My girlfriend’s name is Katrin. She is from Estonia, has studied in Russia and has worked in the Russian foreign trade minister's office. She is fluent in Russian, Estonian and English.
Often, as she did recently, she will read a story for me from the Russian press only available in Cyrillic and that often takes a very different viewpoint than, say, the Herald Tribune or the Times of London reporting from Moscow. Anyway, on this recent Sunday morning, she was on the phone with her grandfather, speaking Russian.
As I was busy typing away in my home office, they were talking really loudly. After the conversation, she came into my office and sat down with a tea and said, "You won't believe what's going on over there." I said, "Tell me."
So she did. Katrin’s grandfather owns real estate in Russia, Estonia and Latvia. He still runs a business, too. He told her that everyone is very nervous right now about the dollar and the ruble and what may happen next.
Hide Your Money in Your Socks
It’s important to understand that in this region, the majority of people do not trust banks, period. And they don't much care for the ruble, and who would, with the way it fluctuates like SpongeBob SquarePants on a roller coaster? So what do they do? According to Katrin, "They keep it in their socks." Sounds good to me, with the way my bank treats me.
Anyway, most of the mainstream press, like the Herald Tribune, know the facts but don’t convey the local flavour or feelings. I wanted to know what some of the local press was talking about, so Katrin helped me out. She showed me Web sites outside of the mainstream... and not in English. We reviewed many stories from Russian newspapers for Russians by Russians in Russia, not some guy on a London desk or in New York.
Very few of the sites can be read in English. Most are only in Cyrillic. However, I did immediately recognize at the top of one story a pile of gold bars. In my extreme Russian illiteracy, my heart jumped, and I had my translator go immediately to work, I knew what it meant.
Banks Urging Russians to Dump the Dollar and Buy Rubles
First of all, the Russian Central Bank is encouraging Russians to dump the dollar - "pull them out of their socks," mattresses, coffee jars, whatever - and buy rubles. They also advise against the euro, saying it's too volatile (as if the ruble isn't).
Katrin's grandpa corroborates the story. In the past, the dollar has truly been the preferred currency, due to its stability. But across the nation now, you can almost hear sock drawers opening and dollars being changed.
But that's not all... The second story on the site goes one step further. The biggest private bank in Russia is buying fewer and fewer dollars every day, because local demand for the greenback is falling sharply! In this article, the author urges Russians to get the money out of their socks and into...
... Yes, you guessed it, GOLD! Katrin says many Russians will likely be selling dollars and buying gold jewellery, because it’s the most portable and secure form of low-volume gold investment.
Many Russian investors buy gold even though there is an 18% sales tax on any transaction involving gold.
Katrin stressed to me that gold is attractive to the average Russian because it's real and you can hold it in your hand and barter with it. It's tangible. As I have always said, gold has no board of directors, no central bank, no scandals and no P/E and you always know it’s in "your sock" when you need it.
So this is just more fuel for the gold fire, and seems to be catching a spark.
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