In the modern world economy, monetary units are not provided with a gold reserve of states and, like any commodity, have their price expressed in digital form, that is, in exchange rates. The demand for each currency is formed according to market laws, depending on the need. If the American dollar, Japanese yen or euro is required for interstate settlements, then demand for them is growing, as is the price.
Devaluation and inflation
After the collapse of the USSR, almost all the states that arose on its former territory experienced a systemic crisis, including an economic one. The dependence of internal economic processes on the external environment was so strong that the concepts of devaluation and inflation could be considered identical. As soon as the dollar grew, prices rose proportionally, and for all, regardless of the country of origin of the goods. Salaries, store price tags, the value of real estate and cars was indicated in "at. e. ”. So shyly called the greenish-gray banknotes of the American Federal Reserve. The survival of millions of families in Russia and other post-Soviet countries depended on whether the ruble fell again.
Rate regulation mechanism
State regulation of exchange rates takes place according to a simple scheme. The Central Bank makes foreign exchange intervention, that is, targeted intervention in the market mechanism. It consists in increasing the supply of a foreign currency, and therefore causes a decrease in its price. In some cases, government agencies make a conscious decision to maintain their own currency at a deliberately low level. In order to understand the motivation for this behavior of the Central Bank, you should understand what the fall of the ruble means for the national economy.
Devaluation pluses
Any sharp changes in the situation on the currency exchange cause many consequences, both unpleasant and quite desirable. The depreciation of the Russian ruble at present does not lead to a massive increase in prices; it affects only the imported product range. In some cases, when domestic manufacturers use components purchased abroad, devaluation leads to an increase in the cost of production, which depends on the percentage of their content. But import-substituting sectors of the economy are experiencing a rise associated with a decrease in the competitive load, which significantly affects their development. Thus, state bodies, realizing what the ruble is facing in relation to other world currencies, deliberately “slows down” currency interventions in order to create preferences for national commodity production without introducing additional restrictive duties or fees. Of course, such a measure is possible only when the country's industry is able to satisfy domestic needs and enter foreign markets. Cost reduction due to the low exchange rate has a positive effect on the competitiveness of domestic goods, creating them export price advantages.
Minus devaluation
So, the depreciation of the national monetary unit entails many positive macroeconomic consequences. However, there are no such parameters in the world whose increase would always be desirable. Everything is good in moderation, otherwise all countries would constantly compete in whose currency is cheaper, but for some reason this does not happen. Among other macroeconomic indicators, the investment climate is of no small importance. The undermining of confidence in the monetary unit is what threatens the fall of the ruble if it occurs too often and unpredictably. After all, any foreign resident who decides to invest his own money in our economy does this based on the profit received in the currency that he invested, and if his hopes are not fulfilled, then he will take his money and go home. This situation is undesirable, Russia needs technology and jobs, and therefore, the ruble exchange rate needs to be maintained.
What threatens the fall of the ruble for citizens and the banking system
Macroeconomic indicators are vital for the country; they guarantee the very fact of its existence and successful functioning of the state. But besides them, there is a more mundane aspect, expressing what threatens the fall of the ruble for an ordinary citizen, far from high financial policy. What will be his reaction to the growing devaluation? Yes, it’s very simple, you don’t need to be a professor of economics to understand that you need to go to the nearest exchange office and buy dollars or euros with the money you collected. If their rate will grow faster than a bank deposit, then it will be so. As a result, funds that could work for the good of the country will be withdrawn from circulation, and foreign banknotes will lie idle in secluded places of the homes of our fellow citizens.
Undoubtedly, in the event of a sharp drop in the ruble exchange rate, all those objects imported from abroad will become more expensive to which we are accustomed: foreign cars, radio equipment, laptops, tablets, mobile phones and other equipment without which modern life cannot be imagined.
However, at present there is no reason for panic. The Russian economy is in an unprecedented good position. The country has a huge gold and foreign exchange reserve with almost complete absence of external debts, and there is no reason to expect an extraordinary drop in the ruble exchange rate. Only a well-thought-out “downgrade” game is possible.