Cash-strapped Belarus allows its currency to float

By YURAS KARMANAU
April 20, 2011, 4:15am

MINSK, Belarus (AP) – Cash-strapped Belarus announced Tuesday that it would allow its beleaguered national currency to float, effectively permitting its devaluation in a bid to ease a spiraling currency crisis.

International financial institutions have been calling for a sharp devaluation of the Belarusian ruble to help the former Soviet republic's foundering economy. The move was the latest blow to authoritarian President Alexander Lukashenko's attempts to show he can still deliver economic stability after 17 years in power.

The currency crisis, an increasingly severe crackdown on the opposition — including the arrest Tuesday of a human rights activist on suspicion of involvement in a subway bombing last week — have spawned a sense of rising panic and disorder in this nation of 10 million, often labeled the last dictatorship in Europe.

Belarus' first post-Soviet leader, Stanislav Shushkevich, told The Associated Press that Lukashenko's political survival now hinges entirely on another Russian loan.

"He will be able to ease social tensions if the Kremlin gives him another loan," Shushkevich said. "Otherwise people will start protesting. What we are seeing now begins to resemble the collapse of the Soviet system."

The government's hard currency reserves plunged 20 percent in the first two months of the year to less than $4 billion, and staples such as vegetable oil and sugar started vanishing from stores as people started to hoard.

Starting next week, banks will be able to buy and sell the Belarusian ruble at a rate determine in open trading, Central Bank deputy chief Nikolay Luzgin said, adding that the government will "take extra steps to balance the situation on the domestic currency market" after next week's trading.

The U.S. dollar stood at 3,074 Belarusian rubles on Tuesday. Stanislav Bogdankevich, former chief of the Belarusian central bank, told The Associated Press that he expects the ruble to drop by one-third after the float.

Importers of medicine and Russian natural gas will be able to buy foreign currency at privileged rates.

Even before the announcement, frightened citizens had been lining up for hours in the past few weeks to exchange their rubles for euros and dollars. Since the free float will initially affect banks, it was unclear how currency rates on the street will be affected.

"My short-term plan is to emigrate to Poland," said Pavel Korchevsky, 37, a businessman. "It's impossible to do business in a country where the president personally determines the dollar rate."

Belarusian authorities also announced sharp budget cuts Tuesday, reducing financing for investment programs by 30 percent and state office construction by 20 percent.

A long-standing social contract that asked Belarusians to give up their political freedoms in exchange for safety and a modest standard of living now appears to be fraying. The April 11 explosion in the capital's busiest subway station during an evening rush hour killed 13 and wounded more than 200 — the first deadly bombing in a nation where the opposition has been largely peaceful and militant groups have been unheard of.

Authorities quickly arrested a man accused of placing the bomb and four suspected accomplices, but haven't said who ordered the attack. Lukashenko responded to the subway blast by ordering prosecutors to interrogate opposition activists.

That made some bloggers speculate that authorities may have carried out the attack in order to distract Belarusians from the country's rapidly worsening economic situation.

Lukashenko responded with characteristic bluntness.

"Only idiots and scoundrels can allege that, only scum can do that," he said, arguing that the economic troubles and the subway attack had been carried out by unspecified forces seeking to subdue the nation.

Minsk, a city of drab suburban apartment blocks and broad central avenues lined with monumental Stalin-era buildings, looks tense, with police and military patrols deployed on the streets and the subway.

"Belarus has always been known for its stability and order, but the explosion has filled me with fear and anguish," 46-year-old Dr. Zhanna Pankratova said as she walked past the explosion site. "Whom can we trust now?"

Opposition leader Anatoly Lebedko expected the government to intensify its crackdown on dissent.

"If they announce a decision tomorrow to brand all members of the opposition with a hot iron, I will not be surprised," said Lebedko, who was released from a KGB prison earlier this month after 3 1/2 months in custody.

As if on cue, a top human rights advocacy group said Tuesday that one of its members had been arrested on suspicion of involvement.

The Belarus Helsinki Committee said that police were holding Pavel Levinov. Police could not be reached to confirm the arrest, but the head of the committee, Oleg Gulak, said he had visited the police station in the capital, Minsk, where Levinov was being held.

Another activist who was detained along with Levinov but later released said police broke into Levinov's apartment to detain him and several others.

The arrest adds to fears that Lukashenko is using the bombing, which killed 13 and wounded more than 200, as a pretext to pressure political opponents.

The government already has issued reprimands to two main independent newspapers and the prosecutor-general has threatened to "bring order" to the Internet, the last haven of uncensored speech in Belarus.

