The Russian Ruble has taken a turn for the worst as an overnight move by the Russian central bank increased mistrust of the entity and the buying power of the Russian currency. America may feel the pinch before long.
At 1:00am in Moscow, the Russian Central Bank increased interest rates from 10.5% to 17% – a 650 basis point move in moments. That move sent the Ruble into free-fall.
Upon the banking move, the currency went from about $58 dollars per ruble to a low of $79.66 per Ruble.
The Ruble has been steadily declining in value since late summer due to the crude oil glut and ensuing price decreases engineered by OPEC.
Russia is not a heavy manufacturing or intellectual property production nation. It’s gross domestic product comes almost entirely from commodities – oil and precious metals making up a huge part.
As oil declines, so does the ability of the Russian economy to grow. For each $10 drop in the price of crude, Russia loses approximately .8% of GDP. The price of oil has dropped from a high of about $110 to a current value of about $56 which could equate to an almost 5% loss of GDP.
Adding to headwinds, Vladimir Putin’s incursions into Ukraine have brought on international sanctions that make it nearly impossible for Russian businesses to roll-over their Euro and Dollar-denominated debt which could cause a huge number of defaults over the next 12-18 months.
The effects on the American economy may be soon to follow.
Russian oil drillers earn dollars for the oil exports, but spend locally in the Russian currency. That hedges their production budgets against falling crude prices. Unlike America, where producers earn and pay in the same currency.
Because of the currency move, it could be advantageous for Russia to increase production to enhance revenues and tax receipts. This would increase the supply of cheap oil and push crude prices below $45. American shale oil producers will feel the brunt of cheap oil.
With respect, please be informed that the current exchange rate is somewhere around 70 rubles per dollar, not dollars per ruble.
What is astonishing is that we will sit over on the other side of the sea, watch it happen to another country and still remain to believe nothing like this can happen to us. Hate to say it but the tsunami is coming our way as well in the end.
Here is the thing. It isn’t going to just be fine in this country just because everyone hopes it will be. It isn’t going to be fine just because it always has been as long as the living remember. Because a few are still here that can remind us when things weren’t fine. It was called the Great Depression. And there are analysts out there that are stating that what is coming to America is going to make 1929 look like a sunbathing Sunday in the park.
You can’t just keep spending into more and more debt. Our 17 trillion is probably already unrecoverable. Reagan was a master at deficit spending. Today’s government makes him look like a miser. And it’s both parties. Oh except for Cruz. You’re right Mr. Progressive—he’s way off stating out loud we are out of money. That maybe government should shut down until it can get itself under control. And thanks for backing him GOP. Be prepared to lose in 2016 since you can’t seem to learn what the difference is between a conservative and a Progressive.
You see it doesn’t really matter who is driving the car when it hits the cliff at 100 miles per hour. We have a 17 trillion dollar debt and their answer in Congress was to keep spending. So we are going to fall as a nation. We have to. The laws of economics say it must happen. Really, would someone like to explain how you can be 17 trillion in debt and continue massive deficit spending and it isn’t going to happen? Because I would really like to see that new alternative math.
But no one living really has seen suffering in this country. Only a few remember the Great Depression. What we have is a society living in the land of golly gee. Golly gee it will be fine—don’t say the sky is falling. What realists are saying is the tidal wave is coming. It’s out to sea but the momentum has started. What society says is “I don’t want to leave the beach. I really like my spot so I’ll just ignore the warning.” Here’s the problem—the tsunami doesn’t care one way or the other. It is still coming whether you like your spot in the sand or not. And when it hits it will wipe you out. It won’t matter that a tsunami hasn’t been recorded in history for over 80 years. The damage will be the same—or worse.
And then my fiction becomes a reality as we will be out of money with a huge amount of entitlement attitude. That is a recipe for complete breakdown, riots and martial law. So take note of this—copy and paste and keep it in your pocket. So when those who denied the tsunami was coming you can pull out the note and remind yourself that some of us warned you.
Charles Hurst. Author of THE SECOND FALL. An offbeat story of Armageddon. And creator of THE RUNNINGWOLF EZINE.