Russian economy: Keep an eye on the value of the Ruble

See the graph below:

“If panic occurs now (and it can happen simply due to fear among the Russian population, say, through social media rumors), everything could collapse in a matter of days.” - Economist “The Russian economy is indeed on the brink of collapse and disintegration.“

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— Jason Jay Smart (@jjsmart.bsky.social) November 27, 2024 at 11:57 AM

We've heard this before back in 2022 when the first sanctions were rolled out and the Ruble briefly plummeted in value. Although the central bank has been quite adept at adjusting for sanctions up to a point, there is only so much a central bank can do. A devalued currency and inflation go hand in hand. There are remedies for inflation but those remedies are painful. The obvious one is to increase interest rates, which the central bank has certainly done. Right now if you are a consumer or borrower in Russia, it sucks to be you. Add to that the inevitable shortages that come with sanctions and shortages in the labor force as Putin's regime has had to send massive numbers of troops to the front to fight in a war that Putin could have just avoided. Add to that the increased ability of the Ukrainian military to strike deep into Russian territory, awakening ordinary Russians that the "special military operation" is truly going sideways. It probably would not take much for a panic to occur - think runs on banks, hoarding, etc. The Russians could find themselves reliving the bad old days of the 1990s before they knew what hit them. Whether or not that loosens Putin's grip on power remains to be seen. A collapse would not help Putin's cause. We'll see what happens in the days and weeks ahead. This, too, may pass - much ado about very little. Or this could be the spectacular collapse that has seemed to be on the horizon for a while now. What is clear is that propping up the Ruble's value is turning out to be increasingly difficult, and may well be impossible at this point. We'll see what rumors spread on various Russian language Telegram channels and elsewhere. What's that saying about a spark causing a prairie fire?

Addendum: The Analyst has a take as well.

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