Colonel Cassad reports It Takes 44 Hryvnia to Buy a Dollar in Mariupol.

Let’s do some quick math.

On Monday (perhaps reflective of Sunday) Ellen, who lives in Kiev wrote “Today $1 is worth 36 hryvnias on the black market. A Week ago it was 20 hryvnais. No one knows where the bottom is. People buy anything just to get rid of hryvnias.

To be safe, let’s call it 10 days ago. In those 10 days, the hryvnia plunged from 20 to the dollar to 44 to the dollar.

That is a decline of 54.54% in about 10 days. Here is the key “People buy anything just to get rid of hryvnias“.

Laughable “Official” Rate

Here is an amusing chart from Investing.Com for February 25.

I explain that chart below. Meanwhile, rest assured that not a damn thing transacts at that rate other than perhaps graft and illegal transactions by bankers and Ukrainian officials selling 25 hryvnias for a dollar.

Poroshenko Ultimatum

Earlier today I wrote …

Poroshenko Gives “Ultimatum” to Central Bank to Fix Exchange Rate

At a live press conference on the currency market, Poroshenko ordered the Chairman of the National Bank and the Finance Minister to Stabilize the Hryvnia at the “Budget” Rate of 21.5 hryvnia per dollar.

During an online broadcast, Poroshenko issued an ultimatum demanding the head of the National Bank of Ukraine, Valerie Gontareva, stabilize the hryvnia at a level which was guided by Cabinet in approving changes to the 2015 budget.

Amazing Reversal

Yesterday, February 24, the central bank put on currency restriction. Today we see National Bank has Overturned Yesterday’s Foreign Currency Ban.

National Bank of Ukraine (NBU) eased restrictions on foreign exchange market and abolished the prohibition of authorized banks to buy foreign currency on behalf of customers of the 26th and 27th of February.

The National Bank had introduced a temporary ban prohibiting banks to buy foreign currency on behalf of clients on February 25.

Consequential amendments to NBU resolution number 130 made ​​on February 24, and NBU Resolution 131 on February 25, published on the website of National Bank, were abolished.

On February 25, the NBU bought on the interbank foreign exchange market $80 million currency at the official rate, with further intent of foreign exchange intervention.

The head of the NBU Valery Gontareva explained that the NBU bought currency on Wednesday on the interbank market and that “generated an additional supply of foreign currency”.

After the move by the NBU, the hryvnia exchange rate on the interbank market rose to 22-27 per US dollar and 24.96-30.6 per euro.

IMF Calling the Shots?

The only thing that makes any sense in this mess is the IMF demanded Ukraine stabilize the hryvnia.

The National Bank of Ukraine attempted stabilization with a farce of a move that no one on the street believes.

And if the central bank supplies all demands at 22-27 per US dollar while the black market bid/ask is 32:44 (equating to an instant arbitrage profit in spite of the massive spread), all Ukraine’s foreign reserves will be wiped out in a week.

Alas, it appears there is a $50,000 restriction on such moves, reserved for imports, limited to special accounts, with the waiting period increasing from three to four days.

Fake Receipts

The street laughs at the official rates, and so do I. Meanwhile, I wonder how many fake import receipts have been generated recently.

Prime Minister Accuses Central Bank of Negligence

Yesterday Ukraine’s Prime Minister Accused the National Bank of Negligence.

The Prime Minister of Ukraine complains that the NBU did not take control of output currency abroad for import contracts. According to him, during the last 9 months, the financial market has sold $51.5 billion.

He said that the total daily buying and selling foreign currency, carried out and controlled banks NBU on average from 100 million to 170 million.

This means that some currencies bought and sold for the purpose of speculation, with the intention to buy the currency at a lower rate and then sell for a higher” – said the Prime Minister of Ukraine.

Currency Speculation? Incompetence?

Shocking! Say it ain’t so Joe.

Incompetence? Negligence? You bet.

It would be difficult to find a central banker on the planet that is truly competent. By definition, no one competent could even take the job because they would not believe in central bank planning in the first place.

That said, some are more incompetent than others.

Appraisal of Ukraine’s Prime Minister

First, I have a couple of choice comments regarding Ukraine’s prime minister.

  1. Ukraine did not have $51.5 billion in foreign currency reserves to bleed and I highly doubt $51.5 billion in other forex transaction.
  2. I congratulate anyone smart enough to sell or trade every hryvnia they had for any hard currency or gold.

Abandon Ship!

I don’t have a competence rating for Valery Gontareva, but I do have advice: Get the hell out of Ukraine immediately.

When you are dealing with hyperinflation and the prime minister accuses you of negligence, arrest is likely coming unless you stabilize the currency, and that is impossible by decree.

Mike “Mish” Shedlock