Belarus Hyperinflation Update: Food Runs Out As Friendly Foreigners Take Advantage Of The "Favorable" Exchange Rate Arb

Tyler Durden's picture

Yesterday we had the first case study of what happens in a hyperinflation, when we noted that the local central bank had just hiked interest rates from 22% to 27%. Net result for the economy? Zero. Today is case study #2 where we learn what happens to an imploding economy which happens to be surrounded by friendly neighbors who just happen to find themselves in a massive arbitrage courtesy of a currency that is losing multiples of its value on a monthly if not daily basis. Per Bloomberg: "Belarus’s supermarkets are running out of meat as Russians take advantage of a currency crisis that a devaluation and the world’s highest borrowing costs have failed to stem. “All meat has gone to Russia,” Alexander Andreyevich, an 82-year-old former tractor-plant worker, said Aug. 25 in Minsk, the capital. “My relatives near the Russian border called me a few days ago and said the shops are empty."..."Private stall owners simply go and buy meat from state- owned vendors and sell it a couple of steps away for a hefty profit,"Deputy Agriculture and Food Minister Vasily Pavlovsky told reporters in Minsk Aug. 24. The government banned individuals in June from taking basic consumer goods such as home appliances, food and gasoline out of the country. Russians, buoyed by the removal of border checkpoints July 1 as part of a customs union, have circumvented the restrictions." Funny- if the locals had preserved their purchasing power by holding their money in gold, they would not find themselves in a position where those who still have a stable fiat exchange rate (for the time being) can literally steal products from under their noses for a paltry sum as sellers scramble to converts products into some currency before it is devalued even more tomorrow.

More from Bloomberg:

The crisis has sparked protests as Belarusians vent their anger at President Alexander Lukashenko, dubbed Europe’s last dictator by the administration of former U.S. President George W. Bush. While the authorities have sought to control food costs to quell public discontent, buyers from neighboring Russia have pushed meat prices higher.

 

Belarus will allow the ruble to float from mid-September and will remove restrictions on depositors seeking to exchange local currency for dollars and euros, Lukashenko said yesterday.

 

“The Belarusian ruble’s exchange rate will be determined by supply and demand, as with any other commodity,” he told the government and central bank, according to the Belta news service. “We will not support the exchange rate artificially.”

What happens then is simple: revolution, as the currency will collapse into a hyperinflationary vortex. We fully expect the exchange rate a year from today to be several million percent higher, as the ghost of Weimar and all other failed Keynesian experiments moves in to haunt this former Soviet satellite country.

It gets worse:

As well as meat, services are also attracting Russians, who make up one in two visitors at the ‘Lode’ spa 160 kilometers (100 miles) north of Minsk and prefer luxury suites, a representative of the resort, Natalya Varvantseva, said Aug. 26 by phone.

 

Many of them pay with Russian rubles or dollars, the scarcity of which has pushed black-market exchange rates far below the central bank’s official 5,061 rubles per dollar.

 

The unofficial rate slipped to 9,900 by Aug. 25, according to a survey of companies offering foreign currency conducted by Infobank.by, a financial-news website. Prokopovi.ch, a service that matches buyers and sellers of foreign currency online, quoted 8,842 rubles per dollar yesterday.

And again, the case for gold:

The only legal way for citizens to obtain foreign currency is by waiting at licensed exchange booths, where queues often exceed a hundred and the names of people who have left their details on previous visits are called daily.

If only these people had known in advance what happens when a deranged Keynesian madman is in charge of it all... Oh well, they will learn now.

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nope-1004's picture

Predatory.

Coming to another country near you.

 

Max Hunter's picture

Bennie can stop that in its tracks from happening here... in ummm... 20 minutes... maybe 22

SheepDog-One's picture

220, 221....whatever it takes.

redcorona's picture

President Alexander Lukashenko, dubbed Europe’s last dictator by the administration of former U.S. President George W. Bush.

So he's a good guy then.  Was this a plutocratic take down? 

russki standart's picture

Read and weep. This will, to some extent exactly what happens in the US when the dollars depreciates dramatically against other currencies and commodities.  Foreigners will out bid us on many of the essentials. 

kridkrid's picture

As for other currencies, it's a race to the bottom, brother.  As for commodities... everyone has the same opportunity to convert their paper money into something of value.  Every man for himself.

tmosley's picture

Depends on what is the first to fall, or if they will all fall at once.  These are unprecedented times.

