On the way to ruble convertibility

The economic conditions for ruble convertibility are not difficult to formulate, but it is difficult to make the necessary changes in the short term, even impossible for political reasons, since the costs of the transition period are very high, attitudes and institutions change very slowly, and also because the Soviet government over the past five years, he acted slowly and currently does not have sufficient power to solve many of the tasks before him. If the government acted more decisively and enjoyed wider support, a faster transition could be offered than discussed below.

Inconvertibility occurs when the demand for foreign currency exceeds export earnings, foreign exchange reserves, loans and other capital inflows. In such circumstances, the state has to normalize insufficient receipts of foreign currency between private individuals, enterprises, foreign holders of rubles and many subgroups of these categories.

Countries with overvalued exchange rates tend to have current account deficits. A constant deficit often leads to inconvertibility as foreign exchange reserves are depleted and additional loans become more expensive or inaccessible. Typically, such a deficit can be reduced or eliminated through devaluation. Excessive demand for foreign goods and currencies is also possible in a planned economy, but it is not expressed in overvalued (or underestimated) exchange rates, since exchange rates do not play a role in trading operations. It follows that the balance of payments problems in a planned economy cannot be solved by devaluation.

Irrational prices in a planned economy are the result of the fact that, with some exceptions, there are no real commodity markets, especially in transactions between enterprises. In addition, administrative price changes are very rare and take into account little demand. It is clear that with irrational prices, which at best play a passive role, money in a planned economy cannot be convertible. This situation is aggravated by the fact that the official ruble exchange rate is established in an administrative order without taking market forces into account.

Inconvertibility of goods means that only a relatively small assortment of goods, services and property in a planned economy is freely sold to foreign buyers. This is partly due to the fact that almost all means of production belong to the state and are not subject to sale. Play thousands of free online games, including shooting games, arcade free games, racing car games, dress up games and many more on http://freegames4play.com

View the Top, Frequently Viewed Products