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IPFS News Link • Currencies

The Ruble Regains 100% Of Its Loss After Russia Invaded Ukraine, Why?

• https://www.zerohedge.com, by Mike Shedlock

Key Points

When Russia invaded Ukraine on February 24, it took 84 rubles to buy 1 US dollar.

On March 7, it took 131.2 rubles to buy 1 US dollar.

That's a 36% decline in the rubble vs the US dollar.

The ruble is now back where it started on February 24.

Conventional Wisdom 

Putin and Italy's Prime Minister, Mario Draghi, have discussed payments for gas in Russian rubles. 

What's the Difference?

Weiner correctly notes the imagination. 

Oil for Rubles, Who Cares?

Case 1: To get rubles to buy oil, Europe sells Euros to Russia central bank. Europe immediately send the rubles it received straight back to Russia to pay for the the oil. Russia central bank accumulates euros.

Case 2: Russia sells oil for euros. Russia central bank accumulates the exact same number of Euros as in case number one.

The currency exchange takes place in seconds. Europe does not have to hold rubles to buy oil.

This is just more of the "oil priced in euros" stupidity. No one will have to hold rubles to buy Russian oil. Or gas. The Ruble does not become a reserve currency.

There is perhaps some small psychological impact, but there is no real impact unless Europe actually held ruble reserves, and here's a hint: Europe wouldn't.


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