Of course, the owners of gold and silver will keep a strong bid on things as well.

spiral_eyes's picture

stop inflation in 15 minutes, bitchez

Oh regional Indian's picture

Krid, so the game really becomes where said commodities are grown/found and who controls the supply routes in the face of $200 + oil (easily in 3 months when the food crisis will really hit). America's current concentration is oil supply chain, but Agenda 21 looks like they will have an iron-lock on the food supply chain in the continental US anyways. And it is happening fast, in lock-step with an ever increasing population on SNAP. None of this is of course co-incidental.

It's going to get really interesting really fast, because the one thing no government can control for too long  without violence, is a hungry population.

Next WAR will be triggered over food/water, not oil.

V

http://aadivaahan.wordpress.com/2011/08/30/humor-me/

 

Todd Horlbeck's picture

I don't buy the case for gold in hyper-inflation, if you actually want to continue live a country that is going through it.  If I had limited food, I wouldn't trade it for gold if I had plans to stay put.  Society completely disintergates and breaks down to a barter society for nessisities.

In other words, if you had limited food would you really trade it for gold and see your family starve?

However, if I had plans to leave, I'd convert everything to gold which would store value until I arrived at my destination.

 

MFL8240's picture

What do you see as the answer to the confetti game and inevitable hyperinflation.  

Jason_1sandal's picture

I see the soundness of having gold in this situation. You could sell your gold for, what is it, Russian rubles, and afford to buy food cheap. You never know the Peso may be worth more than the dollar soon....

Potemkin Nation's picture

Gold isn't for use during the hyperinflation.  It's for after.

Jason_1sandal's picture

I agree also, I have had to sell a small portion of my PM's to catch up on some long over due bills. I'm not saying to sell all of it, but in a pinch it has been a godsend. I won't have to worry about food as I have stocked up quite enough. I won't be doing anything with my PM's now except to hold until we reset or whatever happens.

Praetorian Guard's picture

"Reset"??????? Thats not the same rosey picture as DoD speculates...

Praetorian Guard's picture

If the shit fails globally, copper and lead will do you more good than gold.

AnAnonymous's picture

I don't buy the case for gold in hyper-inflation, if you actually want to continue live a country that is going through it.

///////////////////////////////////////////////////////////////////////////

But no, that is right. Gold would protect nothing. People with the fiat money would transfer the gold to their own pockets.

What is shown here is the effects of Smithian economics. People with gold would only transfer their gold to money fiat users.

But hey, that is a run for profit blog. And propaganda is better to build profits than facts. It is all the story of marketing. Propaganda aiming at collecting a profit.

So yep...

Mike2756's picture

That's ok, it'll boost exports.

achmachat's picture

does this mean the US meat will end up in Canada and Mexico?

NotApplicable's picture

I was going to comment that I'm glad I don't live anywhere near the border, but then I remembered the NAFTA superhighway complete with a Mexican port in Kansas City. Between all of the rail, air, freeway and river transportation avenues available (KC is the most escapable major city in the US), that place could become the black hole that swallows the output of all of the flyover states.

Interestingly enough, KC is also where fedgov hoards all of its purchased dairy products (cheese!). Will they be exported too? Or used to bait the FEMA camps?

Abiotic Oil's picture

Are you talking about the NAFTA SuperHighway that Bilderberg puppet Rick Perry was a big proponent of?  Before he was forcibly vaccinating young girls and and vetoing legislation to shut the TSA down?

russki standart's picture

No, I think you are confusing Rick Perry with governor Rick Perry, notorious switch hitter and sexual pervert.

Abiotic Oil's picture

Oh right...  And I need to be careful not to confuse Governor Rick Perry and "candidate" Rick Perry with pre-Governor Rick Perry who said Hillarycare and forced health insurance were great, just before he was Al Gore's Texas campaign manager.

Oh regional Indian's picture

Brilliant exchange gentlemen. 

<Golf Clap>

V

FEDbuster's picture

That isn't the same Rick Perry who was Al Gore's campaign chairman in Texas, was it?

LFMayor's picture

How's this one chart on the "Baltic dry ass drubbing" index?

SheepDog-One's picture

'Tractor plant worker'....ominous.

Gully Foyle's picture

SheepDog-One

"'Tractor plant worker'....ominous."

I've seen that movie.

Henry Chinaski's picture

"Private stall owners simply go and buy meat from state- owned vendors and sell it a couple of steps away for a hefty profit,"

"Private banks simply go and buy fiat money from the FED and sell it a couple of steps away for a hefty profit."

fixed it

PSEUDOLOGOI's picture

Never let a good crisis go to waste.  Here comes Russia to the "rescue" one way or another...  The world is heating up...

Gully Foyle's picture

Good fucking lord! This is the perfect opportunity for Bono and Geldoff to stage a massive concert.