For most of his tenure, Lukashenko has relied on cheap energy resources from Belarus' main sponsor and ally, Russia, to maintain a quasi-Soviet economy complete with a social safety net that helped boost his popularity among the working class and the elderly.

But the Russian subsidies have dwindled recently as Moscow has pushed for control over Belarus' most prized economic assets, such as oil refineries and chemical plants, in exchange for more loans.

Even as state coffers were drying up, Lukashenko raised public sector salaries by 30 percent ahead of December's presidential vote to secure his re-election. The vote was harshly criticized by international monitors.

"Belarus was living beyond its means, and it was the president who made it do that," said Leonid Zayiko, head of the independent Strategia think-tank. "All the problems emerged because he wanted to remain president and raised salaries."

*Who says that the world economy is not in trouble?

Gold-Silver Ratio at Two-Month High on Risk Aversion (Update1)

May 05, 2010, 12:05 AM EDT
By Glenys Sim

May 5 (Bloomberg) -- The ratio of gold to silver jumped to a two-month high on concern the Greek debt crisis may spread to other European countries, undermining the global recovery.

An ounce of gold bought 66.19 ounces of silver by 11:36 a.m. in Singapore, the highest amount since March 3, according to Bloomberg calculations. Silver outperformed gold this year through May 3, gaining 11 percent compared with the yellow metal’s 7.7 percent advance, on optimism demand for industrial metals will improve as the global economy rebounds.

Gold tends to rise when currencies and stock markets decline as investors seek to preserve their wealth. Gold for immediate delivery is now up 6.5 percent, while silver has pared gains this year to 4.6 percent.

“All metals that have industrial uses should fall more than gold when people are worried about the economy,” Wallace Ng, the executive director of commodity derivatives at Fortis Nederland NV in Hong Kong. Silver is used in electronics and photography.

European governments are hoping the European Union and International Monetary Fund’s 110 billion-euro ($143 billion) bailout for Greece will stop a crisis that Nobel Prize-winning economist Joseph Stiglitz says threatens the currency’s survival. Investors are speculating that Spain and Portugal may also eventually need assistance. The euro fell below $1.30 yesterday for the first time since April 2009.

Ratio to Rise

In China, a survey showed Chinese manufacturing expanded at the slowest pace in six months in April, a sign that the government’s efforts to prevent the economy overheating may be taking effect. Two days earlier, the People’s Bank of China said it will raise bank reserve requirements for the third time this year as part of measures to rein in lending.

“The ratio will continue to go up as long as uncertainties exist in the market and people buy gold and sell everything else,” said Yang Zhenqiang, an analyst at First Futures Brokerage Co. “We’ll see some corrections along the way but I think $1,200 is a reasonable near-term target for gold.”

Gold dropped for a second day, losing 0.3 percent to $1,167.72 an ounce, while silver declined 1.1 percent to $17.6625 an ounce, extending yesterday’s 5 percent slump.

*The crisis in Greece is a classic example of currency failure.

China To Purchase Half of IMF's Gold

By www.english.pravda.ru/

China has confirmed the intention to purchase 191.3 tons of gold from the International Monetary Fund at an open auction, Finmarket news agency said.

World central banks started to increase their gold reserves after prices on gold began to climb in 2001. The IMF sells gold within the scope of a program to diversify sources of income and achieve an increase in lending.

The IMF announced an intention to sell 403.3 tons of gold in accordance with the adequate decision made by the board of directors of the fund in September of 2009. India, Mauritius and Sri Lanka purchased about 212 tons of the amount at the end of 2009. India purchased most – 200 tons.

China’s interest in international trade is connected with the development of the nation’s economy, as well as with the growing consumer demand in the country.

“Chinese officials have confirmed previous announcements from IMF experts and said that the purchasing of 191 tons of gold would not exert negative influence on the world market. China is interested in the development of the domestic consumer market,” the agency reports.

Most of Chinese citizens believe that investing in gold jewelry is a good way to avoid inflation, Rough & Polished agency said.

The IMF has received the profit of $7.2 billion from gold sales. A part of the funds is to be used for crediting poor countries.

**If a huge country like China is slowly buying metals, shouldn't you be doing the same?

a Letter from an OFW friend

Recently, I received greetings from my inbox folder in Facebook from a friend working in Texas. Since we have not seen each other for a long time and that I knew that she was a victim of a very clever employer who made her travel long distances to see patients (she is a home health Occupational Therapist) and she filed suit to be able to get out of the contract.

