Lessons from the Russian Ruble Crash
Casey Research published an article by Russian coin dealer Dmitriy Balkovskiy that provides fascinating insight into the lives of average Russians suffering from the crash of their ruble currency. He reveals that while the Russian central bank has been adding literally tons of gold to its reserves, the Russian people are not so enthusiastic about the yellow metal. In fact, Russians are very similar to Americans in their complete disregard to owning gold, which he considers a vital part of “personal fiscal hygiene.”
Unfortunately, there’s hardly been a better time for Russians to buy gold. The ruble is quickly losing value against the dollar and euro, while the ruble price of gold continues to soar. Yet Russians are still stocking up on euros, dollars, and flatscreen TVs, even though euros can be hard to come by and TVs are losing dramatic value from one month to the next. There’s almost no awareness that the euro and the dollar will also become casualties in the international currency war. It’s time for people to put their faith in physical gold and silver, not consumer electronics.
Below are some of the “episodes” of daily Russian life that Balkovskiy shares. They should serve as a warning and lesson to Americans. When the dollar starts to seriously crumble, it will be too late to scramble into precious metals. Stories like these demonstrate precisely how poor people’s grasp of basic economics is today. They will likely learn the value of gold the hard way, by watching their fiat savings disappear before their eyes. Savers should be planning for the long-term and buying precious metals now.
- Our small office is located about 200 meters from the Kremlin’s entrance, right across the street from it. So sometimes we get visitors from within those walls. In the early afternoon of December 16, a Ukrainian construction worker came in wishing to buy a one-ounce Austrian Philharmonic. He had just finished several months of work at the Kremlin reconstruction site and wanted to get rid of his rubles and take home a hard asset. (Note: December 16, 2014 has already been named the Russian Black Tuesday. On that day, the ruble fell from 58 to 72 per USD in several hours.)
Now this guy must have been burnt a few times in his life, because he wanted to check the coin for authenticity in every possible way. When he first entered the door, the coin sold for about 86,000 rubles. It took us about 30 minutes to complete the checking procedure to his satisfaction—but when we looked at the price again it had soared above 100,000 rubles. Unfortunately all he had in his pocket was 90,000 rubles. The coin had literally slipped from his grasp.
He told me he had long wanted to buy a thick gold chain, and so we suggested a jewelry store nearby. “Prices do not change there as often,” we told him. Off he went with a sigh.
- An elderly woman at the supermarket cashier, in response to the rumors about a possible freeze of bank accounts, said, “They will take away our money like they did in the early ‘90s?” I replied, “Why not try gold and silver for the long term?” She testily snapped, “What are we gonna do with them—eat ‘em for dinner?”
- A discouraged friend told me, “I’ve got to buy euros to pay my rent (rents are often fixed in euros in Moscow), but any exchange office I go, they have run out of euro cash.”
- A couple days later I overhead this conversation at an electronics retailer: “Honey, I still have some rubles left on me—let’s get a third flatscreen TV.”
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