Among European states, few have been hit by this financial crisis nearly as bad as Ukraine.  Many businesses throughout Ukraine are closing their doors, especially those in the real estate or construction market.  Other businesses are cutting their staffs by as much as 1/2 in order to make a profit, including food manufacturers, distributors, rail operators and many more.  The Ukrainian national currency, Hrivna, has lost nearly half of its value, crippling the population's ability to pay back loans in Dollars or Euro, and forcing prices to skyrocket.  And this is only the beginning ...

As is well known, Ukraine has been granted a $16.5 Billion loan from the IMF.  As much as it baffles the mind how someone can loan money of that magnitude to such a corrupt regime, Ukraine's games are going completely unnoticed by the IMF.

The IMF recently sent its Ukrainian mission head, Ceyla Pazarbasioglu, to check on Ukraine's progress in meeting various milestones set in order to receive further loan instalments.  As can be expected, smoke and mirrors have been used in order to ensure that the IMF agent gets the impression that the money is being put to good use, and that further money will improve Ukraine even more.

The most interesting of all smoke screens is what Ukraine has done with its Hrivna.  The national currency is controlled by the National Bank of Ukraine.  Its value is set by a small group of people, under the control of President Victor Yushchenko.  Over the past 5 months, the currency has had a roller-coaster ride, initially skyrocketing, then falling, then rising, then falling ... which seems almost normal when you take into consideration how the market works. 

Whats difficult to imagine, at least for the western world, is how the currency goes up and down.  For example, when the Hrivna peaked at almost 10 Hrivna to $1, Prime Minister Yulia Tymoshenko stood up, accused the president of manipulating the currency (which he has been doing) and demanded re-evaluation.  The same day, the currency dropped to 7 Hrivna to $1.  It slowly began to rise, Yulia raised her voice again, and it fell.  The important thing to realise is how artificial the system really is.  There are no market variables here, it is simply one person dictating values.  Imagine how much money was made the day the Hrivna took a 30% fall.

As for the smoke and mirrors, prior to the IMFs arrival, the Hrivna saw a steady rise against the dollar and Euro.  It rose over 10% over the course of a weak (more money to be made for those in the know).  Today, the IMF representatives left the country ... magically, the Hrivna rose 5%.  Immediately afterwords, the media begins spreading rumors that the Hrivna will reach 15 to the dollar. 

These are the types of actions that the IMF should be paying attention to.  That is, of course, assuming that Ukraine hasn't negotiated a cut to those in the IMF responsible for the loan.