By Andrew L. Jaffee

Russia’s finance minister thinks the dollar is “too unstable,” but invests in it anyway. Here’s a news story from Novosti, which seems to contradict the minister:

Russia cannot consider the dollar as a reliable reserve currency because of its instability, the finance minister said Friday.

“This currency has devalued by 40% against the euro in recent years,” Alexei Kudrin told a news conference in Washington on the occasion of the opening spring session of the International Monetary Fund.

According to the Central Bank of Russia, the dollar accounted for 70% of Russia’s gold and currency reserves, euro for 25% and other assets for 5% in late 2005. As of April 14, 2006, the reserves were $212 billion.

Actions speak louder than words. The craze over the Euro is just that — a craze. Europe’s economic performance lags the U.S. by far, so the dollar will make a comeback against the Euro. (See article re: “the unfavourable profitability differential of European venture capital investment in comparison with the United States” . Or look at France’s performance.) Currency markets are self-correcting, and eventually end up reflecting the true economic reality, after the speculators get squeezed out.