Ukraine On The Verge Of Bankruptcy

An exchange office worker changes numbers indicating the conversion rates outside a currency exchange office in central Kiev November 10, 2014. Credit: Reuters/Gleb Garanich

Ukraine's Currency Plunges As Ceasefire Fears Grow -- Reuters

(Reuters) - Ukraine's currency lost nearly 5 percent of its value on Monday after a weekend that saw the heaviest shelling in a month hit the main rebel stronghold in the east and signs that Moscow had dispatched troops and tanks to reinforce separatists.

The prospect that a two-month-old ceasefire could collapse and all-out war return to eastern Ukraine has weighed down the economy and helped drive the currency 12 percent lower since the central bank abandoned an unofficial peg a week ago.

The country of 46 million people is near bankruptcy, dependent on international loans, and deeply in debt for natural gas to Russia, the former imperial master it accuses of waging war on behalf of separatists on its territory.

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My Comment: A disclaimer .... I have a bank account in Kiev that I use when I visit Ukraine to see family and friends. I have always kept the equivalent of a few thousand dollars there, and while I have not gone back home for the past year and a half .... I have seen this account get obliterated by inflation and devaluation. But within my family I am actually the lucky one. My cousins who live there have a number of businesses and real estate properties .... and they have been hit hard. The war, government corruption, the collapse of the economy .... this is having a profound impact on everyone ... and none of it is good. Everyone is getting desperate, and many are now hoping that Europe will step in and bail out the Ukraine government .... but I know that this is not going to happen. Ukraine needs tens of billions of dollars in aid, and considering the history of corruption in that country, no one is going to give them that amount of money unless there are multiple strings attached ... and even then.

I also have bank accounts in Moscow .... I have a condo there and I have a share in the family business (commercial real estate and development). The Russian economy is also hurting, and getting worse .... Rouble crashes as Russian economy teeters on brink of recession (The Guardian). Fortunately .... my cousins and I have been lucky because we are debt free (I have always hated debt), and our principle clients are the Russian government and international companies (they always pay). But everyone knows that tough times are coming, and the big worry is that since Russia has a lousy history when times get tough .... the fear is that widespread demonstrations and civil strife will become the norm on the street .... and very quickly.

On a final note .... this is one of the main reasons why I choose to leave eastern Europe and become a happy Canadian citizen in the Great White North. My cousins are always worrying and stressing out over what is happening there .... God Bless them I say .... my priority is when can I have some snow on the ground so that I can then go skiing.