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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LawsofPhysics's picture

The issue that eventually comes to a head is related to exactly what you are getting at.  It's a global market and much of the global debt is in fact in dollars.

 

Of course, everyone should also recognize that there simply is no monetary, eCONomic, political, or fiscal solution to resource scarcity.  When resources run low, people's standard of living goes down or they go to war, period.  Innovation is expensive and requires a tremendous amount of capital and resources.  Now you tell me, has the world been investing it's resources and capital well? 

tick tock...

Oldwood's picture

What resources are we short of except the productivity to pay for them? Compared to what my parents grew up with, we are living large.

LawsofPhysics's picture

Yes, unfortunately the calories that must be consumed on a daily basis is also quite "large".

Tell me, do you think that is sustainable?  If so, for how long?

tick tock.

mkkby's picture

LawOf, just STFU already you stupid troll.  Resource scarcity?  The entire continents of Africa and South America are largely untapped wilderness.  I don't want to see them decimated, but the fact is they will be.

These supposedly scarce resources are so cheap/plentiful they are all being wasted.  There's the logic even a moron like you can't escape.  We just casually use it and throw it away.

UselessEater's picture

if a true free market and true free price discovery existed resource availability is fine

we live in a world where resources are controlled and owned by a web of relatively small interconnected interests with the backing of ownership in central banking and the MIC

eg in the 60's and 70's the former nation called Zimbabwe was highly productive, lift the boot off its neck and it still has the resources and capability to be so again

scarcity is an over used word by design it has the benefit of enriching a few at the expense of the rest

remove monopoly protections & patents & crony international "corporate vested" courts that inhibit innovative progress and scarcity will be quickly seen as propagandized therefore a weaponized word

sessinpo's picture

What I find amusing is thoser that think that this control of resources is a modern phenominon. It isn't. It has been around since the beginnings of government.

UselessEater's picture

longer than that even (if 'royalty' is considered government)..how much does one include in a post? In southern africa it was even before Cecil Rhodes but there in itself is a mighty fine example.

LawsofPhysics's picture

Yes, it is and has always been about power and control over real resources (inclduing the human kind), but if you seriously think that truly free markets don't lead to monopolies and corruption you are a first class fool.

Moreover, I have two patents that I brought to market and if you don't think that real innovation requires real capital and resources, again, you are a complete fool.

Like life, success is about balancing that "free market" with a fair and smart regulation and rule of law (is John Corzine in prison yet?).

At the heart of all societies is their currency as this is how we exchange the fruits of our labor.  The creation of that currency is no longer attached to COLLATERAL or REAL PRODUCTION.

The earth has a very real carrying capacity motherfucker so if you cannot connect all these dots, then you are probably no different than the statists that were "leading" those good folks on Easter Island.

Sweet Chicken's picture

"At the heart of all societies is their currency as this is how we exchange the fruits of our labor.  The creation of that currency isno longer attached to COLLATERAL or REAL PRODUCTION."

^This

JRobby's picture

What you seem to be dancing around here is the relative size of CB's (ever expanding) balance sheets? It is all timing.

HardAssets's picture

( deleted )

I was just gonna do more sheeple bashing . . . but there's really not more that needs to be said on that.

Oldwood's picture

If things go badly, and I do think they will go VERY badly, gold will be a valuable as lead, and maybe less, if not in the form of a projectile.

GetZeeGold's picture

 

 

Remain calm.....and tune into CNBC.

cossack55's picture

Hopefully you have the appropriate molds and fishing sinkers by now.

Took Red Pill's picture

Didn't the Lone Ranger make his bullets out of silver?

sessinpo's picture

I don't think the Lone Ranger made shit other than love to his mate Tonto.

rejected's picture

No silly,,, silver bullets are used to kill werewolves.

Global Hunter's picture

Another exceptional American foreign economic and military success story!!!

WTFUD's picture

Another Coup? Coups cost money , ask that CUNT Nuland.

Will be good to watch the Nazi boys in Kiev stringing up the installed Vichy DC puppets.

yogibear's picture

Victoria Nuke-land just wants massive war.

Oldwood's picture

Does anyone think that ANY governments WANT stability? It is the constant stirring of the pot, the destabilization of the world that creates the opportunities they need to get ahead. Chaos is the their friend.

rejected's picture

Actually Joel Skousen (Strategic Relocation) has a radically different take. Listening to him the other night with A. Jones he believes all this is somehow being done by Russia. Says the breakup of the USSR was phoney and that Russia wants to reassemble it. He has been saying this even before the Ukraine mess.

Personally I don't know....  If Russia is behind all this they are far and above superior to any western strategists.So far I tend to agree with PCR's version. The u.s has admitted to brokering a regime change. Nuland did make that stupid call and the u.s has actual combat troops on the ground in Ukeland.

But, gotta look at both sides because mostly what we see isn't what's happening. He does have a lot of credentials so.....I'll post his site for those smarter than me can check it out.

http://www.joelskousen.com/

 

tired1's picture

Sorry, he's an old cold warrior. I think the Sov collapse was an effort to segment the empire so that it might be more easily pilfered, and that is exaclty what happened.

I think that the theivery was so crippling and blatant that is made popular support for national revival possible. That's what I see under Putin.

You might want to look at Stratfor's policy projections, which are even more insane than usual

“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.

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

I think Americans are soon going to learn some hard learned lessons that much of the world already knows. Good luck.

Martian Moon's picture

Good

Remove from a state the ability to print currency out of thin air and have it be considered money, and war stops

sessinpo's picture

False thinking. Nothing stops the evil progressives from war.

