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Countdown to $100 oil (46) - what's a dollar worth?

by Jerome a Paris Thu Sep 13th, 2007 at 09:19:52 AM EST

There's an old Soviet joke that goes as follows:


Q: what's the difference between a dollar and a rouble?
R: one dollar

Will we soon need to update this as follows?


Q: what's the difference between a dollar and a euro?
R: one euro

or


Q: what's the difference between a dollar and a barrel of oil?
R: a barrel of oil
More below - promoted by whataboutbob


While we're not quite in such dire straits yet, some interesting symbolic levels have been breached today:


Oil price surges past $80

Crude oil prices jumped to a record high of $80 a barrel on Wednesday, as the market judged this week's move by the Organisation of the Petroleum Exporting Countries to increase production as "too little, too late".

The jump in oil prices came as other commodities, such as wheat, hit all-time highs at a time when industrialised countries' central banks are under pressure to hold down interest rates to insulate economic growth from financial turmoil.


Dollar hits record low against euro

The dollar dropped to a record low against the euro on Wednesday as concerns over a US economic slowdown continued to weigh on the beleaguered currency.

The dollar fell to $1.3878 against the euro ... [now to an all-time low of 1.3915]

Moe interestingly, the dollar has breached a very important level against all currencies, not just against the euro. The USDX index reached a record low, below the highly symbolic 80 level, which had held both in the 70s and in the early 90S, during previous bouts of weakness of the dollar.

Of course, what's interesting today is that record lows against both the euro and against oil were reached. This suggests a weakness of the dollar as much as any particular strength of the other two.

  • oil is strong because oil stocks are seen as low, and because OPEC's decision to increase quotas somewhat was seen as more symbolic than anything else (they are increasing quotas to less than what actual production already is);

  • the euro is getting stronger because of expectations of lower interest rates from the Fed at the next meeting, and because of fears of an economic slowdown in the US;

Most analysts suggest that the dollar is not overvalued against the euro (if anything, fundamentals would suggest the opposite). But as the dollar is not allowed (because of the mercantilist policies of Asian and oil exporters) to weaken against most other currencies, it can only go down against freely tradeable currencies, i.e. those of other Western currencies - Australia, Canada, the UK and the euro - which means overshooting against the "fair value" in these currencies. The expectation is that a weakened appetite for the dollar will lead to both lower rates against the above currencies (creating problems for exporters in these countries) and higher interest rates (to keep on attracting the $2.5bn per day the US needs to borrow to sustain its current lifestyle) - draining consumption and investment on both sides of the Atlantic.

Which brings us back to oil. In view of the expected slowdown (or worse) of the US economy, oil prices should be trending down. That they are not shows simply that we are in a new world, where oil prices are driven by exogenous (to us) factors - persistently strong demand growth in emerging and oil producing countries (China, Iran, Saudi Arabia, Russia and India), and constrained global supply (declining Mexico and North Sea, struggling Russia and Saudi Arabia). So despite the strong expectations of lower US and European demand, prices are still going up - or the dollar is going down - which is only compounding the problems, as imports get more expensive (generating more inflation), interest rates will need to go up (further weakening balance sheets and household finances).

And thus you see oil vs dollar index:

:: ::

