Ukraine Enters Hyperinflation: Currency Trading Halted, "Soon We Will Walk Around With Suitcases For Cash"

Tyler Durden's picture

Yesterday we summarized the most recent economic, political and social situation in Ukraine as follows:

"A year or so on from the last coup in Ukraine, Ukraine’s former Prime Minister Sergey Arbuzov told TASS, with growing popular discontent, "another state coup can’t be ruled out in Ukraine." As the cease-fire deal hangs torn and tattered in the Debaltseve winds, the nation is a mess: a new gas dispute looms as Gazprom demands upfront payments; capital controls have been tightened as the $17.5bn IMF loan may not be enough; and the central bank governor faces prosecution as the economy craters. All of these factors have driven massive outflows from Ukraine and the Hryvnia has crashed to over 33 to the USD - a record high (and 70% devaluation from the last coup)."

So as the Ukraine government watches its country go down in flames, with the blessings of the US State Department of course, it decided to take action. According to Reuters, with the hryvnia in free fall (see above) the central bank tried to call a halt on Wednesday by banning banks from buying foreign currency on behalf of their clients for the rest of this week.

Although banks could still trade with each other, by mid-morning there were no registered trades at any rate, leaving the currency in limbo. The previous day, the central bank rate based on reported trades had fallen 11 percent against the dollar.

Exchange kiosks on the streets in Kiev were selling limited amounts of dollars for 39 hryvnias, around 20 percent worse than the rates advertised in the windows of commercial banks where dollars were not available. This compares to the official rate of 33 USDUAH posted yesterday, a rate which will continue in freefall, now that the central bank has no more gold left to sell (it's mysteriously gone), and virtually no foreign reserves.

Following the closing of the FX market closing, the central bank has been able to artificially dictate the interbank rate, which it reduced from 32 to 24 hryvnias as of 12:45 p.m. local time. The artificial rate only affects exporters, who are forced to sell 75 percent of their foreign currency revenue to the National Bank at the rate.

Even the Ukraine government is shocked by what is going on: "I learned this morning on the Internet that the National Bank of Ukraine has, as usual on its own without any sort of consultations, made the decision to close the interbank currency market, which will absolutely not add to the stability of the national currency that the national bank is responsible for. This situation has a very complex and negative influence on the country's economy," Ukrainian Prime Minister Arseniy Yatsenyuk said.

The Ukrainian National Bank chairwoman Valeriya Hontareva, however, contradicted the Prime Minister's statement. "We coordinate all administrative measures with the International Monetary Fund first, and only then implement them," Hontareva told reporters.

In short: total chaos, which is indicative of any country's collapse into the hyperinflationary abyss.

It gets better. According to RIA, on Tuesday, Ukrainian television channel Ukraina announced that with the new exchange rate, the minimum wage in Ukraine stands at around $42.90 per month, which according to the channel, is lower than in Ghana or Zambia. There are currently no plans to raise the minimum wage until December.

Behold hyperinflation: "Food prices among producers rose 57.1 percent, with the price for grains and vegetables rising 91 percent from January 2014 to January 2015, while the official inflation rate over the period totaled 28.5 percent. Meanwhile, Ukrainian consumers responded to economic difficulties by cutting their spending in hryvnias by 22.6 percent, which amounts to an almost 40 percent decrease in real consumption."

And the punchline: "A construction worker exchanging dollars at a kiosk in a grocery shop in return for a bag filled with thousands of hryvnia, laughed and told shoppers: "Soon we will have to walk around with suitcases for cash, like in the 1990s.""

Which is ironic, because the central banks of "developed world" nations, most of which are now facing over 300% debt to consolidated GDP, would define Ukraine's imminent hyperinflation with just one word: "success."

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mkkby's picture

Ukie has no reserves in either gold or harder currenies, so any foreign "partners" were found and paid off by the US.

Haus-Targaryen's picture

Mr- Yellen is jealous with envy.  Looking forward to CNBC and CNN jumping up and down about how this is the end of the Ukrainian currency. 

Oldwood's picture

Well, at least they don't have to worry about deflation, right? Winning all the way!

USisCorrupt's picture

America is capable of doing GREAT things for other Countries.

