EDITORIAL: The Russian Ruble, Collapsing

EDITORIAL

The Russian Ruble, Collapsing

Ruble as Rubble

Ruble as Rubble, the Dollar Ascending

As shown in the chart at left, during the month of October so far the Russian ruble has lost 8% of its value against the U.S. dollar, which has risen steadily as the Russian stock market has fallen.  Since Russia invaded Georgia in August, the ruble has plunged 12%.  That means foreign goods have experienced 12% price inflation in that short time. Soon, you’ll need 30 Russian rubles to buy one U.S. dollar on the street in Moscow.  All the gains made by the ruble during the Putin years are being wiped out, at breathtaking speed.

The consequences for Russia are dire. Obligations that were established in dollars are now far more expensive for ruble-earning borrowers to service, with an avalanche of defaults predicted.  On Tuesday, the average price of ruble-denominated corporate debt dropped to an all-time low of 86 percent of face value yesterday, from more than 100 percent in June.

To stave off catastrophe, the Kremlin is spending the national savings at an alarming rate to artificially support the ruble, which is now a Potemkin currency.  Without the billions being pumped into purchasing it by the Kremlin, the ruble’s value today might well be half what it was six months ago, or even less.  The Kremlin is spending an astounding $1.2 billion every two days in order to prop up the ruble’s value and prevent domestic inflation from spiraling out of control (Russians must buy large amounts of foreign products which they can’t produce themselves, and all these goods become instantly more expensive as the ruble plunges).

But the worst problem of all, from the Kremlin’s perspective, is psychological.  As the AP notes, the Kremlin has pinned is reputation on the strength and stability of the economy, and a plunging ruble is irrefutable proof of failure in the eyes of the Russian people.  The AP states:  “Only a few months ago, the Kremlin was talking about pricing its oil in rubles and making the ruble a regional reserve currency, giving it a status closer to that of the euro and the dollar.”  Russians who see the stocks of rubles they had been encouraged by the government to keep  begin to dramatically lose their value will inevitably lose faith in the Kremlin and begin to doubt the wisdom of having a clan of KGB spies in charge.

A recent item in Pravda exposes the full extent of the Kremlin’s panic.  In classically crazy, paranoid neo-Soviet fashion, the story tries to blame Georgian propaganda for causing a run on the Russian currency, never pausing for a second to wonder whether any mistakes by the Russian regime might have anything to do with it. It was exactly such an attitude, totally detached from reality, that brought down the USSR.  America caused the Georgia war, Georgia caused the Russian economy to plummet, and the Kremlin is blameless.  That is Russia in a nutshell.

How can Russians expect any other fate under the misrule of Vladimir Putin?

2 responses to “EDITORIAL: The Russian Ruble, Collapsing

  1. Menshiviks lose, war socialism returns, details when crisis blooms.

  2. Related to the subject… anyone russian-speaking will understand :)

    В России слишком много авиакомпаний и банков, поэтому целесообразно было бы сократить их число. Такое заявление сделал вице-премьер страны Сергей Иванов, сообщает агентство “Интерфакс”.

    Отсюда интересно, а не дохуя ли в России вице-премьеров?
    Было бы целесообразно сократить их число.

    LA RUSSOPHOBE RESPONDS: Oh is he still alive? How the mighty have fallen!

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