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> because the Russian currency has, through a series of impressive self owns, become completely useless. Huh. Checks forex rates. Not worthless, USD/RUB went f

by rsj_hn 4y ago

> because the Russian currency has, through a series of impressive self owns, become completely useless. Huh. Checks forex rates. Not worthless, USD/RUB went from 100 to 60. It's worth 167% what it was before Feb 2022. How do you explain that? So many people forget that the value of a currency derives from considerations of supply and demand. When Russia said it demands to be paid in Rubles for some commodities, then this created a demand for Rubles. You may not like the demand, but it is a real demand. A net exporting nation is not going to have a worthless currency, rather it will be able to control the value of its currency by either insisting that a portion of its exports be bought with its own currency, or -- equivalently -- allowing its exports to be bought with a tradeable currency and then selling that for rubles. So the strength or weakness of the currency is going to be decided by the net export situation, and as Russia's trade surplus is much higher in 2022 than in 2021, earning roughly $330B in energy exports in 2022, a roughly ~40% increase from last year, it's currency is going to appreciate unless Russia takes steps to devalue it. And that's just energy. Russia is also a major global supplier of fertilizer, wheat, diamonds, gold, titanium, etc. That's what makes the ruble valuable, not what you think of Russia's geopolitical strategy. Currency markets don't reflect the moral value of a nation, they don't reflect their foreign policy, they reflect the net supply and demand for the nation's production. The world is hungry for oil, gas, coal, wheat, fertilizer, wood, titanium, potassium, gold, and diamonds. It is the value of these commodities that gives the Ruble its value. In terms of China, Russia runs large trade surpluses against China because it is a major energy and food supplier to China. It has therefore accumulated a large amount of CNY reserves, just as the record of all those surpluses. It makes sense that it would use some of these reserves to purchase output from CNY or other countries willing to be paid in CNY. That use of foreign reserves does not mean that the Ruble is worthless, it means that Russia is spending some of its foreign reserves. Nothing particularly special going on here - China is more than eager to sell goods to Russia to reduce its trade deficit with that country.