Earlier Countdown diaries
Countdown to $100 oil (45) - time to bet again (eurotrib)
Countdown to $100 oil (45) - time to bet again (DailyKos)
Countdown to $100 oil (44) - oil industry admits it cannot save us
Countdown to $100 oil (43) - IEA boss denies and confirms peak oil in same breath
Countdown to $100 oil (42) - IEA predicts shortages within 5 years
Countdown to $100 oil (41) - oil more expensive than it appears
Countdown to $100 oil (40) - Undulating plateau
Countdown to $100 oil (39) - BigOil running out of oil
Countdown to $100 oil (38) - Who gets Champagne edition
Countdown to $100 oil (37) - OPEC says peak oil (and $100 oil) is near
Countdown to $100 oil (36) - Free game! win champagne! no risk! (eurotrib)
Countdown to $100 oil (36) - Free game! win champagne! no risk! (DailyKos)
Countdown to $100 oil (35) - peak oil: the last skeptics capitulate (CERA)
Countdown to $100 oil (34) - Oil major CEO calls for demand reduction
Countdown to $100 oil (33) - Below zero
Countdown to $100 oil (32) - peak oil is, like, so over. Not!
Countdown to $100 oil (31) - $15 oil? The cornucopians are fighting back
Countdown to $100 oil (30) - senior politico fears looming oil wars
Countdown to $100 oil (29) - Alaska joins axis of evil (unreliable oil suppliers)
Countdown to $100 oil (28) - New records suggest more to come
Countdown to $100 oil (27) - 'Mission Accomplished' - High oil prices are here to stay
Countdown to $100 oil (26) - Time to bet again (eurotrib)
Countdown to $100 oil (26) - Time to bet again (dKos)
Countdown to $100 oil (25) - Iran vows that oil prices will not go down
Countdown to $100 oil (24) - What markets are telling us about future energy prices
Countdown to $100 oil (23) - Running out of natural gas in North America
Countdown to 100$ oil (22) - gas shortages in the UK - 240$/boe
Countdown to $100 oil (21A) - The 4 biggest oil fields in the world are in decline *
Countdown to 100$ oil (21bis) - long term vs short term worries (dKos)
Countdown to 100$ oil (21) - 8-page extravaganza in the Independent: 'we're doomed'
Countdown to 100$ oil (20) - Meteor Blades is Da Man in 2005
Countdown to 100$ oil (19) - Your bets for 2006 (Eurotrib)
Countdown to 100$ oil (19) - Your bets for 2006 (DailyKos)
Countdown to 100$ oil (18) - OPEC happy with oil above 50$
Countdown to 100$ oil (17) - Does it matter politically? A naked appeal for your support
Countdown to 100$ oil (16) - We'll know on Monday
Countdown to 100$ oil (15) - the impact on your electricity bill
Countdown to 100$ oil (14) - Greenspan acknoweldges peak oil
Countdown to 100$ oil (13) - Katrina strikes / refinery crisis
Countdown to 100$ oil (12) - Al-Qaeda, oil and Asian financial centers
Countdown to 100$ oil (11) - it's Greenspan's fault!
Countdown to 100$ oil (10) - Simmons says 300$ soon - and more
Countdown to 100$ oil (9) - I am taking bets (eurotrib)
Countdown to 100$ oil (9) - I am taking bets (dKos)
Countdown to 100$ oil (8) - just raw data
Countdown to 100$ oil (7) - a smart solution: the bike
Countdown to 100$ oil (6) - and the loser is ... Africa
Countdown to 100$ oil (5) - OPEC inexorably raises floor price
Countdown to 100$ oil (4) - WSJ wingnuts vs China
Countdown to 100$ oil (3) - industry is beginning to suffer
Countdown to 100$ oil (2) - the views of the elites on peak oil
Countdown to 100$ oil (1) (eurotrib)
Countdown to 100$ oil (1) (dKos)
* added to the series after the fact

Display:
Most analysts suggest that the dollar is not undervalued against the euro

Not or now? (that is a common typo), believe it or now. ;-)

You might want to consider revising that paragraph - I find it quite confusingly phrased.

Oye, vatos, dees English sink todos mi ships, chinga sus madres, so escuche: el fleet es ahora refloated, OK? — The War Nerd

by Migeru (migeru at eurotrib dot com) on Wed Sep 12th, 2007 at 06:47:05 PM EST
Most PPP values or other estimates of the euro dollar "fair" value usually put it in the 1.10-1.30 range, so the euro is theoretically overvalued, on a purely bilateral basis.

But of course nothing is bilateral in that relationship.