Quick, quick name a Belorussian band. We need that local flavor.

Fuck me, Gore needs some media coverage...maybe Global warming, scratch that, Climate change can be combined with SAVE THE BELORUSSIANS.

GOT IT! SAVE THE BELORUSSIANS WITH CAP AND TRADE!

Written by Sting [& Sergei Prokofiev!]

In Europe and America there's a growing feeling of hysteria
Conditioned to respond to all the threats
In the rhetorical speeches of the Soviets
Mister Krushchev said, 'We will bury you'
I don't subscribe to this point of view
It'd be such an ignorant thing to do
If the BeloRussians love their children too

How can I save my little boy
From Oppenheimer's deadly toy?
There is no monopoly on common sense
On either side of the political fence
We share the same biology
Regardless of ideology
Believe me when I say to you
I hope the BeloRussians love their children too

There is no historical precedent to put
Words in the mouth of the president
There's no such thing as a winnable war
It's a lie we don't believe anymore
Mister Reagan says 'We will protect you'
I don't subscribe to this point of view
Believe me when I say to you
I hope the BeloRussians love their children too
We share the same biology
Regardless of ideology
What might save us, me and you
Is if the BeloRussians love their children too

 

 

Oh regional Indian's picture

Oppenhiemer's deadly toy. Hmmmmmm!

Awesome Gully.

V

Goldenballs's picture

If the Foreigners have brought all the the food and there is nothing to eat,eat the Foreigners and why let a good crisis go to waste.

disabledvet's picture

How the hell do you buy gold in a communist dictatorship? Anywho i find it hard to believe Venezuala isn't next. Sounds like intervention risk...

Id fight Gandhi's picture

Smuggle it in. Melt it into unassuming objects and paint it.

If the gov. doesnt like it, fuck em. They're fine with everyone starving.

I would assume someone could come in use gold buy tangible goods to export them out and also be "paid" in the fiat currency to make it look legit.

fuu's picture

"We have to use the indefinite article, "a dildo", never … your dildo."

Missiondweller's picture

Same way Vietnam does, on the black market.

becky quick and her beautiful mouth's picture

does this mean i can get a screaming deal on a belarus tractor now?

DosZap's picture

becky @13:39,

Yep, but shipping cost is  a bitch.

Plus you will be arrested for a State Violation of Agenda 21 for attempted USE.All foods henceforth must be Monsanto, or ADM certified 10-15yrs/ All monies ur possession forfeited to STATE agency who are caught ju max penalty for eating food grown elsewhere.

Ju haff vin varrned!!

Strider52's picture

All of your Belarus tractors are now belong to us.

bbq on whitehouse lawn's picture

Do you have a big sail boat? If so, then yes. There is risk involved, like sinking, pirates and such. if you pay in cash, just pray those dollars you bring dont collapse to zero before you get there. Otherwise the deal is off.

 

Debugas's picture

some farmers in neighbouring Lithuania do get EU financing and use it to buy cheap tractor and other machinery for their farms from Belorussia because it is much cheaper than buying from Germany.

baby_BLYTHE's picture

John Maynard Keynes on run-away inflation:

"Lenin is said to have declared that the best way to destroy the Capitalist System was to debauch the currency. By a continuing process of inflation, governments can confiscate, secretly and unobserved, an important part of the wealth of their citizens."
"Lenin was certainly right," John Maynard Keynes continued in his 1919 classic, The Economic Consequences of the Peace.
"There is no subtler, no surer means of overturning the existing basis of society than to debauch the currency. The process engages all the hidden forces of economic law on the side of destruction, and does it in a manner which not one man in a million is able to diagnose."

bbq on whitehouse lawn's picture

Always liked Marx and Lenin.  Because to their ownself they were true.

Wrong, but you dont have to be right to believe.  They held on to their belief to the bitter end.

You can have character and be wrong. its those without character who hold nither moral or ethical nor logical bearings that i dispise.

"To thy'n own self be true."  You can't lie to your heart nor to your god. Only you can fine morality and only you can ignore it.

Humanity is all and nothing. It is all we create for ourselves and nothing we do not. The flower has no morality nor does the spider who hides within.

Only us few in the universe have a sense of betterment. We can be and act better then the flower or spider. We can and do decide to be and act with a moral code.

"Judge not yet the be judged. " I am ready for judgement; are you?

 

AnAnonymous's picture

"Judge not yet the be judged. " I am ready for judgement; are you?

--------------------------------------------------------------------

US citizens collegial answer: "we are ready to be the judge; are you?"