kasey_junk 4y ago
And what are the currency volumes? What mechanisms can you use to turn rubles into other currencies that are legal in Russia? Can a bank or investor trade rubles currently? What are the interest rates charged to loan rubles? Those currency controls have the direct impact of making imports expensive or unattainable. Russia is now mulling issuing yuan denominated bonds. As if they were a client state of China. That’s not because their economy is strong. Their trade surpluses are largely because their imports have collapsed. The ruble/yuan pair is quite simply China taking advantage of a Russian economy that is teetering. Extrapolating out anything beyond that about global reserve currencies is folly. [edit] went looking for detailed trade data for Russia and it turns out it’s no longer published by the Russian authorities https://www.reuters.com/article/ukraine-crisis-russia-imports-idUSKCN2MD1T7 https://www.reuters.com/article/ukraine-crisis-russia-import...
hnews_account_1 4y ago
This is like the stupidest voluminous comment written by someone who has never observed a market for any length of time. Just the first paragraph is enough to dismiss the rest of this, even if it is accurate lol
SergeAx 4y ago
(laughs satanically) Oh, well, Forex rates! Go try to buy USD with RUB for this rate. Go try to wire those USD out of Russia. Go try to withdraw your USD in cash. Go try to export that cash from Russia. I am sorry for sounding like a jerk, but you don't understand the current situation in Russia. Country is under heavy sanctions and they are mountaining more and more every month. A good chunk of sovereign reserves are just frozen. Country is net exporting not because it has that much goods to offer, but because it cannot import anything. Yuans and rupees (and YTL) are spent immediately to buy anything from China or India or Turkey. "Anything" like on anything not on US/EU blacklist, because of course China, India and Turkey are more interested in avoiding secondary sanctions than profit from trade with official terrorist-state.
- ShivShankaran 4y ago
  Russia is not officially a terrorist state beyond some symbolical declarations. EU and US still have large imports and also declaring them terrorist would also mean sanctioning secondary buyers like china India turkey. Also rubles don't have to be exchanged for USD, you can use that to buy Russian gas, oil, arms, nuclear, wheat etc
- rsj_hn 4y ago
  > Oh, well, Forex rates! Go try to buy USD with RUB for this rate. Go try to wire those USD out of Russia. Go try to withdraw your USD in cash. Go try to export that cash from Russia. I am sorry for sounding like a jerk, but you don't understand the current situation in Russia. I mean, you must live in the U.S., which explains why you think your experience generalizes to the whole world and why you think if something is unavailable in the U.S., then it must be unavailable in the whole world. But for other readers, consider for a moment that there is a world outside of Europe and North America. Consider for another moment that the vast majority of the planet lives in that world -- the world where Russia isn't being sanctioned, where you can purchase Russian output and sell goods to Russia, and demand for Rubles is high because even in the poorest nation on earth, they still need to buy oil, wheat, and fertilizer. They may not be importing a lot of iPhones, but Russian output they will import. This is why despite the sanctions imposed by a small minority of nations, the majority of nations is still purchasing Russian output, which is why Russia exported more to the rest of the World in 2022 than what was purchased in total in 2021. Shocking, I know. In terms of how you trade fiat currencies, you need to keep in mind that fiat is non-convertible and therefore doesn't leave its own banking system. All dollars are held in the U.S. system, and for a foreigner in, say, Brazil, to buy dollars, they become a depositor of a bank in Brazil which has a relationship with a bank in the U.S. that is a correspondent bank for the Brazilian bank. The Brazilian bank is a depositor in that U.S. bank, and the U.S. bank buys the dollars and holds them in an account assigned to the Brazilian bank, but which actually exists in the US system. Then the Brazilian bank creates a matching entry in the Brazilian system and assigns ownership of that corresponding account to you. But the dollars stay in the U.S. (here I am ignoring paper money, which can travel, but isn't important for forex rates.). When you decide to sell the dollars, the clearance happens in the U.S., someone else -- either a foreigner with a correspondent bank or a local with a direct domestic bank -- has the money transferred from the correspondent account to their account. So to buy pounds, you need an account with a bank that has a correspondent account in England, and has reserves in the Bank of England. The pounds never leave England. That is how you buy pounds. To buy Rubles, you need an account with a bank that has a correspondent account in Russia, and stores reserves with the Russian central bank. The largest correspondent bank is Sberbank. I am sorry that your local bank doesn't have a correspondent relationship with a Moscow bank, but there are plenty of other banks that do outside of that walled garden. This is how Japan and China buy oil and gas from Russia, for example. So that is how you -- or rather, someone who has escaped the walls of the garden -- can own foreign fiat currencies. In terms of how you trade them, well, dollars are traded in US exchanges, CNY is traded in Chinese exchanges (there is a parallel currency for Hong Kong traded in HK exchanges) and rubles are traded in Russian exchanges. I understand you think the US exchanges are the entire world of forex exchange - perhaps you think they are the entire world of investment -- and that only a black void exists outside of that, but really there are currency exchanges all over the world. The forex rate I cited was from Moex (which is the largest), the Moscow exchange. The volume of forex transactions in Moex is about 18 Trillion rubles a month. After the Western sanctions, there was a decline in volume of about 30% as the Western customers exited the exchange, severing their correspondent relationship, so it would be about 25 Trillion forex transactions per month before the sanctions. Nations outside the West -- primarily in Asia -- account for that remaining 70% of Moex flow, 18 Trillion rubles a month is plenty of flow to support a net trade surplus of 330 Billion a year.

by rsj_hn 4y ago

kasey_junk 4y ago

And what are the currency volumes? What mechanisms can you use to turn rubles into other currencies that are legal in Russia? Can a bank or investor trade rubles currently? What are the interest rates charged to loan rubles? Those currency controls have the direct impact of making imports expensive or unattainable. Russia is now mulling issuing yuan denominated bonds. As if they were a client state of China. That’s not because their economy is strong. Their trade surpluses are largely because their imports have collapsed. The ruble/yuan pair is quite simply China taking advantage of a Russian economy that is teetering. Extrapolating out anything beyond that about global reserve currencies is folly. [edit] went looking for detailed trade data for Russia and it turns out it’s no longer published by the Russian authorities https://www.reuters.com/article/ukraine-crisis-russia-imports-idUSKCN2MD1T7 https://www.reuters.com/article/ukraine-crisis-russia-import...

hnews_account_1 4y ago

This is like the stupidest voluminous comment written by someone who has never observed a market for any length of time. Just the first paragraph is enough to dismiss the rest of this, even if it is accurate lol

SergeAx 4y ago

(laughs satanically) Oh, well, Forex rates! Go try to buy USD with RUB for this rate. Go try to wire those USD out of Russia. Go try to withdraw your USD in cash. Go try to export that cash from Russia. I am sorry for sounding like a jerk, but you don't understand the current situation in Russia. Country is under heavy sanctions and they are mountaining more and more every month. A good chunk of sovereign reserves are just frozen. Country is net exporting not because it has that much goods to offer, but because it cannot import anything. Yuans and rupees (and YTL) are spent immediately to buy anything from China or India or Turkey. "Anything" like on anything not on US/EU blacklist, because of course China, India and Turkey are more interested in avoiding secondary sanctions than profit from trade with official terrorist-state.