In the long run, we're all dead. John Maynard Keynes

by Jerome a Paris (etg@eurotrib.com) on Wed Sep 12th, 2007 at 06:59:56 PM EST
[ Parent ]
the dollar is not undervalued against the Euro

means that the dollar is fairly valued or overvalued

so the euro is theoretically overvalued, on a purely bilateral basis

and then my head explodes.

Oye, vatos, dees English sink todos mi ships, chinga sus madres, so escuche: el fleet es ahora refloated, OK? — The War Nerd

by Migeru (migeru at eurotrib dot com) on Wed Sep 12th, 2007 at 07:09:14 PM EST
[ Parent ]
The euro is, if anything, overvalued, and the dollar should not go down against the euro - taking only into account the bilateral relationship.

But I expect it to go down against the euro because of the global situation, thus exarcebating its undervaluation relative to the euro and the overvaluation of the euro...

I'm editing now.

In the long run, we're all dead. John Maynard Keynes

by Jerome a Paris (etg@eurotrib.com) on Thu Sep 13th, 2007 at 03:19:29 AM EST
[ Parent ]
... trading relationship, which is what PPP values address ... but with in excess of 80%, often in excess of 90%, of exchange transactions related to the capital account, presuming that values of tradables ought to rule the roost is having the tail wagging the dog.

And for the long term fundamentals, the bulk of US real wealth seems to have been invested over numerous decades in what will be an untenable suburban settlement pattern, which, while replicated to some degree in Europe, is not replicated to the same degree, and therefore a promise from a European source to meet an ongoing obligation is a stronger long term promise than a promise from a US source of the same kind.


I've been accused of being a Marxist, yet while Harpo's my favourite, it's Groucho I'm always quoting. Odd, that.

by BruceMcF (agila61 at netscape dot net) on Thu Sep 13th, 2007 at 07:39:31 PM EST
[ Parent ]
oil prices are driven by endogenous (to us) factors - persistently strong demand growth in emerging and oil producing countries (China, Iran, Saudi Arabia, Russia and India), and constrained global supply (declining Mexico and North Sea, struggling Russia and Saudi Arabia)

That would be exogenous, or my brain is turning to goo.

Oye, vatos, dees English sink todos mi ships, chinga sus madres, so escuche: el fleet es ahora refloated, OK? — The War Nerd

by Migeru (migeru at eurotrib dot com) on Wed Sep 12th, 2007 at 06:48:30 PM EST
This one I need to correct! Thanks.

In the long run, we're all dead. John Maynard Keynes
by Jerome a Paris (etg@eurotrib.com) on Wed Sep 12th, 2007 at 07:00:18 PM EST
[ Parent ]
Think of it this way, the price of oil is being driven by   (nearly) purely endogenous factors, i.e.  consumption.  I think that what Jerome is trying to say is that the ability of OPEC to engage in price readjustments by upping production is no longer (as) effective.  

So this issue is consumption (endogenous) rather than supply (exogenous), that meaning that any effort to affect the price of oil must be directed towards limiting consumption.

This seems to assume that further untapped oil doesn't exist.  

Deep sea Artic oil probably isn't recoverable at $80/barrel.  But $200/barrel (or priced higher in a more stable currency?)

See this whole global warming thing works out well.  

1)Burning oil makes ice melt.

2) Ice melting makes more oil available for burning.

Rinse and repeat.

And if Reagan's EPA director is to be believed when we run out, God comes back.

Why do you environmentalists want to make us all wait forever for God to come back?

And I'll give my consent to any government that does not deny a man a living wage-Billy Bragg

by ManfromMiddletown (manfrommiddletown at lycos dot com) on Wed Sep 12th, 2007 at 07:01:35 PM EST
[ Parent ]
... and the fact that US consumption can drop dramatically without resulting in a similar drop in global oil demand is one of the things that we yanks are so unaccustomed to.


