Question of the Day: has the ruble really strengthened?

The rapid fall of the Russian ruble after the introduction of Western sanctions at the end of March miraculously stopped and the ruble began to win back its positions. Today, its rate is already very close to the pre-sanction one. What happened, many are perplexed, trying to explain this phenomenon.

Economist Dmitry Prokofiyev understands in his channel:

“I receive a lot of questions about the “strengthening of the ruble”. Here's the story with this.

First. If a ban is introduced on the purchase of cash currency by citizens, then something is very "wrong" with the official rate.

Imagine that you would go to the championship and say - but remove these athletes, I will not compete with them. Why? Well, I don't want to, that's all. If you cannot explain the reason, then you do not believe in your own strength.

It's the same with currency. If you are confident in your currency - you do not prohibit citizens from exchanging it for the currency of another country. If you do this, it means that you have artificially limited the demand for other currencies; formally, the exchange rate of other currencies against the ruble may decrease, but this is not a real strengthening.

Second. On March 30, the Central Bank of the Russian Federation issues a statement that “the publication of reviews of the activities of the Bank of Russia in managing assets in foreign currencies and gold for the period from January 1, 2022 is suspended.” Is there something “wrong” with the ZVR too? What is it that we cannot know? The Central Bank of the Russian Federation has always published detailed and timely reports - but something happened. And this “something” is clearly not in favor of the ruble, otherwise if everything was in order, they would have written to us, do not hesitate.

Third. A real “strengthening” of currency A against currency B means a reduction in the cost of imports denominated in currency B. That is, with the strengthening of the ruble, there should be no inflation of 15%, no doubling of prices for a part of imports. The strengthening of the ruble means that you can buy more goods with your salary, primarily imported ones.

Assess your consumer opportunities - whether they have increased or decreased - and this will be the best answer to the question "whether the ruble has strengthened."

As for the difference in exchange rates, I remembered.

In the film "The Elusive Avengers" there is an episode when a reward is put on the heads of the "avengers":

"So I'm announcing...

...For the capture of the leaders of the gang of the "Red Avengers" from the personal sums of the father will be issued: Money...

Royal "Katenka" - 100 rubles,

"Kerenki" - one and a half meters ...

Soviet rubles - two hundred thousand

and 5 thousand receipts from the father himself.

Announce to all farms

and villages

Ataman Gnat Burnash,

year 1920, month May»

In this episode, the economist will see an illustration showing that any "credit money" is a uniformly accounted for debt receipts, and the price of such receipts in relation to each other is a derivative of the risk level of owning certain debts.

“Strengthening a currency” is, to begin with, reducing the risks of owning this currency. By the way, the “receipts from the father himself”, which are mentioned in the film, are quite a lot of money if there are those who are ready to accept them for payment, along with the “royal” one hundred rubles, “kerenki” (even if they are measured in meters) and “Soviet banknotes".