In light of recent events in the world, many Russians are concerned about the security of the national currency, since the level of prices for basic goods and services depends on this. The heated debates of economists and politicians in the media do not add optimism. There are many myths about how the Russian ruble is supported, and whether it is necessary to be supported by gold or not. To understand why the ruble is becoming more expensive or cheaper relative to other currencies and why the dollar is still “on horseback”, it is possible only after a thorough study.
When and how did the ruble appear?
The Russian ruble appeared as a means of payment for a long time. Back in the 13th century. But then it was more a measure of weight than a coin. The thing is that as the national currency of Ancient Russia, hryvnias were used, which were ingots of silver. The right amount of silver was chopped off, and so the ruble appeared.
He acquired the form of coins during the reign of Peter the Great, when a new, more advanced stamping machine was introduced. Coins printed by the Treasury. The face value was indicated on one side, and the profile of the emperor on the other. The coins were silver.
The first paper rubles
Bills, that is, the Russian paper ruble secured by gold and silver, appeared in the country during the time of Catherine 2. But paper money did not inspire confidence. The then rulers did not understand much how to reinforce the ruble, given that there was not enough gold and silver. Often there was a situation where a salary was paid with bills, and taxes were demanded to be paid in silver. This led to peasant unrest and riots.
Along with paper and silver rubles, gold rubles were issued, which were used both domestically and abroad. The leadership of the Russian Empire was forced to use them when conducting international settlements. The fact is that after 1860, silver fell sharply in price. New silver mines were found in America, and there were so many that they practically didn’t give anything for it. And the fact that the ruble is reinforced, that is, silver, has depreciated.
Soviet time
In Soviet times, the ruble was provided with gold and not only it. The fact that the ruble was reinforced was indicated by all Soviet bills. It was indicated on the banknote that it was provided with minerals, industrial enterprises and other state assets. Although operations with foreign currency within the country were very limited, only citizens traveling or working abroad had the right to receive, store and exchange, the ruble was a firmly secured currency.
The first years after the disappearance of the USSR from the political map of the world
After the collapse of the USSR, a stable currency ceased to exist. The Russian ruble is not backed by gold or any other assets. There was a massive sale of public property in the country, and new money was printed almost uncontrollably. Hyperinflation reigned, the refinancing rate reached a record 200%. Turning off the printing press did not stop the process of economic collapse, and in 1998 a default struck. As a measure to prevent default, the Government carried out devaluation and denomination, as a result of which ruble denominations and coins acquired a modern look.
Despite all the vicissitudes of the fate of the national currency, disputes about why the ruble is supported and why it is still not a world currency do not subside. Especially opposition representatives, constantly losing the elections, shout loudly about this.“Gold is exported from the country, and unsecured green papers are imported,” they shout, calling for national pride.
Naturally, without access to the international trade process, it is difficult for an average person to understand what the Russian ruble is backed up with now, and why, even if it is provided with gold, it will still fall in price, and the US dollar will remain king in the international market.
What is money?
Money for market participants (with the exception of currency speculators) is not a commodity simply because they themselves are worthless. They are the equivalent of a product. This is especially evident in non-cash payments, when money does not exist in the form of paper or coins, but in a numerical, that is, abstract form. Therefore, it is not so important in which currency the payments will be made, the main thing is that goods can be purchased for these banknotes. So it doesn’t matter how the ruble is supported in Russia, if a country is highly dependent on imported goods, its currency will always sag.
Money must be recognizable and trusted. This means that they are accepted by all market participants as a means of payment and give out goods in return. Therefore, the currency of the country that produces the most is global. If 90% of countries buy American goods (even if these products are not made in the USA), then the dollar will be in value.
Why don't you need gold?
Neither the dollar nor the Russian ruble is backed by gold, because gold is just metal, minerals, albeit expensive. It, like any asset, is included in the provision of the national currency, but it is not critical. So then, what is the ruble and the dollar supported by? The national currency can not in the conditions of the modern economy be provided with only one type of product, and even limited in volume. It is provided by all goods and services produced and sold abroad and domestically.
By the way, even JV Stalin was trying to buy sowing grain for Soviet gold rubles - they did not accept it, they had to stamp coins with the image of the tsar (foreigners believed in the imminent collapse of the USSR and the return of Russia to the monarchy). This suggests that gold coins were provided not so much with the cost price as with other state assets. They were not so much a product as the equivalent of a product.
It is only necessary to sell Russian goods abroad for rubles, then the people will become richer
The status of world currency does not give any advantages to the country that issues such currency. While a country sells more goods on the world market, most countries will use its currency as a convenient means of payment. If American goods are in demand, what is the use of national currency as a means of payment?
The problem of the security of the Russian ruble is not that domestic goods are sold for dollars, but that the country produces little and sells little goods not only in the domestic market, but also abroad. Dependence on imports, not on the dollar, is the Achilles heel of the Russian economy and national currency. And whether the ruble is supported by gold is not so important in international trade. Even if (hypothetically) all Russian exports are sold in rubles, you still have to exchange them for dollars or any other currencies in order to purchase imported goods.
Trading with the use of Russian rubles will bring nothing but the additional costs of commissions on foreign exchange transactions. Moreover, you have to prove that this is really a secured currency, and not some kind of "African candy wrappers." After all, most players in the foreign exchange market in the world do not even know about the existence of such a currency as the Russian ruble.
Why did the Russian ruble sink after sanctions?
In 2014, the Russian ruble sank almost 2 times.The president, the government were blamed for this fall, and the annexation of Crimea and the costs of the Olympics in Sochi were announced as the reason. Although these events have affected, but not in the way it is customary to think.
As a result of the sanctions, Russian enterprises were denied loans from foreign banks. The consequences of the habit of living "on credit" quickly made themselves felt. Companies were forced to hold onto foreign currency and buy less rubles.
The foreign exchange market is inert, that is, if there is no currency purchase or purchase volumes have fallen, the price falls. And the Russian ruble collapsed. The situation could be corrected only by "draconian" methods. Since the treasury received less funds from foreign exchange earnings, the budget deficit had to be covered by an additional issue of banknotes.
The existing system in Russia of linking ruble emissions to exports (and not to the dollar, as some say), although it gives stability to the exchange rate, is a constraining factor. Whether the ruble is supported by gold reserves or not, it does not matter with the existing system of monetary emission. Although the gold and foreign exchange fund available in the country and beyond its borders may be a good airbag, it’s better not to bring the matter to another catastrophe so that it should be used.