I've been accused of being a Marxist, yet while Harpo's my favourite, it's Groucho I'm always quoting. Odd, that.
by BruceMcF (agila61 at netscape dot net) on Thu Sep 13th, 2007 at 07:41:15 PM EST
[ Parent ]
http://www.dailykos.com/storyonly/2007/9/12/171552/522

In the long run, we're all dead. John Maynard Keynes
by Jerome a Paris (etg@eurotrib.com) on Wed Sep 12th, 2007 at 06:58:40 PM EST
You're almost on target to have 100 diaries before $100 oil.   If we can get Bush out of office before he hits Iran, there's a good chance we don't see $100 until after 2010.  We're overdue for a recession.

I still think you are right overall though.  Just a little early.

by HiD on Wed Sep 12th, 2007 at 07:30:55 PM EST
... China and India, it will as likely see a slowing of growth in demand as a drop in demand ... which means, still hanging around about where we are now ... and and with no buffer production available to act as a price anchor, we only need a single exogenous shock to get from where we are now to $100.


I've been accused of being a Marxist, yet while Harpo's my favourite, it's Groucho I'm always quoting. Odd, that.
by BruceMcF (agila61 at netscape dot net) on Thu Sep 13th, 2007 at 07:44:30 PM EST
[ Parent ]
a US recession is a disaster for China.  If we slow down buying their crap, their economy will puke.

A move to $100 is just 25% now.  I agree, any big political event can make that move happen in a heartbeat.  

by HiD on Thu Sep 13th, 2007 at 10:30:49 PM EST
[ Parent ]
... as all that. It may be the most important single national market, but its certainly not a majority of Chinese exports, and exports are not the sole growth driver in the current boom.

So it depends largely on whether its a synchronized slowdown with Europe and Japan. The Chinese economy will certainly continue growing if its merely the US in recession ... its post-Olympics where I would be more worried about a slowdown in the Chinese boom.

I've been accused of being a Marxist, yet while Harpo's my favourite, it's Groucho I'm always quoting. Odd, that.

by BruceMcF (agila61 at netscape dot net) on Fri Sep 14th, 2007 at 08:07:29 AM EST
[ Parent ]
Depends on how you define National.

If memory serves, the EU is a more important trading partner now to China than the US is mine de rien...

The Hun is always either at your throat or at your feet. Winston Churchill

by r------ on Fri Sep 14th, 2007 at 11:32:09 AM EST
[ Parent ]
... as an aside, not, that's not how I define national, hence the qualifier ... but when asking when the EU becomes a federal nation state is like asking how long a short piece of string can be ... given evolution in that direction, its a status that is most likely to recognized in the rear view mirror, and then some more or less arbitrary event will be selected as the "starting point".

... but, yes, that reinforces the point. North America is not even the largest single market for Chinese manufacturers, and export is not China's sole growth engine at this point in time.


I've been accused of being a Marxist, yet while Harpo's my favourite, it's Groucho I'm always quoting. Odd, that.

by BruceMcF (agila61 at netscape dot net) on Fri Sep 14th, 2007 at 03:18:31 PM EST
[ Parent ]
If the American consumer cuts back sharply China will have an ugly recession.  And they have a lot of structural problems that a rapid growth rate is papering over.

My gut is we'll get to see who's right pretty soon.

by HiD on Fri Sep 14th, 2007 at 05:26:18 PM EST
[ Parent ]
They certainly do have a lot of structural problems ... of course, so did the US when it overtook the English economy as the largest economy in the world.

There will be some broken glass, but they can weather an unsynchronized recession in the US.


I've been accused of being a Marxist, yet while Harpo's my favourite, it's Groucho I'm always quoting. Odd, that.

by BruceMcF (agila61 at netscape dot net) on Fri Sep 14th, 2007 at 07:25:51 PM EST
[ Parent ]
What would the price of a barrel of oil graph look like if you were to use euros instead of dollars?

