issues ,though I may disagree with the sources you use to self educate yourself with, you have undermined your ability to debate on certain issues because of your bent views of the way the world works or should work. What you think and how EVERYONE else thinks you think on issues pertaining to America are TWO DIFFERENT THINGS. It's a fact, accept it! Why hide your discontent for America? It's your right to feel the way you do but don't hide it and give the illusion you're not bias. You enjoy slipping into your posts here and elsewhere things America shouldn't be proud about such as a falling dollar. While you have done a good job getting people ashamed of their national currency(dollar) elsewhere, I have remained silent to your remarks because I only can only type so much in a day and I'd rather address other issues, but in this thread I have stood up to mention the falling dollar is nothing to be ashamed about and presented an argument that can't be denied.

Andrew, I like to self educate myself too and I like things that challenge my mind. That is why I enjoy debating you but in this thread you're making this too easy for me!

[wxman]

In the short term a devalued dollar may be good as it helps reduce the trade deficit, but a long term devaluation is not good. During the 70s the dollar devalued considerably. In fact for a few years the Canadian dollar was worth more than the US dollar. Our economy went in the tank with a prolonged period of stagflation along with high interest rates and high unemployment. Back in the 70s we also did not have a huge deficit either. What is needed is a stable dollar, not one that continues to flucuate.

The huge deficit will continue to plague us and may aid in the dollar sliding even more for years to come. I'm not worried about the short term deficit caused by the war, but by the continuing huge national debt caused by the entitlement programs of social security and medicare. They are the huge gorillas that we are not trying to tackle. As the country ages, more and more will be recieving these benefits, and the programs are not sustainable without tax hikes or reduced benefits, neither of which the American populace will agree to. So the national debt will only get larger and larger until it reaches critical mass.   

[beattledog]

Like you, I think that the dollar will devalue, inflation will increase, and interest rates will rise to keep the economy in check

beattledog

[BillyB]

The huge deficit will continue to plague us and may aid in the dollar sliding even more for years to come. I'm not worried about the short term deficit caused by the war, but by the continuing huge national debt caused by the entitlement programs of social security and medicare. They are the huge gorillas that we are not trying to tackle. As the country ages, more and more will be receiving these benefits, and the programs are not sustainable without tax hikes or reduced benefits, neither of which the American populace will agree to. So the national debt will only get larger and larger until it reaches critical mass.   

Weatherman,

I'm sure you've been around the media and listened to the many politicians complain about the Huge national debt around election time. Don't sweat it, almost every country has debt. When I started to question the media that fed me depressing news, I began to learn and this is what I learned.
http://www.cia.gov/cia/publications/factbook/rankorder/2079rank.html

The definition of external debt there is: the total public and private debt owed to nonresidents repayable in foreign currency, goods, or services. These figures are calculated on an exchange rate basis, i.e., not in purchasing power parity (PPP) terms.

Well in that case we owe others and they probably owe us. The foreign aid we give out is tremendous. Even Japan and China has debt. And if you look carefully, most developed nations lead in debt hands down compared to underdeveloped nations. The UK is close behind the US and one only needs to add a few EU nations for the EU to surpass the US. But still, I would rather live in those developed nations than ones with REAL problems such as lack of food and medicine, civil war, and rampant disease.

I don't think our national debt will reach critical mass, it will grow on pace as other nation's debt grow. And as far as taking care of the baby boomer generation, that generation has a lot of kids that will be running the country as CEO's and running the money which is normal since they'll be over 45 years old on average. If the US can pull out of the Great Depression and the poor economy of the 70's stronger than ever, then they can pull out of the problems of baby boomers retiring. Yes, we have problems in this nation to address, but looking at the big picture, it's nowhere near the problems other nations have to address.