Martian Moon's picture

War costs money, real money, and lots of it.

Without the ability to inflate away the wealth of its people, or borrow against future generations, war becomes unfeasible for the state.

Do you think a single war that America has been in since 911 would have happened if Americans actually had to pay for it upfront?

Oldwood's picture

There is no doubt that all wars demand debt, but there are differences. WWII was met with real sacrifice at home for virtually everyone, and we actually did have the ability to pay it back. Since that time very little has been asked from the public directly related to the costs of war. Everything now is based on infinite debt

Martian Moon's picture

Oldwood, I know WWII was met with real sacrifice, but it does not lessen my point.

Both WWI and WWII were bankster wars, caused by and for the bankster class, and both relied on fiat currency printing and indebting of future generations.

http://www.theatlantic.com/business/archive/2012/11/the-long-story-of-us...

 

It is not perchance that the Fedral Reserve was established in 1913 and America was at war less than four years later.

I'll go one step further, quash the ability to print currency and magically have it accepted as money, and you've eliminated the source funding for most evil in this world.

JRobby's picture

Nor perchance that the growth of debt/money supply/velocity was unsatisfactory to the banksters world wide in the decade leading up to WWII

LawsofPhysics's picture

More to the point all fiat creation is no longer attached to any real collateral or production.  Until 1971, there was at least some very real strings keep the silver dollar attached to reality and some sort of productive capital...

tick tock motherfuckers.

Icelandicsaga...............................................'s picture

 

A total banker war . run up to WWI .. Russo Japanese war .. and it was so obvious ... am not sure bankers are the sum total of all wars. but they help them along and know how to make massive amounts of money off of them .. not sure bankers caused Japan's militarism which was based more on philosophical and cultural issues.. the war with Germany could be said to have had massive interference of western banking and corporate interests .. From IBM . Ford and GE to Standard Oil .. Chief Justice Robert Jackson said in one of his papers that one of the reasons they stopped the Nurmeberg TRials when they got to the industrialists . .was because the trail led back to about 26 American owned companies or their subsidiaries in the Reich .. the trials also ended according to various experts like Higham because the Cold War with Russia was just kicking off and it would have made capitalims look bad to discover the very deep connections of banking and corporate interests in the US with the Third Reich.

tired1's picture

Exellent. Might want to look into Meiji Restoration and where Japan got the money for warships to be built in England.

also: http://www.viator.com/Kochi-attractions/Paradesi-Synagogue-and-Jew-Town/...

Japanese have a slang for the tribe: fugu

rejected's picture

WWII debt was paid by inflating....

Per Globalfinancialdata.com

 

Run a deficit that is less than the growth in nominal GDP so even if you continue to run a deficit, the debt/GDP ratio shrinks. The government may have to run a surplus before interest payments in order to achieve this. The lower the interest rate, the easier this is to do. This is largely what happened in the United States between 1945 and 1973. This imposes a lower cost on taxpayers in the short-run, but raises the total cost of debt over time the same either way.
LawsofPhysics's picture

And what did the tax brackets and taxation look like in the U.S. from 1945 to 1973 again?  Don't be such a disingenuous cunt.

rejected's picture

1945 tax over 200, 000 was 94%. Stayed there until 1964 when it dropped to about 75%..............Answered your question.

 

$200,000 1945 dollars == 2.6 million 2014 dollars.(Yep,,, no inflation tax there!)

Federal Tax approx $1.3 million equals somewhere in the neighborhood of 50%.  If you live in California add another 3- 400,000.

 

Actually I do try to look at the facts when in fact they appear to be facts :))

And the fact is the government did use the GDP - Deficit scheme to pay most of the war debt.

 

Speaking of taxes, there is a difference between marginal tax rates and Effective tax rates. Example

1979 Marginal Tax Rate was 70% the Effective Tax Rate was 22%

2005 Marginal Tax Rate was 35% the Effective Tax Rate was 20%.

Like everything government the gobbley gook and bullshit is so pervasive it's impossible to make any definite comparisons.

christiangustafson's picture

Send in Craft International. Send the Stern Gang. Send in Jamie Farr!

Hurry! I only pray it is not too late.

RealityCheque's picture

Are they soft and gentle when wiping one's arsehole though? Enquiring minds want to know.

Oldwood's picture

Fifty years ago we had the phone book and the JC Pennys catalogs as backup to any TP emergency. Its going to be tough to wipe my ass with my tablet. Selfie???

silverer's picture

Yuk.  Bud still skip the poison ivy leaves.

SheepDog-One's picture

'Suitcases to carry cash'? Better forget that nonsense and buy a good rifle, that's about the only thing that can actually do you any good.

Z_End's picture

Former NATO Intel Officer Blames US for Ukraine Crisis

A former NATO intelligence analyst has said that the crisis in Ukraine stems from as far back as 30 years when the United States "deliberately sabotaged" relations between Europe and Russia.

 

http://sputniknews.com/world/20150225/1018728748.html

wmbz's picture

How can this be? I thought we lived in the modern age? This time it's different. Good thing that this can not happen here in the good 'ol USSA!

Capt. Jack's got this right?

Coming soon to a theater near you!

exomike's picture

Hey, how 'bout them Nazis!? No, not those Nazis! I mean the Nazis from the U.S.

Outlaw_Rambler's picture

Tampons and toilet paper are about to become a solid and valuable trading currency in Ukraine

WTFUD's picture

With the expectant ' river of Right Sector blood ' forecast for Kiev, Big Fluffy Towels are the new luxury item.
Soak it up MotherFuckers!