Money is a sign of Poverty - Culture Saying
by RogueTrooper on Thu Sep 13th, 2007 at 08:25:16 AM EST
About 15% less steep, to judge by these charts:

(from the comments to a recent diary of Jérôme's)

Oye, vatos, dees English sink todos mi ships, chinga sus madres, so escuche: el fleet es ahora refloated, OK? — The War Nerd
by Migeru (migeru at eurotrib dot com) on Thu Sep 13th, 2007 at 08:44:58 AM EST
[ Parent ]
This part is unclear to me:
But as the dollar is not allowed (because of the mercantilist policies of Asian and oil exporters) to weaken against most other currencies, it can only go down against freely tradeable currencies...

It used to be true that a government could artificially set the exchange rate of its currency (think of the ruble in the USSR), but this led to a black market and also inhibited international trade. Real deals needed to be made in a reliable currency such as the dollar.

Now China is trying to do the impossible. It wants the dollar to remain strong so that its vast holdings don't become devalued while, at the same time, it wants to control its own currency to promote exports, and, unlike the USSR, it depends upon extensive international trade.

This can't work. China is already experiencing higher inflation. Some estimates are 12%, but they fudge these numbers too.

If I were smart enough I would know what to do and then people would be reading my books (if I had any) instead of George Soros.

Based upon historical patterns, the US will have to weaken the dollar to "pay off" the rising deficit. This will cause inflation in the US and a simultaneous recession. In China there will be a knock-on effect as exports (at least to the US) decline and as internal inflation also causes an economic slowdown. There is a lot of discussion about what the Fed should or could do, but I don't think that it has the tools to counter international pressures.

The parallel is right in front of us, the aftermath of the Vietnam War, 15 years of economic stagnation and runaway inflation. Not only is the government following the same policies as then it is actually many of the same people. Apparently nothing succeeds like failure.

Policies not Politics
---- Daily Landscape

by rdf (robert.feinman@gmail.com) on Thu Sep 13th, 2007 at 09:18:40 AM EST
rdf,

"It used to be true that a government could artificially set the exchange rate of its currency (think of the ruble in the USSR), but this led to a black market and also inhibited international trade. Real deals needed to be made in a reliable currency such as the dollar."

I'm sure you are correct in what you say, but it was not just the ruble, not just even the Eastern Bloc, and the effects were not so strong in other places, I think. I remember when I was growing up that the AUD bought about USD1.20 (!), until the dollar was 'floated' by the Hawke government in the early 1980s. Was there a 'black market' in AUD? Did it really matter that the currency was not freely convertible?

Farmers hated the old rate, but nobody else cared, so to this day I can't understand why the dollar was floated in the first place (like the Labor Party needed their mortal enemies the farmers to vote for them ...)

Anyway, on conversion the rate went from USD1.20 to about 68 US cents, if I remember (and I probably don't :) )

I freely admit I understand none of this stuff. But I do remember when a dyed-in-the-wool total-USUK-suckhole country called the Commonwealth of Australia had currency that was not fully convertible (apologies if I mangle the technical language here ... I'm sure most of you can work out what I mean, it wasn't 'floated' on the currency markets ...)

by wing26 on Thu Sep 13th, 2007 at 10:46:30 AM EST
[ Parent ]
Soaring food prices propelled the Chinese inflation rate to its highest point in nearly 11 years, cementing expectations that the central bank would defy a global trend and keep raising interest rates.

Consumer prices rose 6.5 percent in August from a year earlier after gaining 5.6 percent in July, the Chinese statistics bureau said Tuesday.

[...]

The statistics office said inflation had been driven by an 18.2 percent leap in the cost of food, which accounts for a third of the consumer price basket.

Meat prices rose 49 percent in August from a year earlier, reflecting a shortage of pork, the staple meat in China. That results from a 10 percent drop in the Chinese pig population because of blue-ear disease and fast-rising feed grain costs, even as prices for pigs fell last year. Cooking oil cost 34.6 percent more in August than a year earlier, eggs were up 23.6 percent and vegetables 22.5 percent.



Peak oil is not an energy crisis. It is a liquid fuel crisis.
by Starvid on Thu Sep 13th, 2007 at 11:28:03 AM EST
[ Parent ]
... and sustained indefinitely.