Offering a little unsollicited advice, I inquired if she was aware of where the US economy is headed and followed to tell her that she should have a PLAN B AND PLAN C if things do not go well and Medicare will have to suffer a budget cut.

For most of you who do not know this, Pres. Obama is trying to reduce the budget for health care but is being met with widespread opposition. Others may have a tendency to be too optimistic about the US Economy, but I would not bet too much on this since their problems are just beginning. Their next problems will be meeting the retirement needs of SSS Pensioners who are 75 Million in population (Baby Boomers) who will be retiring in the next few years. Their programs are just too insolvent to survive, not to mention the cost of war in Iraq and the threats coming from Bin Laden on the Israeli issue.

It is a sorry audio flick to hear these things but this is reality and we need to prepare for these sort of occurrences. This affects us Filipinos since one way or another many of us have relatives, friends and family who have families in the US and who think that their fairy tale is still going to continue in the next decade.

My friend on the other hand, surprised me and told me she was studying the subject of investing in precious metals. Smart Kid! She told me she was studying many books including Mike Maloney's "Guide to Investing in Gold and Silver" and also a lot of Robert Kiyosaki's books and has been looking to buy actual metals to hedge for the future. Now that makes sense. Motivating her further more, I told her to stay away from ETFs and Metal Futures which are worthless papers.

If you are reading this and know OFWs that you care about, then you would be doing them a favor by helping them understand the dynamics of the economic powers.

Roubini: Risk of double-dip recession increasing

Nouriel Roubini, the New York University professor who predicted the financial crisis, said the chance of a double-dip recession is increasing because of risks related to ending global monetary and fiscal stimulus.

The global economy will bottom out in the second half of 2009, Roubini wrote in a Financial Times commentary. The recession in the United States, the UK, and some European countries will not be “formally over” before the end of the year, while the recovery has started in nations such as China, France, Germany, Australia and Japan, he said.

Governments around the world have pledged about $2 trillion in stimulus measures amid the worst worldwide recession since the Great Depression. Federal Reserve Chairman Ben Bernanke and other global policy makers have cautioned that the recovery is likely to be muted, indicating they would not soon remove all the stimulus injected into the financial system.

“There are risks associated with exit strategies from the massive monetary and fiscal easing,” Roubini wrote. “Policy makers are damned if they do and damned if they don’t.”

Government and central bank officials may undermine the recovery and tip their economies back into “stagdeflation” if they raise taxes, cut spending and mop up excess liquidity in their systems to reduce fiscal deficits, Roubini says. He defines “stagdeflation” as recession and deflation.

Those who maintain large budget deficits will be punished by bond market vigilantes, as inflationary expectations and yields on long-term government bonds rise and borrowing costs climb sharply, he wrote. That will in turn lead to stagflation, Roubini said.

European Central Bank (ECB) officials led by President Jean-Claude Trichet are suggesting they won’t rush to reverse their emergency stimulus amid mounting evidence of an economic recovery. The ECB has cut its benchmark interest rate to a record 1 percent and is buying covered bonds and flooding banks with money.

“We see some signs confirming that the real economy is starting to get out of the period of freefall,” Trichet said at the Fed’s annual symposium in Jackson Hole, Wyoming, on Aug. 22. This “does not mean at all that we do not have a very bumpy road ahead of us.”

When needed, the ECB will implement a “credible exit strategy” from its crisis policies, Trichet said.

The United States must address the massive amounts of “monetary medicine” that have been pumped into the financial system and now pose threats to the economy and the dollar, billionaire Warren Buffett said last week.

Roubini currently expects a U-shaped recovery, where growth will be “anemic and below trend for at least a couple of years,” he said. A full global recovery from the current recession may take two years or more, Nobel laureate Paul Krugman said earlier this month.

Rising unemployment, a global financial system that is still “severely damaged” and weak corporate profitability are among reasons why any recovery won’t be V-shaped, Roubini said.

“Strains persist in many financial markets across the globe,” Bernanke said in an August 21 speech in Jackson Hole. “The economic recovery is likely to be relatively slow at first, with unemployment declining only gradually from high levels.”

Energy and food prices are also rising faster than warranted by economic fundamentals, which may also increase the risk of a double-dip recession, Roubini wrote, adding that they could be driven by speculative trades.

“Last year, oil at $145 a barrel was a tipping point for the global economy as it created negative terms of trade and a disposable income shock for oil-importing economies,” he said. “The global economy could not withstand another contractionary shock if similar speculation drives oil rapidly toward $100 a barrel.” (Bloomberg)

*Credible economist speaks of coming eminent disaster.

