Get the latest updates as we post them — right on your browser

. Last Updated: 07/27/2016

Why Russia Should Drop The Ruble

At the recent summit of the Commonwealth of Independent States, President Yeltsin announced that Russia is "ready to create a currency union as an indivisible part of an economic union".

There is only one way to read that: Russia is prepared to allow the ruble to be the primary currency within the CIS. This is a step in the wrong direction.

The idea of reinvigorating the ruble as the common currency of the 10 CIS countries is not only unrealistic, it runs counter to Russia's best interests.

Just before the CIS meeting, Kyrgyzstan introduced its own currency, the som. It took to heart the advice of international experts that the only way to gain control of its economy was to dump the ruble.

Meanwhile, with varying degrees of success, other republics are slowly introducing their own banknotes. It is more than a matter of national pride.

With the Central Bank in Moscow alone empowered to issue rubles, the republics have found their economic fates too closely tied to the policies of the Russian government. A new currency allows them to control their own destinies.

Russia, meanwhile, desperately needs to gain independent control of its money supply. It cannot do so with the central banks of other countries issuing credits in rubles and transacting their official business in Russia's currency.

And President Yeltsin, in clinging to the ruble as the basis for the new economic union, ignores the reality that other countries, as well as the Russian people, have lost faith in the currency.

As the State Statistics Committee reported recently, capital flight from this country is at least $11 billion. Whatever laws Russia might pass, those earning hard currency will never be persuaded to keep their money in the country until the local currency is stable and they are assured that the money they earned today will not be worthless tomorrow.

With today's modern technology, different currencies are just a slight inconvenience. Companies do not care what money they do business in, they care only about being able to agree on a set price for goods and being paid for what they deliver in a currency with value. The ruble cannot offer that assurance.

These are among the convincing reasons why Russia should dump the ruble. It lacks confidence, value and -chief among a currency's reasons for existence - the ability to settle debts.

Russia should introduce its own currency as part of a broad-based economic austerity plan that would also bring down inflation and reduce the growth of the money supply.