What cannot be sustained indefinitely is a central bank raising the value of its currency against external market pressure, unless it has the full co-operation of the central bank of the other currency in the exchange.

Because the direct market action to raise the value of a currency is to buy the domestic currency with foreign exchange, and the central bank can only use whatever foreign exchange it has on hand.

However, a central bank operating under a reserve banking system can depress the value of its currency indefinitely, since that only requires buying foreign exchange with domestic currency, and the central bank has unlimited power to generate new domestic currency.


I've been accused of being a Marxist, yet while Harpo's my favourite, it's Groucho I'm always quoting. Odd, that.

by BruceMcF (agila61 at netscape dot net) on Thu Sep 13th, 2007 at 07:48:27 PM EST
[ Parent ]
Thanks for that.

Oye, vatos, dees English sink todos mi ships, chinga sus madres, so escuche: el fleet es ahora refloated, OK? — The War Nerd
by Migeru (migeru at eurotrib dot com) on Sat Sep 15th, 2007 at 03:39:27 AM EST
[ Parent ]
i listened a podcast few weeks ago from an expert who lives currently in China, i do not remember excatly the rational (structural problems) but his view was that in reality the chinese currency was over valued not undervalued.
by fredouil (fredouil@gmailgmailgmail.com) on Thu Sep 13th, 2007 at 10:38:17 PM EST
[ Parent ]
I have a house to sell. Already enough to worry about plunging real estate prices...

Seriously though, USD at 1.4EUR is not at post-BW historical lows against DEM - close, but not quite there.

And, for what it's worth, it's nowhere near historical lows against FRF, which was worth more than 0.25USD for much of the early 1970's (and is worth now more like 0.21USD).

The Hun is always either at your throat or at your feet. Winston Churchill

by r------ on Thu Sep 13th, 2007 at 12:25:40 PM EST
I think you can buy a decent house cheaper here than in the Sates. Where are you moving to in France?

Hey, Grandma Moses started late!
by LEP on Thu Sep 13th, 2007 at 12:53:26 PM EST
[ Parent ]
I guess the problem is not being able to buy a house in France but being able to sell the US house for more than the outstanding value of the mortgage.

Oye, vatos, dees English sink todos mi ships, chinga sus madres, so escuche: el fleet es ahora refloated, OK? — The War Nerd
by Migeru (migeru at eurotrib dot com) on Thu Sep 13th, 2007 at 01:02:08 PM EST
[ Parent ]
I didn't realize it had gotten that bad that there was no equity. Where does Redstar live?

Hey, Grandma Moses started late!
by LEP on Thu Sep 13th, 2007 at 01:19:56 PM EST
[ Parent ]
I don't know what redstar's equity is. That was just a general statement about selling a house when prices are going down.

He's in the Twin Cities.

Oye, vatos, dees English sink todos mi ships, chinga sus madres, so escuche: el fleet es ahora refloated, OK? — The War Nerd

by Migeru (migeru at eurotrib dot com) on Thu Sep 13th, 2007 at 01:37:27 PM EST
[ Parent ]
I'm not worried about that, thankfully. More just worried about the value of whatever assets I have left for buying there - the slowdown hasn't hit there, and we're a year into it here.

Market timing is a bitch.

The Hun is always either at your throat or at your feet. Winston Churchill

by r------ on Thu Sep 13th, 2007 at 02:23:48 PM EST
[ Parent ]
I notice that the asking prices in the 18th of Paris seem to be coming down. This is not scientific; just my observations of the vitrines of the real estate agents. If you want to go out to the country, about 60km, a nice house can be purchased now at in the 2 million+ franc range. I don't know if sales are slowing but I bet it wont be too long before they do.

