Economic Mournings

[Mir]

Yes and the Ukranian Hryvna is now 7.50 to the dollar

[chivo]

The ruble is 28-28.20 per dollar as of 30 minutes ago when I walked by a kiosk. This is as high as its been  since it started to move the other way in the summer. Just to put it in perspective, it was over 30 when I moved here in '04. The buy back rate is still well under 29.

There are layoffs, and many more to come, but it pales to what's happening in the USA. I was in a popular restaurant last week that was half-full, when normally I would have waited to get a seat.

There was also a pump up in the reserves last week by 5bn, but not an ongoing trend by any means. Oil is trading around $40, and while it cost more to extract these days, it's triple what it was trading for 4-5 years ago. I have no doubt that within the next year or two, it will be back over $100. 

While we should be concerned about where things are headed, don't lose track of where things came from. Things are tightening up, like many places globally. Things will get worse before they get better, but for those of you that think the end of the world is near, I'm here to also say that it is not going to happen. Good luck.

chivo

[kievstar]

Oil will not be $100 for a longtime.  Have to remember the World past several years dumped big cars and people do not realize what an impact that has to buying oil.  Russia should be fine - it is a different economy than Ukraine. Plus Putin is going to buy all the former Soviet Union companies back. 

Recession has not really started yet.  People can speculate but China is really starting to slow. 

[wxman]

If China enters a recession, oil will likely drop to $20 a barrel. That is the biggest fear of OPEC.

[chivo]

Oil will not be $100 for a longtime. Have to remember the World past several years dumped big cars and people do not realize what an impact that has to buying oil.

Let's agree to disagree.

The emergence of China and India as industrialized nations hungry for oil will more than offset the dumping of big cars. We're talking populations of 1.3 & 1.1 billion respectively, with 2/3rd's of the world's projected oil growth coming from these nations over the next 20 years.

The new oil agreements between China and Russia lend fuel to that fire. Keep in mind that India imports about 75% of its oil.

Demand for oil will continue to outpace production in the long run, especially as money for expansion in the short term becomes less available to some oil producing countries such as Russia and Mexico, and the cost of producing what IS expanded becomes increasingly more expensive.

Yes, 1-2 years "might" be considered a stretch (just not by me), time will tell. Good luck.

chivo

[kievstar]

Chivo, have you been to India and China recently.  There slowing down.  World can not afford to pay $100 for oil. 

[chivo]

Chivo, have you been to India and China recently.  There slowing down.  World can not afford to pay $100 for oil. 

Agree. That's why it's not $100 as we speak.

Of course things are slowing down. Projected growth in China for next year is still about 7% (which compared to previous years is considered recessionary ).

Does not mean they won't continue to use oil? The more things change, they more they stay the same. Things tend to run in cycles, and people tend to have short memories. The Dot Com bust was followed by a housing bubble.

We're not talking about now either, but 2 years from now. Oil was at $147 five months ago, and now look, meaning it can go the other way just as fast. It is also a limited commodity of necessity/addiction whether one wants to admit it or not.

Again, time will tell. As for going to China or India recently, well no, but I have clients who work there a few months of the year (one just returned at the beginning of November), or have businesses there, and they tell me yes, things are slowing, but still moving forward positively. Matter of fact, one thought she might have to close her business in China, but business has picked up recently and now is turning a profit.

Maybe you will be proved right in a couple of years. If that is the case, not only will I be surprised, I will stand corrected, and tip my hat to you for being right. As of now, I think otherwise. Good luck.

chivo

[Misha]

Of course things are slowing down. Projected growth in China for next year is still about 7% (which compared to previous years is considered recessionary ).

The reason China needs high growth rates is to keep a lid on social conflict. You have roughly 100 million jobless peasants who moved to the cities searching for work in the last decade or so. Hundreds of millions more will likely join them in the coming decades. As long as the economy was growing in double digits, the state could provide enough new jobs to satisfy the needs of the masses moving to the city. If growth slows down to only 3 or 4%, it would put China in a very delicate position where it will be very difficult for it to maintain social peace.

This is a good article reviewing some of the challenges China faces: http://query.nytimes.com/gst/fullpage.html?res=9D0CEFDE1630F937A35754C0A967958260. It is dated, but the problem is still unsolved.

