The ruble took another nosedive Thursday at the Moscow Interbank
Currency Exchange, dropping to 309 to the dollar from 254, as the chorus for acting Prime Minister Yegor Gaidar's resignation grew louder.
It is a familiar refrain for the British chancellor of the exchequer, Norman Lament, who has presided over sterling's devaluation despite his pledge to hold the line. He seemed like a man who would be looking for a new vocation as the markets closed Friday and there were calls for him to step down.
The fall of the ruble reignited the bickering between the Gaidar government and the Russian Central Bank over who was responsible. The Central Bank charged that the government was spending indiscriminately; the government shot back that the Central Bank was wantonly printing rubles.
All of this sounded a lot like the inter-European wrangling that went on last week between Britain and Germany over who was responsible for the pound's demise.
Britain has blamed Germany for its high interest rates. And, in a charge that sounded like a child accusing a parent of favoritism, the British Treasury complained that the German Bundesbank had intervened on behalf of the French franc but left the pound to languish.
Germany denied the charge and defended itself in a letter to the British Treasury, which became public. This rejuvenated the row between the two governments and led to a squabble between the Bundesbank and the German government over who made the letter public in the first place.
The German government, meanwhile, has been calling for lower interest rates while the Bundesbank, for fear of inflation, has refused.
As for the fate of the ruble, statements from officials of the exchange and Central Bank indicate it could get worse. Sergei Osenmuk, deputy director of the Moscow currency exchange, says that ruble holders have lost all confidence in the currency.
"People will buy dollars at any price", he said.
New details of the Central Bank's ruble intervention strategy, meanwhile, show that its purpose is not to prop up the currency.
Rather, said Alexander Potyomkin, head of the bank's hard-currency division, the Central Bank intervenes to bolster confidence in the exchange, not the currency. The bank infuses dollars to convince ruble holders that no matter how bad it gets, they will always be able to trade their dollars for rubles.
This, of course, indirectly props up the ruble, to the extent that it staves off a rush on the exchange, or forces it to close down early, as happened recently in St. Petersburg, for lack of dollars.
But it means that, unlike Lament's claim that he would defend the pound at a certain rate against the Deutsche mark, which did not work anyway, the Russian Central Bank has drawn no such Maginot Line for the ruble.
Free marketeers should cheer this laissez-faire strategy, but one wonders how long the Russian public will tolerate the deterioration of its currency. The British have already shown far less patience.
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