Many Predict US Financial Collapse in September

By: Charles

Let us contemplate the day in the near future when the consequences of financial chicanery finally outpace the ability of the governments, central banks and big media to cover up and obfuscate the truth. Many respected voices have now gone on record that September 30 or thereabouts will be that day.

Bob Chapman [Internationalforecaster.com] revealed that the US State Dept has advised embassies worldwide to stock up on a year's worth of the local currency in anticipation of collapse of the US dollar. Look for a temporary banking shutdown timed for around September 2009. As under Roosevelt, some banks won't reopen. 96% of bank reserves are currently held with the Federal Reserve who tells the banks not to loan the money, but rather to save it for further banking acquisition and consolidation. Chapman foresees a bank holiday lasting 4-5 days. Chapman thinks this first bank holiday presages a much more significant bank holiday months to years later which will involve simultaneous devaluations of multiple currencies as well as other significant changes in the banking system.

Harry Shultz [as quoted in marketwatch.com] says "Some U.S. embassies worldwide are being advised to purchase massive amounts of local currencies; enough to last them a year. Some embassies are being sent enormous amounts of U.S. cash to purchase currencies from those governments, quietly. But not pound sterling. Inside the State Dept., there is a sense of sadness and foreboding that 'something' is about to happen ... within 180 days, but could be 120-150 days."

Benjamin Fulford [http://benjaminfulford.typepad.com/benjaminfulford/] states that for almost a century the US Treasury Dept has been issuing specialized debt instruments to countries with which the US has had a trade surplus. These complex debt instruments are tailored by complex treaties. Unfortunately, the recent US Treasury funding needs exceed the willingness of these creditor nations to extend additional credit. Fulford writes, "The problem is that after nearly a century of issuing these debt instruments, the chickens are coming home to roost. President Obama tried at the recent G8 plus 5 meeting in Italy to borrow more money than George Bush junior did in 8 years. He was told a resounding no. The result should be total economic chaos in the U.S. by September 30th . "

Jim Willie [goldenjackass.com] writes of an Asian led initiative ending dollar hegemony beginning this weekend. Willie suspects that the Fed/Treasury is covertly loaning foreign central banks the money with which the central banks are now using to buy US debt. Increasingly, US debt is being bought by foreign central banks taking up the slack of investors abandoning US Treasury debt. Willie confirms Chapman's comments and says he solicited and received "multiple confirmations." He adds, "CHAOS WILL PREVAIL WITHIN SEVERAL MONTHS, PERHAPS A YEAR AT MOST{his emphasis}."

Jim Sinclair [jsmineset.com] has recently visited China meeting with its leaders. He states that China is increasingly more willing to take on the United States in its apparent maneuvers to inflate its way out of its debt crisis. In early July Sinclair started a 120 day countdown till breakdown of the US dollar ends market manipulation and all those sour economic chickens come home to roost.

OUT OF TRICKS

Seemingly the Federal Reserve/US Treasury have exhausted their bag of tricks. The Fed is fighting rising interest rates, a difficult task given the hyperinflationary debt financing it is now doing. Once rising pressure on interest rates become too much for the Fed to control, there will probably be several sudden economic and financial surprises cascading with currently known dilemmas: crashing dollar; increasing home mortgage defaults; commercial mortgage defaults reaching critical mass; falling bond and stock markets extending insolvency of pension funds; defaults on debt by state and local governments. And don't forget derivatives and further exposure of corruption and criminality on Wall Street. Bernie Madoff may soon have lots of company.

Unable to produce any more financial wizardry, the cynical federal government is arrayed in full battle dress uniform: 1] Mass forced swine flu vaccinations scheduled this fall performed under the specter of martial law; 2] Rumblings of extending the wars in Asia into Iran and Pakistan; 3] Rekindling the Korean conflict may also be in the cards. Of course, don't forget that both Iran and North Korea are client states of the British World Order. All the recent saber rattling involving Iran and North Korea is wholly orchestrated. We need the distractions from the economic crisis, so our clients Ahmadinejad and Kim provide us with the necessary theater. So what will come first, further banner headlines of dollar collapse and market crashes or the distracting theater of more war or 911 type events?

What will this fall really bring? It is not too far away so we shall soon know. Unfortunately, it may make last fall look pretty tame. When the government answers economic distress by preparing for the worst, then the worst may very well be what happens.

* It is scary but we owe to be vigilant whether or not the time frame is right or wrong. Even if we are in the Philippines, when the US sneezes, the rest of the world catches a cold.