Hey, Grandma Moses started late!
by LEP on Thu Sep 13th, 2007 at 05:13:19 PM EST
[ Parent ]
Assume you're talking in new francs, huh? (Sure beats old francs, all the older generation down south still speaks in those. Hadn't yet migrated to new francs before those were put to pasture, as they soon will be ;)

The Hun is always either at your throat or at your feet. Winston Churchill
by r------ on Thu Sep 13th, 2007 at 05:22:24 PM EST
[ Parent ]
I have some neighbors who still talk in old francs- everything's in millions. I don't understand it too much; I have to get my wife to translate.
It's funny how many French still express real estate prices in new francs, although I sense that's finally starting to change and we're moving slowly to the euro.

Hey, Grandma Moses started late!
by LEP on Thu Sep 13th, 2007 at 06:19:09 PM EST
[ Parent ]
Try talking real-estate in old francs. Hell, my mother-in-law still talks about consumer items and the days receipts (they're shopkeepers) in old francs. Or salaries in briques, et c. Even I do this last, it's sort of hard not to.

The Hun is always either at your throat or at your feet. Winston Churchill
by r------ on Thu Sep 13th, 2007 at 07:22:30 PM EST
[ Parent ]
Depends - combination of on where the job market is for me and where the nursing school opening are for my wife (she's finishing prepa this year).

Probably Paris region, Lyon region or Grenoble/Annecy/Geneva region.

The Hun is always either at your throat or at your feet. Winston Churchill

by r------ on Thu Sep 13th, 2007 at 02:22:01 PM EST
[ Parent ]
Or more simply...
is the oil de-facto priced in euros... at a fairly constant price....?

A pleasure

I therefore claim to show, not how men think in myths, but how myths operate in men's minds without their being aware of the fact. Levi-Strauss, Claude

by kcurie on Thu Sep 13th, 2007 at 02:43:18 PM EST
We've given evidence to the contrary on this thread.

Oye, vatos, dees English sink todos mi ships, chinga sus madres, so escuche: el fleet es ahora refloated, OK? — The War Nerd
by Migeru (migeru at eurotrib dot com) on Thu Sep 13th, 2007 at 03:18:44 PM EST
[ Parent ]
There's an old Soviet joke that goes as follows:
Q: what's the difference between a dollar and a rouble?
R: one dollar

That wasn't a Soviet joke because a dollar in, say, Brezhnev times, cost 0.64-0.66 Rouble and even  with dollars you couldn't buy anything in the USSR but go to prison instead (messing with foreign currencies was a serious crime).

Now if you referred to Yeltsin times, that would be true, what was it, 6000 Roubles per one dollar? The blessed Yeltsin times when democracy flourished over here and you ,Jerry, were studying (and practicing in Russia) how to empty our pockets in a more civilised and ecological way

by lana on Sat Sep 15th, 2007 at 05:34:05 PM EST
That wasn't a Soviet joke because a dollar in, say, Brezhnev times, cost 0.64-0.66 Rouble and even  with dollars you couldn't buy anything in the USSR but go to prison instead (messing with foreign currencies was a serious crime).

Well, I knew that joke... which was of course aimed just at the unrealistic official exchange rate.

I also remember that ban or not ban, people hid Western forex, keeping it as a security just like jewels or gold. They also practised cross-border barter trade and smuggling like a folk sport -- say, if a university class from Prague or a workers' brigade from Budapest went on a tour to Moscow, they'd load various stuff available at home or smuggled from the West (from kitchen utensils through forex to sex magazines), and sell or exchange in the Soviet Union. One colleague told that on one such tour in the seventies, they had a great time because their KGB minder was busy in the trade himself.

*Lunatic*, n.
One whose delusions are out of fashion.

by DoDo on Sat Sep 15th, 2007 at 06:43:12 PM EST
[ Parent ]
...but you would be completely right to say that inflation in the Yeltsin/IMF/Western advisors times made the old joke a mockery, with a devaluation orders of magnitudes bigger than the Soviet-time over-valuation.

*Lunatic*, n.
One whose delusions are out of fashion.
by DoDo on Sat Sep 15th, 2007 at 06:47:41 PM EST
[ Parent ]


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