Following Tucker Carlson’s visit to a supermarket in Moscow seen in a clip that has been widely published and disseminated by Russian propagandists, the pro-Russian media grifter, Tucker Carlson is surprised that a Russian grocery bill came in total just at $104 compared to $400 in the US.
Allow me to break it down to you since propaganda is reaching the level of distorting even the most basic of facts taught to us in schools.
The average consumption of a Russian is several times below the average consumption of a US citizen. The reason why a grocery bill in a poor state may come cheaper than that of a rich country is that a poor state may have the propensity to produce its own food or import it cheaply, but the average citizen of that country will not find that food is relatively cheap as much as the person holding foreign US Dollars.
Before the Russian invasion of Ukraine, the average monthly salary of a Russian worker outside Moscow or Saint Petersburg would have been around $300 per month. Considering the Rouble’s devaluation since then, it is even less today in real terms. This also means that a week’s grocery shopping in a Moscow supermarket would take one-third of the average Russian worker’s salary. Moscow is an elitist city, and ordinary Russians don’t live there because it is too expensive for them, so these numbers do make sense when considering the other statistic that Russians in general spend 60% of their income on food.
Now, we can go into many theories and explanations on what provides value to a currency, but the most basic and fundamental reality in today’s trading world is that a currency’s value is measured in US Dollars and its value is mainly derived by its relationship with the US Dollar. Other factors include exports and the rule of law, but US Dollar or (or its nearest relatives such as the Euro) exports are in many cases, the strongest variables in the equation. In simplistic terms, if a currency is trading in a lot of US Dollars, it will have a lot of value – it’s really that simple. One exception to this rule is the Chinese Yuan which many argue is artificially devalued by the Chinese authorities to accommodate its export industry.
Now, imagine you have an oil refinery and you want to sell your oil. How would you prefer payment? In Yuan, Roubles, or US Dollars? Russia has a lot of oil and gas but can’t sell these commodities in the US Dollar or Euro markets unless it does so illegally, so it has to contend by selling these products to China and accepting Chinese Yuan in return. As we have witnessed, replacing your US Dollar and Euro currency inflows with Chinese Yuan would not be enough to preserve the value of your currency. Same story with the Indian Rupee. What this means is that in reality, you are better off with $100 in cash than $100 worth of oil and the reason is that $100 in cash provides you with more optionality than barrels of oil. You can only consume your oil, but with $100 you can buy anything you want from any part of the world. Bottom-line is that in today’s trading and economic conditions, having lots of oil (or commodities for that matter) does not necessarily make you rich.
So if you are in Moscow and say, you earn an average salary in Moscow, you are not richer than the average salary earner in the US – this should be obvious. If you go to a poor country and you feel that your grocery shopping is cheaper than what it is back home, it’s because your currency is worth more, not because the products you are buying are actually relatively cheaper for the people who live there.
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