One Year Out, Has The Free Float Ruble Done Russia Any Good?

Just over a year ago, the Bank of Russia unpegged itself from a dual currency soft-peg, ending its dependence on the US dollar and the European Central Bank-backed euro. Under the peg, the the Bank propped up the rubble when exchange rates against the euro or dollar exceeded its boundaries.  In its announcement, the Bank of Russia said that exchange rates would be determined by market factors, making for greater efficiency in monetary policy, and ensuring price stability. The question is, a year out at their goal of a free floating ruble in 2015, has it done Russia more harm or good?

Not Totally Free Floating

Let’s start with the fact that Russia never truly achieved its goal of a free floating ruble. While the nation states they haven’t given up on the idea, seven months after announcing its untethering, the Bank of Russia and officials as far up as Putin started buying up foreign currency again, including heavy investment in the US dollar.

With the Russian economy already hurting from lower oil prices, the extended period of volatility pushed the exchange rate into a cycle of negative feedback, with depreciation dropping even lower than its 46% decrease in 2014. Even with the Bank buying the dollar back up, boosting Russia’s reserves to the desired $500 billion could take up to seven years, a matter that doesn’t seem to have Russian officials giving up on the short-term hopes of a free floating ruble.

An Economy In Crisis

Russia’s decision to unshackle the ruble has not only not fully worked, it’s still managed to create some big economic problems within the nation. Inflation is at a 13 year high, the nation is projected to see a visible increase in poverty and workers are already seeing their salaries and hours cut prompting a decrease in domestic spending.

The ruble was unable to stabilize even as Russia butchered itself to keep its goals progressing forward, leading to a drop against both the US dollar and the euro, even as the euro sank during the midst of the Greek debt crisis. The matter only fed into itself as the budget then destabilized in an effort to make up for the declining sectors, and foreign investment continued to decline, a crisis already in full swing after Russia’s conflicts in Crimea.

So has the free floating ruble helped Russia reach its goal of efficiency and stability. The answer is patently no on both accounts, and Russia seems to know that. After all, that’s what prompted the Bank’s return to buying foreign currency. That doesn’t mean that the Russian market can’t stabilize, though. Oil prices may be lower, but they’re maintaining. A cheap ruble is profitable for exporters, too, meaning that for the time being there’s some foreign interest in Russian raw material.

Internal statements seem to encourage a cooler-heads perspective, too, talking about the competitiveness and purchasing power of the currency as a primary concern. While there’s some debate as to what that really entails, Russia isn’t necessarily outright doomed, even if the hope of a truly free floating ruble might be.

Youtube Begins Charging Subscribers

Perhaps Youtube has become envious of Netflix and other subscription services, because the world’s most expansive and frequented vlog has decided to introduce a subscription service. The news have been received with mixed feelings, with many people expressing their surprise at Youtube’s new strategy.

Youtube is considerably popular largely because of its free-for-all services. So, why would they actually introduce a subscription service? Aren’t the proceeds made from adverts enough for Google?

According to Google, the pay subscription service will be known as Youtube Red. So far, the company has tested it out in the United States at a subscription cost of £6.50 or $9.99 per month. The same subscription cost will be replicated as the company rolls out the service to the rest of the world.

Youtube is already a comprehensive vlogging service that’s increasingly ideal for social media users for free. Does Google plan to reduce the free privileges to trigger people into paying for subscription? What will pay subscribers have over other Youtube users?

Just as in the Youtube Red test in the US, pay subscribers will have access to a couple of exclusive videos, including feature-length pieces uploaded by popular vloggers. That means that they will indeed reduce the privileges for other users. Additionally, pay subscribers will be saved from the pain of rewatching adverts, most of which are usually automatically played before actual videos start running. But are adverts already too much of a struggle that people are willing to fork out $9.99 to be saved from them? Are the exclusive channels actually worth it?

Google projects that it will successfully convert millions of users into paying subscribers. Analysts think otherwise — turning subscribers who already expect free services will not be a walk in the park. According to Brian Blau, a Gartner analyst, Youtube has done a commendable job offering alternatives for users to choose from. He further adds that unfortunately, the introduction of payment channels hasn’t always done well, and the overall adoption of the pay subscription depends on how users balance the pain of sitting through lots of ads and the attractiveness of the exclusive channels.

Ian Maude, another analyst, who works for Enders, gave mixed comments too on the whole issue of Youtube introducing pay packages. According to him, Youtube will never be successful in converting 50% of its users. They will only manage to attract a few subscribers into their pay subscription service. This however, as he further added, shouldn’t be a problem for Google since they have deep pockets and their main goal is coming up with original, exclusive content — not just relying on third party contributors.

If original content is indeed on Google’s pipeline, we should gear up for renewed competition against Netflix and the likes. It would however be largely detrimental to Youtube if the current privileges enjoyed by general users were reduced just to drive them to the pay package. Since the package has been free in the United States since the 28th of October — and will remain so for a month as its being rolled out to the rest of the world — it’s only a matter of time before we get the actual feel of the new Youtube pay subscription.