Monday, April 7, 2008

"Help, I've Fallen and I Can't Get Up!"

No, I'm not talking about the old lady in that commercial from the early '90s (remember that, guys??). Unfortunately, I'm talking about the US dollar.

It has been falling....

and falling...

and falling...

(you get the picture)

since we moved to Moscow.

It used to be pretty easy to calculate the difference between the two currencies. In July of 2004, there were 30 rubles to every dollar. $1 equaled 30 rubles. $10 equaled 300 rubles. $100 equaled 3,000 rubles. Now, instead of getting 3,000 rubles for my $100, I get 2,355! $10 equals 235 rubles. $1 equals 23.5 rubles.

So when I now exchange $100, I'm getting 645 rubles less! 645 rubles equaled $21.50 when we moved here in 2004... Now that the ruble has grown stronger as the dollar falls, 645 rubles are actually worth $27.39--$27.39 that we're not getting out of the ATM!! That's a LOT of money we've lost, are losing, and will continue to lose!

The 35 ruble container of juice used to cost us $1.17; now it would now cost us $1.50. THAT ADDS UP! At the same time, prices in rubles have also risen... so that juice container actually now costs us $1.91!

Mind you, I'm not crying poverty. Most expatriates working for US companies in Moscow have some kind of "Cost of Living Allowance" as part of their salary packages that takes into consideration the higher expenses here. Still... a higher cost of living and the falling dollar are apples and oranges. Related, but not the same. If on January 1st the ruble is at 28 rubles to 1 dollar, but by September it has fallen to 20 rubles per dollar, that's 7 rubles per dollar that Joe Expat has lost in income.

So... Why is the dollar falling so much? I've heard many explanations:
  • One key reason is that the Federal Reserve has been printing more money and expanding the money supply, which dilutes the value of existing dollars.
  • A trade imbalance between the USA and other countries. The USA imports many more products than it exports, and those countries must be paid for their goods in their currencies.
  • The cut in US interest rates.
  • Freefall of US housing market.
  • The US current account deficit stands at more than 6% of gross domestic product. To put that into perspective, most economists believe that 4% represents the danger point for an economy. (MoneyWeek)
  • The dollar is considered weak in comparison to other currencies--many of which are rising as their individual countries' economies prosper.
  • Others will throw in comments about the war in Iraq--but I haven't an explanation as to how that actually impacts the dollar.
Hmph. It's all rather depressing.


Rachael said...

I'm completely lost on how the powers that be decide the value of the dollar. I do know that when we were there just a year ago we were getting about 25-26 rubles/dollar. I hope it swings the other way before we come back to visit (some day).

garnet said...

We're hit with this as well. We got to watch it creep up a bit again during the political troubles early this year and then were stunned at how quickly it plunged again -- to even further lows.

I don't think that we're helped much by any cost-of-living allowance.

On the other hand, our neighbors who are moving back to the U.S. in June and have to sell their car here are glad to have such a low exchange rate.

Natalie said...

don't depress me!

Annie said...

I'm daydreaming, daydreaming about working in Russia....but they a) are not really expecting parents with 5 children! and the pay is generally intended for a carefree single person and b) the cost of living is scary.

I thought Putin might enjoy having five Russians "back" so to speak. I wonder if he would make it worth our while?

Anonymous said...

All these explanations sounds like just excuses to me - they make them as we go. For example, housing problems - they are not even a year old. 2-3 years ago dollar was already below euro ( 1.3 to 1.4). I remember it well, because at that time I spend nearly 4 months in Europe on business and the dollar kept falling. I could see it every time I filled the travel expense report.
We are going to London next week and I am using ostrich strategy - keeping my head in the sand and not even checking the exchange rate.
I usually do not fill my car ( my husband does it ) - last Saturday I had to fill it - and what a shock - 10 gallons at 3.55 A GALLON - 35 bucks. I do not cry poverty either, we drive to work together and only 7.5 miles each way. Some people here drive easily 40 - 50 miles each way every day. At this rate it might be more profitable to stay at home.
The only explanation of falling dollar that makes any sense to me is that our government is printing more and more money - to bail some businesses out , to cover the war etc. But even that does not sound too convincing: bailing out just started and I have read that war is mostly done on credit ( I hope not on credit card, because the rates here in the States are still could be up to 20%). I do not think you need to print money to borrow,do you? I may be wrong about it.

Tina in CT said...

I almost need one of those "Help, I've fallen and can't get up buttons." tonight when I tried to get off the couch. I have a sciatic nerve problem. The nurse practioner at work (a real fringe benefit at our company) told me to use a moist heating pad after I did some exercises. OK, I got down on the floor to do the knee to chest exercises and almost was crying out in pain as they hurt my back so much. Then I tried to get up and had to think about it as I struggled. I put the puppy out so she'd be OK and then we came into the den. I had the heating pad cranked up, got on the couch all positioned well, the puppy curled on on me and went to sleep (after many attacks with her needle teeth), called my college roommate to chat and after we hung up, I wanted to get up. Ohhhhhhhhhhh! Not an easy task!!!!!!!!!!! I thought I'd have to call my friend to come over to help me. It was not easy and it was quite painful. I shuffled over to the computer desk to check blogs and email and here I am. Now, I wonder how I'm going to bend down to put a 3 lb. puppy outside. I can't wait to go take my muscle relaxer pill and go to bed. Hopefully the puppy won't cry too long in her crate or I'll come take her to bed like last night.

Your aching mother in the U.S.A.