[kievstar]

Very easy for China to grow at 10% a year.  More than 80% of the population makes no money.  India is the same.  The problem is the World has to buy there stuff and many of the new jobs do require steel and oil.  I go to India and China this week but people tell me all the construction cranes have halted.  Was supposed to be in Mumbai last week but postponed it a little. 

[SANDRO43]

many of the new jobs do require steel and oil.  I go to India and China this week but people tell me all the construction cranes have halted.

Can't speak for India, but I do remember Sinhalese construction sites: their scaffolding was bamboo, and they lugged weights up it on their backs, with nary a crane in sight, except possibly for the flying variant that had decided to make a nest on top of the still-under-construction building .

[John K]

The Hryvna has depreciated against the dollar about 100% from this summer.  When I was over there in late July, the hryvna was around 4-4.5 hryvnas to the dollar.  Now, it is at 8 hryvnas to the dollar, with banks expecting it to go to 10 after the new year.

This is a serious concern to travellers abroad for a number of reasons.  First, you can only legally exchange your dollars for hryvnas at banks, now.  If you try to exchange them on the street at a street exchange and you get caught, you will go to jail!  Second, banks are taking a 10% "transaction fee" for every dollar you exchange for hryvnas.  Third, banks will no longer change hryvnas for dollars.  The Ukrainian banks are hoarding dollars and refuse to give them out.

I believe there is no problem getting dollars out of ATMs yet, but if I hear differently I will let you know.

Remember, forewarned is forearmed...

PS:  Don't go driving a car in Ukraine, unless you have a fire extinguisher and first aid kit in the car.  If you are stopped by a cop and you don't have these items, it is a $50 fine.  Of course, the cops are stopping the new, nice cars especially...

[ScottinCrimea]

John,  When did all of these changes take place.  My wife was just there and all of the street exchange places were still open and doing business as usual with the exception that it was hard to find any place that would exchange hryvnia for dollars.  Some banks still would, but they would grumble about it and the charge was 3%, not 10%.

I'll have to ask someone there about the first aid kit and fire extinguisher thing.  I have never heard this before.

[ScottinCrimea]

so far I'm not finding that reuirement anywhere but the link you posted.  ONe legal document I found mentions many things, but not that.  Here is an excerpt:

But regardless of what legal foundation a person owns a car on, she has such rights and duties (they
are defined by Section of 2 Rules of the Road traffic, ratified by Decision of Cabinet of Ministers of
Ukraine from 2001.10.10 № 1306):
The duties are:
1) in transit a driver has to have with himself
- certification with a coupon on a right for the drive of such category of vehicles
- registration document on a car
- policy (certificate) of obligatory insurance of civil liability or documents about the release from
insurance
- at transportation of definite load - documents on a load
- at presence of advertising, lighthouses, the special sound devices are needed the permissions or
concordances on them
2) before departure it is needed to check up the technical state and completeness of the car
3) at the management to be attentive and accurate
4) by a common rule it is needed to use passive facilities of safety (like straps of safety,) for a driver and
passengers
5) on call of policeman a driver has
- to stop
- to show documents
- to give possibility to check up the technical state of the car, numbers of aggregates, completeness
- to allow to examine the car (at presence of legal grounds for examination)
- to pass medical examination or even extraordinary verification of knowledges of Rules of the road
traffic and skills of driving
- to give the car to police or medical men in the urgent cases

I'll keep looking and asking.

[John K]

Well, I heard about all this before my wife ever went over.  Marina chats with her mother on ICQ almost every day and also by phone a couple of times a week.  Marina's godmother is an officer in the bank, so she is privy to a lot of knowledge.

I talked with Marina a couple of nights ago and she told me that ATMs no longer dispense dollars, which I figured would happen.  Apparently, the 10% fee is even applying to ATMs, at least that is what I'm being told.  Also, the hryvna is trading 7 to the dollar right now, but the banks expect it to go to 14 to the dollar after the new year.  Everyone is hoarding dollars...

As far as the extinguisher and first aid kit go, I don't know if it's an old law or a new one.  I do know that all the cops are out on practically every street corner, stopping any car that looks expensive, so they can get their "fine".  If you drive an old beat up Ukrainian car they don't stop you very often.

Marina is only over there for 2 months this time, but to be honest, this is the first trip I've ever worried about her well being while she's over there.  I can easily see the whole situation over there destabilizing in a big way...