 

Ukraine is PROOF!

tarsubil's picture

In Soviet America, we buy it, we break it.

JRobby's picture

Then we cast it aside and go out and buy another one.

Dame Ednas Possum's picture

Yet another society converterd into a GREAT, super-sized pile of shit compliments of unkle sam the anal rapist and his tribe of weird friends. .

Do you want lies with that?

Y'all have a nice civil war now.

See you again in another decade or so...

pods's picture

The funny thing about that is that the money IN the wheelbarrow won't BUY the wheelbarrow.

pods

BandGap's picture

That is very fucking funny.

What a fucked up show we are watching, taking notes to pass along to the grand kids. Too bad a lot of people are going to perish when the music stops.

 

shouldvekilledthem's picture

I find it very entertaining that most people cannot comprehend this and even here on zh they believe that cash is the way to go.

The population deserves what's coming.

Eeyores Enigma's picture

What doesn't make any sense is where are people supposed to get suitcases and wheelbarrows full of cash? Do all the employers raise wages at the same rate as inflation? 

I think it is all Bull$hit.

Oldwood's picture

Those who have it spend it. Everyone else either stands in bread lines or steals. Its called societal breakdown.

Haus-Targaryen's picture

at this exchange rate, the average Ukranian makes $15 a month.  Essentially they are now poorer than Eritreans.  

Congratulations Mr. Nuland, you took a developing nation and threw it into the pot with Zimbabwe, Niger, Chad and Yemen.  But hey, the Ukies *MIGHT* get the blue and yellow flag, so its worth it.  Right!?  

Oldwood's picture

That's "ms" Nuland to you...

HonkyShogun's picture
HonkyShogun (not verified) Oldwood Feb 25, 2015 10:21 AM

Not Nuland but Nudelman. Before she changed her Jew-name.

tired1's picture

The problem is that Ukraine wasn't developing at all, it was gettig worse by the year. After the USSR collapse the tribe moved in and made sure, with $5 bill benny bucks, to forestal any development through the use of numerous NGO's.

The new oligarcs, previously convicted theives in USSR, took control ot he country. This was all part of the general plan to cripple Russia. Might be worth looking at Stratfor's predictions:

Collapse of Russia will prove major test for US – Stratfor

“It is unlikely that the Russian Federation will survive in its current form,” the forecast’s chapter dedicated to Russia begins. The research maintains that Moscow’s “failure to transform energy revenues into self-sustaining economy” will eventually lead to a “repeat of the Soviet Union's experience in the 1980s and Russia's in the 1990s,” with the process accompanied by a demographic decline that is set to “really hit” Russia. bla, bla bla

http://rt.com/usa/234983-stratfor-decade-forecast-russia/

junction's picture

Money not worth the paper its printed on.  Thanks, George Soros.

Truther's picture

Fuck Soros and the Nuland Brothel that goes with it. Another one bites the dust. Queen.

giovanni_f's picture

You have been offending a philantropist and a democratic liberator. Your cell at Homan square is currently being prepared. You hear from us.

Boxed Merlot's picture

...Thanks, George Soros...

 

You weren't supposed to see his connection with this or his purchasing of the US presidency.  You were only supposed to see his philanthropy in decriminalizing marijuana in the US.  Obviously his media hold is needing additional attention. 

Now where's that hotline to Teneo? 

http://www.google.com/url?sa=t&rct=j&q=&esrc=s&source=web&cd=2&ved=0CCwQ...

 

(Don't let the sanitized wiki-link fool ya, their "2012" birthday is Bogus.  

giovanni_f's picture

The list of flourishing democracies 'made in US' keeps on growing

Philby MI6's picture

The Ukraine is turning out to be another US foreign policy failure.
During 1945-49, with German, French and Italian economies in ruins, the US together with Britain managed to hold the line militarily against the Soviets giving the others time to rebuild their economies. They recovered sufficiently and the tide turned in the west's favor. With the collapse of the Soviet empire, Russia is now being pushed eastwards. She’s trying to hold on to her traditional markets in Eastern Europe. Russia must have a strong economy to support a strong military industrial base. The US is attempting to constrict her economically. The EU is suffering from expansion fatigue and I sense is trying to resist pressure by the Americans to continue the drive eastwards. In the last 20 years the EU has grown from 12 to 28 states, that’s a considerable increase. Recriminations between Europe and the US over the failures in the Ukraine have been quite vocal. The EU has serious economic problems, particularly in France and Italy, they can’t afford it. The Americans are too aggressive. The Ukraine is suffering. That’s what happens when great powers clash over territory.

tired1's picture

Russia needs a strong economy but it doesnt need much from foreign (hostle) states. The country is blessed with resources that can and will be developed, in part due to sanctions.

