BLOG: The High Life May Be Waning (noteshairenik.blogspot.com)

According to some friends I have just been chatting with the dram exchange rate to the dollar is falling. For almost a year the dollar bought 300 dram, the lowest the rate had been in years. As of last night the Armenian currency's worth decreased 80 dram against the dollar, apparently during the course of one hour if A1+ can be believed.

My friend Loris tells me that dollars are no longer even being exchanged. This means that the dollar will continue to strengthen against the dram because the currency is finally losing its value and significance. It most likely has been artificially inflated as many people believe--at least everyone I know has mentioned this in conversation. People are apparently on a shopping spree and grocery stores now have shelves emptied of the bare essentials, like sugar, flour and cooking oil. So it was just a matter of time. I am surprised it didn't happen sooner, quite honestly.

The collapse of the Armenian economic paradox is occurring for a number of reasons. The World Bank's recent prediction that Armenia would see zero economic growth in 2009 wasn't an encouraging way to start the year. It means that government-connected businessmen only now have started to panic. Perhaps the Central Bank's dollar reserves are getting low or are running out. No one can say because their modus of operations has never been transparent to the public. Perhaps only the World Bank and the IMF really know what's going on, but then again, they have most likely been closely associated with the problem to begin with, having both been strong supporters of the Central Bank's decisions with the currency and the overall banking system. Now the banks are going to get into trouble, especially when their regular customers start withdrawing whatever they have in a panic and convert it to euros or whatever else they can think of. There may even be a resurgence in public unrest with rallies and riots.

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