ShivShankaran 4y ago
Russia is not officially a terrorist state beyond some symbolical declarations. EU and US still have large imports and also declaring them terrorist would also mean sanctioning secondary buyers like china India turkey. Also rubles don't have to be exchanged for USD, you can use that to buy Russian gas, oil, arms, nuclear, wheat etc
rsj_hn 4y ago
> Oh, well, Forex rates! Go try to buy USD with RUB for this rate. Go try to wire those USD out of Russia. Go try to withdraw your USD in cash. Go try to export that cash from Russia. I am sorry for sounding like a jerk, but you don't understand the current situation in Russia. I mean, you must live in the U.S., which explains why you think your experience generalizes to the whole world and why you think if something is unavailable in the U.S., then it must be unavailable in the whole world. But for other readers, consider for a moment that there is a world outside of Europe and North America. Consider for another moment that the vast majority of the planet lives in that world -- the world where Russia isn't being sanctioned, where you can purchase Russian output and sell goods to Russia, and demand for Rubles is high because even in the poorest nation on earth, they still need to buy oil, wheat, and fertilizer. They may not be importing a lot of iPhones, but Russian output they will import. This is why despite the sanctions imposed by a small minority of nations, the majority of nations is still purchasing Russian output, which is why Russia exported more to the rest of the World in 2022 than what was purchased in total in 2021. Shocking, I know. In terms of how you trade fiat currencies, you need to keep in mind that fiat is non-convertible and therefore doesn't leave its own banking system. All dollars are held in the U.S. system, and for a foreigner in, say, Brazil, to buy dollars, they become a depositor of a bank in Brazil which has a relationship with a bank in the U.S. that is a correspondent bank for the Brazilian bank. The Brazilian bank is a depositor in that U.S. bank, and the U.S. bank buys the dollars and holds them in an account assigned to the Brazilian bank, but which actually exists in the US system. Then the Brazilian bank creates a matching entry in the Brazilian system and assigns ownership of that corresponding account to you. But the dollars stay in the U.S. (here I am ignoring paper money, which can travel, but isn't important for forex rates.). When you decide to sell the dollars, the clearance happens in the U.S., someone else -- either a foreigner with a correspondent bank or a local with a direct domestic bank -- has the money transferred from the correspondent account to their account. So to buy pounds, you need an account with a bank that has a correspondent account in England, and has reserves in the Bank of England. The pounds never leave England. That is how you buy pounds. To buy Rubles, you need an account with a bank that has a correspondent account in Russia, and stores reserves with the Russian central bank. The largest correspondent bank is Sberbank. I am sorry that your local bank doesn't have a correspondent relationship with a Moscow bank, but there are plenty of other banks that do outside of that walled garden. This is how Japan and China buy oil and gas from Russia, for example. So that is how you -- or rather, someone who has escaped the walls of the garden -- can own foreign fiat currencies. In terms of how you trade them, well, dollars are traded in US exchanges, CNY is traded in Chinese exchanges (there is a parallel currency for Hong Kong traded in HK exchanges) and rubles are traded in Russian exchanges. I understand you think the US exchanges are the entire world of forex exchange - perhaps you think they are the entire world of investment -- and that only a black void exists outside of that, but really there are currency exchanges all over the world. The forex rate I cited was from Moex (which is the largest), the Moscow exchange. The volume of forex transactions in Moex is about 18 Trillion rubles a month. After the Western sanctions, there was a decline in volume of about 30% as the Western customers exited the exchange, severing their correspondent relationship, so it would be about 25 Trillion forex transactions per month before the sanctions. Nations outside the West -- primarily in Asia -- account for that remaining 70% of Moex flow, 18 Trillion rubles a month is plenty of flow to support a net trade surplus of 330 Billion a year.