Who is “propping up” the Ukrainian Hryvnia (UAH) – Part 2
The Federal Reserve via “currency swaps”?
by John-Henry Hill, M.D.
Thursday, March 11, 2015
When I first wrote this essay, the USD-UAH exchange rates were reaching “peaks” of 13.5 UAH per USD, up from the typical rate of 7.5 to 7.9 of the last 4 years. For most Ukrainians now, those probably seem like the “good ole’ days”!
Just WHO is propping up the UKRAINIAN CURRENCY? (It is called the Hryvnia; pronounced “greev-na” and is also referred to as UAH). (For the sake of consistency I have used FX rates from http://www.oanda.com/currency/converter/ which tends to value the Hryvnia more highly than the other five web sites I use for exchange rates. In addition, currency exchange booths, which tend to offer MORE Hryvnia per USD than the “official” FX rates found on web sites, are located all over Odessa, from supermarkets to shopping malls to large stores – NOT simply in banks, which tend to give you the worst exchange rates.) Further, located near “markets” (small semi-outdoors shops in one location which over time increased greatly in number, often to 200 or more shops in one location) are unofficial “on-the-street” currency exchangers usually offering between 2 and 2.5 UAH above even the best official currency exchange outlet.
Since the beginning of February 2015, the Hryvnia (UAH) had been losing value extremely rapidly and by mid-February people were beginning to panic. In Odessa (where I live) supermarkets and small food shops were mobbed, with people buying items in bulk. (For example, while a supermarket may sell flour and sugar in 5 Kg bags (about 10.4 pounds), many of the smaller food shops sell flour and sugar in 25 Kg sacks (about 55 pounds). Another noticeable change was that Odessans tend to buy food for that day or the next day only, so food shopping is usually an everyday event. Consequently, supermarkets have only the plastic or metal hand-carry baskets for shoppers. The large metal shopping carts on wheels are unheard of here – so many shoppers were grabbing multiple shopping baskets, filling them up with as much as they could carry. The one “brake” on this buying spree was the “currency controls” placed on banks by the Kyiv regime: people are allowed to withdraw a maximum amount of money per day from their accounts. However, the weak point in the “currency controls” is that the do not appear to have placed limits on debit cards. And most Ukrainians use debit cards (MasterCard or Visa) to obtain cash, since Ukraine is still primarily a cash-based economy. Indeed, even in upscale shopping malls, at the malls’ entrances there are always a dozen or more ATMs (called “Bank-O-Mats”) from which people use their debit cards to obtain the cash to make their actual purchases (since most stores will not accept debit or credit cards).
On Feb 20, 2015 the official exchange rate reached 30.64 UAH per USD (as listed on various web sites), but even official currency exchanges were offering over 33.0 UAH per USD. And the unofficial “on-the-street” currency exchangers were offering 36.5 UAH per USD (according to my records of my exchange that day). The UAH was “meltdown”! Then in ONE DAY the UAH the came back to life, increasing in value from the official 30.4 UAH per USD to 26.9 UAH per USD. Within a week it was in the 22.0 UAH per USD (23.5 “on-the-street”) where it remains today, March 11, 2014.
The BIG QUESTION is HOW did Kyiv stop the crash of the UAH? The only possible method was a large injection of U.S. dollars into the Kyiv treasury. But from WHOM?
Several weeks ago the Ukrainian Finance Minister publicly announced that Kyiv is “bankrupt” (his words). The Kyiv government has so few dollars that it has been paying Russia for natural gas (with U.S. dollars) for several days’ worth of gas at a time: the previous payment was for 3 days; the last payment was for an additional 5 days. (Kyiv still owes Russia $4.5 billion for past purchases, so Russia now requires payments in advance of delivery.)
The Ukraine economy is in ruins, since most of the mining and industry (which was already outdated and decades behind in terms of automation) is in eastern Ukraine within the war zone. The farmers in western Ukraine have lost not only their Russian markets and are in dire straits; and they may soon lose their land, as the Kyiv regime has enacted a new law to allow foreign companies to purchase farm land. (Indeed, farmers from western Ukraine – the base of the Kyiv regime’s support – staged a massive protest outside the Kyiv Parliament building this past weekend.) Kyiv has also blockaded the two roads and rail lines into Crimea, cutting off the massive amounts of goods that typically flowed from Ukraine into Crimea. (On my last trip to Crimea – where buses were allowed to cross the border for one day – I saw literally thousands of large commercial trucks lining the side of the highway (stretching for at least 10 miles on both sides of the highway) waiting for permission to enter Ukraine. The rail lines are permanently blocked by the Kyiv regime. But WHO loses in this situation. Crimea has many ports and can easily import items from Russia and many other nations. It is Ukraine that it shooting itself in the foot economically.
So just WHERE did Kyiv get the massive injection of U.S. dollars to stave off the collapse of the UAH, when it has no substantial income coming into the treasury. The only possible answer is the FEDERAL RESERVE, either directly or indirectly. Ex-Fed Chairman, in testimony of several years ago before Ron Paul’s committee, explained how this process works. Bernanke explained that when a country needs U.S. dollars, the Federal Reserve engages in “CURRENCY SWAPS” with other nations’ central banks. In fact, he admitted that trillions of dollars of “currency swaps” had taken place with a variety of European and other nations, but refused to give the amounts or to name the recipients. When asked why these transactions had NOT been reported earlier, Bernanke explained that since the currency swaps were “exchanges of equal value”, these currency swaps were kept “off-the-books”. Now, that argument might hold true if the REAL value of those currencies was equal to the U.S. dollars exchanged. But no one outside the Federal Reserve possesses that information. Further, even the strongest currencies change in relative value on a minute-to-minute basis, so the question remains as to whether these\bailed out foreign central banks paid the true market value for those U.S. dollars.
