Silicon Investor (SI) -- The First Internet Community

STOCKTALK

We've detected that you're using an ad content blocking browser plug-in or feature. Ads provide a critical source of revenue to the continued operation of Silicon Investor. We ask that you disable ad blocking while on Silicon Investor in the best interests of our community. If you are not using an ad blocker but are still receiving this message, make sure your browser's tracking protection is set to the 'standard' level.

Gold/Mining/Energy : Gold Price Monitor -- Ignore unavailable to you. Want to Upgrade?

To: long-gone who wrote (18152)	9/8/1998 8:33:00 PM
From: scotty	Respond to of 116960

Don got booted...read this mornings post..about 10 a,m

To: long-gone who wrote (18152)	9/8/1998 9:49:00 PM
From: goldsnow	Read Replies (2) \| Respond to of 116960

I bet you they will start minting Golden Rubles before they humiliate themselves into dollar (USA) rule... More Russia pain seen before currency board okayed 06:53 p.m Sep 08, 1998 Eastern By Hugh Bronstein NEW YORK, Sept 8 (Reuters) - As bad as the Russian economic crisis is, U.S. analysts said Tuesday that it may have to get worse in order to shock Moscow into following Argentina's example by forming a currency board to stabilise the rouble. Deeper economic pain, brought about by the high inflation being predicted by analysts, may be the only way to produce the broad public support that a reformist government would need to carry out such a radical programme, experts said. Until then, the few reformers left in the Russia government will probably remain without partners to help them tango toward an Argentine-style solution to the falling rouble. In 1991, Buenos Aires instituted its currency board, which pegs the peso to the U.S. dollar and requires each peso to be fully backed by U.S. currency, thus curbing inflation. But the establishment of that board came only after years of breathtakingly high inflation, which helped create the support President Carlos Menem needed to push through economic reforms that stabilised the peso. Russia's inflation rate is currently about 25 percent, a fraction of Argentina's hyper-inflation rate of 3080 percent in 1989, and 2314 percent in 1990. Higher inflation is in the cards so long as the rouble continues to depreciate, analysts said. Russia's national currency has already lost about 60 percent of its value since late August. ''The situation in the country will have to deteriorate to such a point that a consensus develops among political elites and the population at large that something radical needs to be done,'' said Gretchen Rodkey, Eastern European sovereign bond analyst at Bear Stearns & Co. ''They're not there yet.'' Estonia in 1992 and Bulgaria in 1997 also opted for currency boards following periods of high inflation, Rodkey said. A currency board forces sound fiscal and economic policies by using a reserve currency such as the U.S. dollar to fully back a currency at a fixed rate, which means a government has no power to print money or change interest rates for political reasons. But a major difference between Russia now and Argentina in 1991 is that President Menem had popular support to carry out his reform programme, an advantage Russian President Boris Yeltsin doesn't have. ''He knew what he wanted and he had the political muscle to do it,'' said Steve Hanke, a currency board expert and professor of applied economics at The John Hopkins University in Baltimore, Maryland, referring to Menem. ''In order (for Russia) to institute a currency board, there would have to be a strong, reformist government in place. That's what Argentina had going for it in 1991,'' said Matthew Sherwood, a Russian analyst with PlanEcon Inc., Washington-based consulting firm. By comparison with Argentina, Russian policy is paralysed as the Duma, parliament's Communist-dominated lower house, has twice rejected President Boris Yeltsin's prime minister nominee Viktor Chernomyrdin. Adding to the murk, Central Bank Chairman Sergei Dubinin resigned Monday, citing the Duma's failure to pass laws aimed at, among other things, protecting the savings of ordinary people from the ravages of Russia's economic crisis. Hanke has put forth a plan under which Russia could institute a board, the first step of which would be for Moscow to recognise U.S. dollars as legal tender. There are already $40 billion U.S. dollars circulating in Russia that cannot be used in legal retail transactions, and only about about eight billion dollars worth of roubles. In order to bolster the rouble against the dollar, Hanke said a Russian currency board would have to be extremely strict, not allowing for any discretionary lending to Russian banks. While Argentina's currency board can lend excess reserves to solvent banks within the country, Hanke does not want the Russian currency board to have that latitude because he is afraid it would be abused. This relinquishing of monetary sovereignty would be psychologically difficult for Russians, Rodkey said. Indeed, the Russian board, according to Hanke's draft law, would be based in Switzerland and three of its five directors would be non-Russians. ''Not long ago they were a superpower,'' she said. ''Now it's being suggested that they can't even have their own central bank.'' Hanke said the issue of monetary sovereignty has already been settled by the fact that Russians have opted for dollars over roubles at a ratio of five to one. ''And the dollar isn't even legal tender,'' he said. Copyright 1998 Reuters Limited.