In fall 2023, when the Rubble was crashing the 100 RUB per 1$ bar, the government and central bank had to put drastic measure to stabilize the currency:
1. increasing the interest rate from 8% to 15% in just 1 month
2. putting control on capital by forcing exporters to convert 90% of their revenue in Rubble, thus creating a false demand for the currency
Since then, the Russian currency levelled off at round 88 RUB per 1$ until recently, when the sh*t start hitting the fan big time, including:
* inflation which should be at 4%, is instead at 9% and still rising
* interest rate continue rising, now at 19%
* new budget plan for 2025 have been made public (further increase in military budget)
* sale of Russia bonds had drop off sharply, even with 19% rate
* head of Russia bank announce important risk of stagflation nightmare scenario (inflation rising combine with no GDP increase)
* less then 1% of Russian export are done in Rubble, and Chinese banks are blocking/delaying payment to Russia to prevent being sanctioned (it involve going thru intermediary with multiple exchange rate involve, greatly reducing the amount in the end)
The actual exchange rate of the Rubble is non-consequential, since nobody is using the clown money outside Russia. However, it’s a good marker of how bad the economy is going for it to keep getting worse. And remember we are looking at the ‘official’ rate, actual rate on the street is likely much worse already.
We could be closer to a 1989 Afghanistan war scenario, with the war economy killing whatever USSR had left, causing the government fall a year later.
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In fall 2023, when the Rubble was crashing the 100 RUB per 1$ bar, the government and central bank had to put drastic measure to stabilize the currency:
1. increasing the interest rate from 8% to 15% in just 1 month
2. putting control on capital by forcing exporters to convert 90% of their revenue in Rubble, thus creating a false demand for the currency
Since then, the Russian currency levelled off at round 88 RUB per 1$ until recently, when the sh*t start hitting the fan big time, including:
* inflation which should be at 4%, is instead at 9% and still rising
* interest rate continue rising, now at 19%
* new budget plan for 2025 have been made public (further increase in military budget)
* sale of Russia bonds had drop off sharply, even with 19% rate
* head of Russia bank announce important risk of stagflation nightmare scenario (inflation rising combine with no GDP increase)
* less then 1% of Russian export are done in Rubble, and Chinese banks are blocking/delaying payment to Russia to prevent being sanctioned (it involve going thru intermediary with multiple exchange rate involve, greatly reducing the amount in the end)
The actual exchange rate of the Rubble is non-consequential, since nobody is using the clown money outside Russia. However, it’s a good marker of how bad the economy is going for it to keep getting worse. And remember we are looking at the ‘official’ rate, actual rate on the street is likely much worse already.
We could be closer to a 1989 Afghanistan war scenario, with the war economy killing whatever USSR had left, causing the government fall a year later.