The Russian Ruble has declined significantly vs. the US Dollar this year, mainly as a result

| March 31, 2017

Question
1) The Russian Ruble has declined significantly vs. the US Dollar this year, mainly as a result of Economic Sanctions by the US and European nations for the Ukraine Crisis, and declining oil prices.

Russia is another member of the BRICS Nations: Brazil, Russia, India, China, South Africa. However, it is not a member of OPEC, the oil cartel.

On Feb. 16, 2016: $1.00 = 77.786 Rubles.

Going back to Feb., 2014: On Dec. 8, 2015: $1.00 = 69.455 Rubles, on Aug. 18, 2015: $1.00 = 65.782 Rubles. On April 17, 2015: $1.00 = 52.27 Rubles. On Feb. 19, 2015: $1.00 = 61.93 Rubles.On Feb. 22, 2014, $1.00 = 35.48 Rubles.

There are risks of significant inflation and shortages in the Russian Economy.

The Russian Central Bank has raised interest rates to prop up the Ruble; however, the Ruble keeps on declining.

Moody’s has lowered the Bond Rating of Russia to “junk bond” level.

There may be both economic risks and political risks in the Russian Economy. Russia may take on more military adventures in Eastern Europe and the Middle East to rally its people behind the Putin Government.

What do you think will really happen to Russia’s economy in the next several years? In the long run?

Will this dampen long term investment prospects by foreign investors in Russia?

Will the other four BRICS nations be able to prop up their economic ally?

2)Think of possible Short Term vs. Long Term steps Central Banks of nations do in order to deal with interest rates, and how these interest rates impact on relative values of free floating currencies.

The Fed created liquidity (Quantitative Easing Policies) to deal with the recession in 2008, and now we are still under these low interest rate policies.

The US Fed is now putting the possibility of negative interest rates on the table. To deal with the rising US Dollar, to prevent deflation in the U.S., and to stimulate economic growth in the US. Will this work? If there is deflation in the US Economy, this would lead to a recession. The Great Depression of 1929 to the 1930’s was a deflationary period..

The European Union has been busy bailing out its own members: Greece, Spain, Portugal, Cyprus and perhaps also Italy and Ireland.

European Union’s Economy is slowing down. The current slowdown of China’s economy and economic sanctions imposed on Russia, and the surge of Syrian migrants are also hurting the Eurozone Economies.

Since 2008, the Euro’s valuation vs. the US Dollar had not changed very much (until recently): The two currencies’ valuations have been around 1.00 Euro = $1.26 – $1.37.

The US Dollar had not significantly improved vs. the Euro since 2008 – in spite of US Government bailouts of banks, AIG, GM, Chrysler, etc. and in spite of low interest rates and Quantitative Easing by the US Fed since 2008.

Now, however, the Euro has declined vs. the US Dollar. ($1.114 = 1.00 Euro) (Feb. 16, 2016).

What will happen when the US Dollar reaches 1 to 1 parity vs. the Euro? What would happen if the US Dollar moves higher than the Euro in valuation in the future?

How will it impact Airbus and Boeing as they compete to export their products to various countries around the World?

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