Monday, May 23, 2011

Fiat Trouble.

Today, the Belorussian ruble was the subject of confusing and contradictory news reports coming out of Reuters.

At 6:33 AM, the average Belorussian was informed of some good financial news: the ruble is continuing to strengthen. All those pensioners concerned about their ability to buy the weekly groceries could breathe a sign of relief.

However at 8:33 AM, their celebration turned out to be premature as the ruble was devalued by the country's central bank: Oh oh. How much did the central bank pilfer of each citizen's savings? Thirty six percent, according to Reuters.

What can one say? Could have been worse. In fact, it was if you take the time to check Reuters math. On May 23, one American dollar was worth 3,155 Belorussian rubles, and on May 24 it will be worth 4,930 Belorussian rubbles. That means it was devalued by 56 percent in one night.

One week ago, there was a story in the Wall Street Journal that described an old pensioner who could not take the time to stand in line, waiting to change her rubles into the more "stable" dollars. In reality, it is a known fact that the bank exchange service will typically run out of foreign currency very quickly and that it is a complete waste of time waiting in such a line. The black market exchange rate is closer to 8,000 rubles for one dollar.

Below is a photo of drivers in Minsk waiting to fill up their cars, before the next rate change.

Next, is a photo of what it was like to try to buy something in a Belorussian store today.

Think of this as a dressed rehearsal for the next FIAT currency collapse. Yes, I do mean the US dollar.

On a humorous note, there was an announcement by the Belorussian central bank rejecting any notion of "sharp devaluation". The punchline is that it was dated April 1st.

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