This has Europe scared shitless, as this persists they lose a growing share of Russian market. Ask the Polack apple farmers.

Ondoron's picture

The US "political engineering" has been a great success. NeoNazis in the Kiew government, Bidens son there to exploit what there it to exploit, civil war in the East. Thanks so much - also for the US think tanks who were the spindoctors for the unfolding events... 

Ondoron's picture

The US "political engineering" has been a great success. NeoNazis in the Kiew government, Bidens son there to exploit what there it to exploit, civil war in the East. Thanks so much - also for the US think tanks who were the spindoctors for the unfolding events... 

JRobby's picture

Uhaul and Budget truck rental lots empty.......................

HardAssets's picture

And bullish for clothing with sewn in hidden pockets ? (For real money.)

campaign4liberty's picture

Sorry but this on the picture is a banker moving dollars to a voult, not a construction worker. I'm on your side, but there's plenty of good pictures from Weimar.

LawsofPhysics's picture

Yes, unfortunately, the suitcase will be of greater value than the paper inside...

same as it ever was...

Urban Roman's picture

Hopefully it is printed on nice clean paper, without a lot of plastic.

Plastic stinks and makes a mess when you burn it for heat.

Jim in MN's picture

The microchips can add a nice greenish color and spark--just watch the ventilation!

 

Wait 'til the fire turns greeeeeennnnnnnnnn......

HopefulCynical's picture

Wait 'til the fire turns greeeeeennnnnnnnnn......

Extra bonus points for the Zappa reference!

Razor_Edge's picture

Stinks when used for ass wiping too!!! But probably cheaper than the real thing.

silverer's picture

Any you can carry your lunch AND your resume in it, with room to spare!

Mr Poopra's picture

It could never happen here though.

Oldwood's picture

We got the almighty DOLLAR.

We are bulletproof!

GetZeeGold's picture

 

 

Convert that crap into equities.....quick!!!

Oldwood's picture

I did already....tools of self defense.

silverer's picture

Watch out for the salaried (-) Yellen trolls.

juantrades's picture

and nothing is stronger!

sessinpo's picture

I think that is a false comparison just like those that use the Wiemar Republic. Neither Ukraine or Wiemar were the world's currency reserve. That is why I have been right in being bullish the dollar.

What is more likely to happen is the dollar continues its strength against other currencies as deflation rages and nations have to get dollars to service debt loads. Then at some point, defaults occur when those debt loads just can't be serviced and then we have an eventual dollar collapse and a move toward a new currency reserve or one backed by commodities such as PMs. Until then, the dollar marches upward.

Oldwood's picture

You may be right, but that doesn't make it a good thing. Economic instabilities have always created "opportunities" which is why we have them. But don't be so foolish as to believe that just because you are on the high side of the Titanic, that your end will be any different from the rest of the passengers.

zerocash's picture

The rich can afford to buy places on the lifeboats though.

LawsofPhysics's picture

Sure, but they better have some serious security to protect those "lifeboat" and their supply lines.

mkkby's picture

Yes, eventually the high side of the titanic will sink. 

When spain, italy, france and japan "go Greece" and start to recover -- only then will the flight to safety in dollars stop and begin to reverse.  That is your tell.  When these larger economies fail and the euro actually collapses.  Not just talk on blogs. 

Since Greece has now been flailing around for 7 years with no end in sight, you can imagine the dollar is safe for decades.

sessinpo's picture

Did I say it made it a good thing?

I was only commenting on the post that suggested hyperinflation could occur here and I suggested otherwise and gave my reasons.

That puts you on the high side of the Titanic because I use history correctly to aid my viewpoint.