In the case of the Kyiv regime, the UAH is essentially worthless paper, being kept afloat by the Federal Reserve for political purposes. Should the UAH collapse, Poroshenko,Yatsenyuk and the rest of the post-coup Kyiv regime would most certainly be deposed in a true grass-roots popular uprising. And that is something which the U.S. State Department and CIA cannot allow to happen, given its current anti-Russian policies.
Who is “propping up” the Ukrainian Hryvnia (UAH) – PART I
The Federal Reserve via “currency swaps”?
by John-Henry Hill, M.D.
Tuesday, September 9, 2014
Just WHO is propping up the UKRAINIAN CURRENCY? (It is called the Hryvnia; pronounced “greev-na” and is also referred to as UAH). (For the sake of consistency I have used FX rates from http://www.oanda.com/currency/converter/ which tends to value the Hryvnia more highly than the other five web sites I use for exchange rates. In addition, currency exchange booths, which tend to offer MORE Hryvnia per USD than the “official” FX rates found on web sites. are located all over Odessa, from supermarkets to shopping malls to large stores – NOT simply in banks, which tend to give you the worst exchange rates.)
Back in November 2013 the exchange rate (at the regular exchanges located all over Odessa) was about 1 USD = 7.9 UAH. Since the February 22, 2014 Kiev coup, its value has been steadily decreasing. Several FX web sites state the UAH fell from 1 USD = 11.4170 UAH on July 20, 2014 to 1 USD = 13.5461 UAH on August 27 2014. (At many any Odessa currency exchanges. located in many stores and malls throughout the city, on August 27, 20014 had exchange rates of 1 USD = 13.9500 USD.)
Then suddenly the fall of the Hryvnia STOPPED, as if by “magic”.
Most notable was the rise in value of the UAH from August 31, 2014 to September 1, 2014 – over this 2-day period there as a nearly vertical line in Fx curve as the UAH rose in value from 1 USD = 13.3020 UAH on August 31, 2014 to 1 USD = 12.8413 on September 1, 2014.
1.) The increase in value of the UAH from 13.5461 (8/27/2014) to 12.8413 (9/1/2014- present) represents a 5.2% increase in value of UAH per USD over a 4-day period.
2.) The increase in value of the UAH from 13.3020 (8/31/2014) to 12.8413 (9/1/2014- present) represents a 4.05% increase in value of UAH per USD over a 2-day period.
3.) Finally, there has been NO CHANGE in the USD to UAH exchange rate since September 1, 2014 to the current day, September 9, 2014. The FX curve is a FLAT HORIONTAL line at 1 USD = 12.8413 UAH. This is unheard of in the foreign exchange (FX) market, even when someone is attempting to manipulate it.
My question is: Given the near-total financial collapse of the Ukraine economy, the war in eastern Ukraine, the fact that the Kiev government has been buying up UAH with the few USDs it has left, and that the Kiev government has imposed on BANKS “currency exchange” limits (from UAH to USD) and “withdrawal limits” on USD-based bank accounts, just HOW IN HELL in the UAH increasing in value?
Is the Federal Reserve (through some third party) once again engaging in “currency swaps”, buying up UAH with US dollars? The Federal Reserve engaged in such “currency swaps” totaling hundreds of trillions of dollars from 2008 through the present, both with many foreign nations, central banks and private companies. And as former Federal Reserve Chairman Bernard Bernanke stated in testimony before Congress, these “currency swaps” are OFF-THE-BOOKS, since supposedly currencies equal in value are being exchanged.
Just curious if anyone with more knowledge about this than I has investigated this phenomenon.
John-Henry Hill, M.D.
Reply to MKD:
You asked, “Why take these small areas when you can take the whole country?”
I am an AMERICAN who has lived primarily in Ukraine since 2009.
Putin and Russia do NOT want to take over Ukraine simply because Ukraine is an economic “basket case” and offers Russia NOTHING (oil, natural gas, coal, etc.) that it already does not possess in great abundance. Ukraine would be a HUGE economic drain on Russia.
Ukraine currently owes Gazprom $5.4 billion USD for past deliveries of natural gas. It will owe the IMF over $17 billion USD, plus interest. And God only knows the amount of Ukraine’s outstanding sovereign debt! $100 billion? $500 billion? $2 trillion? Would YOU buy some land without first knowing if there were any LIENS on it and for how much money?
The problem is that the U.S. and western Europe do NOT have that kind of cash lying around. Even with all the money-printing by the Federal Reserve and ECB, they are barely keeping the Ukrainian Hryvnia (pronounced “greev-na” and is also referred to as UAH) alive – probably the Federal Reserve (through some third party) once again engaging in “currency swaps”, buying up UAH with US dollars.
Ukraine Prime Minister Arseniy Yatsenyuk (“Yats”) and President Petrov Poroshenko (the “Chocolate King”) desperately NEED a war between NATO and Russia, in order to obtain military and financial aid from the West. Will they get what they want?
If they do, then we can all wave our national flags and watch as the world is INCINERATED.