Trivia question: which world leader, just a couple of weeks ago, referred to the US dollar as "a worthless piece of paper"?
Our neighbor Mahmoud Ahmadinejad, of course: "They take our oil, and give us these worthless pieces of paper..."
This is in the context of OPEC thinking hard about switching to some other currency for pricing oil. As the dollar weakens, it hurts OPEC, because they're selling their oil for dollars that are worth less and less.
Will they do it? I have no idea. More informed readers are welcome to comment!
But while the dollar is falling around the world, in Armenia it's plummeting. Crashing. Drilling in an atomic-powered mole machine towards the molten center of the earth.
When my project started (October '03) it was around 550 to the dollar. When we arrived here (March '06) it was 455. A drop of 18% in two and a half years: no big deal.
But then the real slide began: 430, 400, 380. By the beginning of this year it was 360. A month ago it was 335. Last week it was 310.
Yesterday, Monday, it suddenly plummeted down to 297 -- for no reason anyone could see. Then it bobbed back up again to around 308. Checked this morning, it was 307.
Now, there are two things going on here: the dollar falling and the dram rising. The reasons for the falling dollar are well known. The reasons for the rising dram are much less clear. Armenia's economy is, on paper, growing by leaps and bounds -- double digit growth every year for several years now. I say "on paper" because, once you get outside of Yerevan, this is really hard to see.
(Long-time readers may recall that, back when we were in Romania, I used to blog regularly about Romania's economy. In Armenia, I've done that much less. That's because Romania, while it had all sorts of problems, produced pretty good and reliable statistics. Armenia, um, not so much. Large chunks of the Armenian economy are pretty opaque, and the numbers... are numbers. I don't doubt that there's been a lot of rapid economic growth here. But I do question whether it matches the official figures.)
As my wife has pointed out, this is causing us some pain. We're paid in dollars, so everything is about 50% more expensive than it was when we arrived. To give a single, trivial example, every Friday I pay my driver 10,000 drams. When I started doing this, in March 2006, that was around $22. Today it's about $33.
USAID and the State Department do adjust for cost of living, but only late and slowly; the COLA has only increased 5% since we got here.
Meanwhile, the reason for the appreciation of the dram remains somewhat mysterious. And a lot of Armenians aren't too happy about it. In very round numbers, about a quarter of Armenia's adult population is working abroad, and a lot of people rely on remittances -- money those workers send home -- to survive. As the dram gets stronger, those remittances get smaller. It's also massacring Armenia's export industries. (It should be helping imports, but it's not clear whether that's really happening.)
Where will it end? I have no idea.