[krimster]

Scott,
   What "Poker" states is true, an obscure detail in the rather large "Ukrainian Driver's Handbook" that people must memorize prior to taking their driving license test (what an experience that is!)  Auto supply stores in Simferopol will provide a complete kit of everything that is needed, can't remember the price, as I bought mine many years ago.  

[Gator]

Tonight  at 10 EST, CNBC the cable business channel is airing "THE RUSSIAN GAMBLE."

Description:  "The country's role in the global financial crisis."

[Mishenka]

I hear the word on the street is Oil will fall to $10 a barrel. There is a serious issue with supply and demand.  So many people are out of work (10.4 million in USA alone) people are not driving. It's the same way in all the G 8 countries. I celebrated Friday when filling my tank for $20 as gas was USD $1.61 for 4 liters. Imagine .40 a liter. Prices have been falling every day for the last 80 days straight.

Mishenka

[daveyj]

Charts showing the EUR/RUB and USD/RUB fx rates from 2000 to present. 

As you can see we're now back to 2003 rates, thus reversing the prior 10-20% strengthing in Ruble purchasing power.

http://www.exchangerategraph.co.uk/eur-rub.html
http://www.exchangerategraph.co.uk/usd-rub.html

[Muddy]

The Hryvna has depreciated against the dollar about 100% from this summer.  When I was over there in late July, the hryvna was around 4-4.5 hryvnas to the dollar.  Now, it is at 8 hryvnas to the dollar, with banks expecting it to go to 10 after the new year.

This is a serious concern to travellers abroad for a number of reasons.  First, you can only legally exchange your dollars for at banks, now.  If you try to exchange them on the street at a street exchange and you get caught, you will go to jail!  Second, banks are taking a 10% "transaction fee" for every dollar you exchange for hryvnas.   Third, banks will no longer change hryvnas for dollars.  The Ukrainian banks are hoarding dollars and refuse to give them out.

How about in Western Union offices? Sometimes when I am in Ukraine I go to WU to exchange dollar for hryvnas

[kievstar]

USA dollar is going to get weaker based on spending patterns right now in USA on cheap foreign goods and news on $50 billion fraud.  Once Christmas season is over it will get stronger again as spending patterns will get away from foreign goods.  Russia and Ukraine are spending billions to protect their currency.  Russia is not as corrupt and dumb as Ukraine and getting better results.

$10 oil is not going to happen.  Most of the Western Euro zone will not see huge job losses as they protect their workers.  So when times are tough most of those countries do not get impacted as much on job losses.  However, when the boom comes the free economies grow faster than the protected economies. 

[John K]

Not sure about Western Union.  When you send money, I think you can specify dollars or local currency.  When it comes to exchanging money, I would suspect that they are bound by the local laws at that time.  I'll check with the missus, when I call her tomorrow night.

Most Western Union sites are located in either Hotels or Banks, if I remember correctly.  This would make it much easier for the authorities to keep close tabs on them.  If the government is leaning on them, I doubt you'll get any exchanges done for dollars.

Right now, Marina gives dollars to her mother, who then finds a "friend" who does the exchange under the table.  They've used this guy for years, so they know he's trustworthy.  Still, with the climate getting so problematic, I do worry a little.

[Ronnie]

  Russia is not as corrupt and dumb as Ukraine ....

 :ohbrother:

[Mir]

Russia is every bit as corrupt and dumb as Ukraine
Only they have oil and gas to sell

[Ronnie]

Ukraine or Russia?

Hmmm, let me think..

One government is trying to move toward democracy and Western alliances.  The other plants bombs in it's own citizens' homes to justify a rekindling of the Chechen war, insults the west, invades a neighbor, takes over the press, murders opposition journalists and defectors, revokes democratic reforms and returns to brutal authoritarianism. 

Before it was the communists...now it's the KGB running the country into oblivion.

Oh, I forgot to mention that the FSB (KGB) of one country tried to poison the leading candidate (now president) of the other.

Ukraine dumber and more corrupt than Russia?

 :ohbrother:

[Gator]

...plants bombs in it's own citizens' homes to justify a rekindling of the Chechen war, insults the west, invades a neighbor, takes over the press, murders opposition journalists and defectors, revokes democratic reforms and returns to brutal authoritarianism... tried to poison the leading candidate (now president) of the other.

Russians know or suspect the acts you listed, yet the approval rating for Putin says most Russians don't care or even believe such were necessary.