Russia's Inflation Could Be A Harbinger For the U.S.

Bloomberg had an interesting article about what is going on in Russia as citizens there worry about the the value of the ruble. In the article, some Russians are seen turning to the U.S. dollar and other currencies as they worry the ruble will be devalued more. What I find interesting about the article is not that the Russians are turning to the dollar, but the anecdotal evidence of what inflation looks like. It seems Russian are buying hard goods, like jewelery, cars and houses for fear that the ruble will be worth less and less.

I fear what is happening in Russia could happen in the U.S. With all the troubles our country faces financially, there is intense pressure to print money. Printing money may be the only way U.S. consumers and the government can pay back the trillions and trillions of debt that we have been accumulating. Bad for the debt holders, but at least they get paid back. Inflation always seems good at the moment, but has longer-term consequences.

Here are a few notables from the article"

- Property is now a protective investment, not just a status symbol, said Sergei Polonsky, founder of real estate developer Mirax Group, which is building Moscow's tallest skyscraper. "Lately our clients are mostly those who buy real estate not to live in but to secure their investments," Polonsky said.
"No one wants to be left with pieces of paper."

- For the burgeoning middle class, investments of choice range from electronics to gold jewelry. Evroset, Russia's largest mobile-phone chain, is telling people to buy anything they can. "It's better to feel happy that you own something than to fear losing the money you have earned," Chairman Yevgeny Chichvarkin says in a letter posted at 5,200 Evroset stores. "If you need a car, buy a car! If you need an apartment, buy an apartment! If you need a fur coat, buy a fur coat!"

- Sales at Technosila, the third-biggest consumer electronics chain, have doubled since September as customers rush to swap rubles for flat-screen TVs and laptops, spokeswoman Nadezhda Senyuk said by phone from Moscow, where the company is based.

- Jewelry sales are also accelerating, particularly items made of gold and diamonds, said Vladimir Stankevich, advertising director at Adamas, Russia's third-largest jewelry retailer. "More cash appeared on the market and there’s an opinion among shoppers that gold is a good investment in times of crisis," Stankevich said.

- The Russian experience with saving is not that good and people prefer to consume and enjoy rather than save in pre-crisis situations," Tsepliaeva said. "Buy cash dollars and put them in mattresses or safe deposit boxes but not in accounts because most crises are accompanied by banking crises."

- Troika Dialog, Russia’s oldest investment bank, is betting the central bank will allow a one-time devaluation of the ruble of about 20 percent in January, following New Year’s and Orthodox Christmas celebrations.

- Svetlana Guseva isn't taking any chances. The 32-year-old mother of two from the southern city of Sochi plans to take her 8-year-old daughter, Dasha, to Moscow for the New Year's holiday, a trip that will cost twice her family's monthly income of about 30,000 rubles. "This way at least we'll have some memories," she said.

You can read the full Bloomberg article here

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