Russia heading for crash as ruble plummets

[Karee 4,191]

Russia's economy is crashing and its currency appears to be in free fall.

The ruble plunged by about 12% Monday, meaning it's lost nearly 50% against the dollar this year. Early Tuesday in Russia, the central bank hiked its key interest rate for a sixth time this year to 17% from 10.5%.

A double-whammy of collapsing oil prices and Western sanctions is driving up inflation. Cash is flooding out of the country and the risk that some Russian companies may default is increasing.

Russia's central bank has not only been raising interest rates, but has spent nearly $90 billion trying to defend the ruble and prevent prices spiraling out of control.

But investors are growing increasingly alarmed about the prospects for the Russian economy.

The Bank of Russia said Monday that the country could sink into a deep recession next year if oil prices remain at $60 a barrel. GDP could contract by as much as 4.7% in 2015, and then by a further 1.1% in 2016 unless oil prices pick up.

The falling ruble makes it harder for Russian companies and banks to repay their foreign creditors.

Russia has relatively low government debt and hefty international reserves of about $430 billion. Yet Wall Street has pushed up the yield on Russian government debt, betting on greater risk.

The cost of insuring Russia's five-year bonds have also risen, to their highest levels since 2009.

A collapse in oil income takes a bite out of government revenue, meaning it has less to spend.

President Vladimir Putin has already ordered government departments to cut their budgets by 5%, and more cuts could follow. Defense and national security has so far been spared the ax -- Russia is pumping trillions of rubles into modernizing its military.

Related: Could Russian economic turmoil lead to Putin's downfall?

Ordinary Russians are feeling the squeeze instead. Consumer price inflation is expected to hit 10% by the end of the year, in part due to the weakness of the ruble, but also due to a ban on imports of most food products from the West.

That was retaliation for U.S. and European sanctions imposed over Russia's actions in Ukraine.

Even the price of bread is rising, prompting some Russians to begin hoarding staples.

Putin's approval rating remains high but Russians are losing confidence in the future. Some opposition politicians say the economic storm will eventually sweep Putin from office.

"In three years the situation will change," Dmitry Stepanov of the liberal RPR-PARNAS Party said at an opposition conference in Moscow this week. "The country is in economic crisis and no one in the government knows how to solve that."

Source: http://money.cnn.com/2014/12/15/investing/russia-ruble-economy-crash/

[Teddy B 17,252]

But they have Putin!!

[JohnR! 5,495]

Apparently the sanctions imposed by the international community, led by the US are working.

But they have Putin!!

[Karee 4,191]

Be careful what you wish for. A de-stablized Russia isn't good for anyone.

[decocker 7,198]

putting all the rubbles in the military basket sounds like a great plan.

[JohnR! 5,495]

I was thinking about that too. It sounds too much like Germany in the 30's. Worthless currency, ruthless dictator with imperialistic designs and an economy in free fall. The Putinistas will be so disappointed.

Be careful what you wish for. A de-stablized Russia isn't good for anyone.

[Mr. Big Dog 10,747]

I rather enjoy seeing the right wing nut jobs wrong on yet another issue. They said the sanctions wouldn't have any impact on Russia and that Putin laughs them off. He ain't laughing anymore.

[Karee 4,191]

I was thinking about that too. It sounds too much like Germany in the 30's. Worthless currency, ruthless dictator with imperialistic designs and an economy in free fall. The Putinistas will be so disappointed.

Yep. I was thinking about that same comparison.

[Operator 1,927]

So, who's in the market for some Rubles?

[Mr. Big Dog 10,747]

So, who's in the market for some Rubles?

Rubles will soon be cheaper than Charmin. I might be in the market then.

[Operator 1,927]

Rubles will soon be cheaper than Charmin. I might be in the market then.

Cheaper than Charmin but rough like a corn cob. Don't skimp man.

Putin was appointed to the head of security services during Russia's last economic crisis as Yeltsin was losing his grip. I don't think that Putin has the same problems as Yeltsin had, he still seems to be firmly in control, at least for now.

[Karee 4,191]

Cheaper than Charmin but rough like a corn cob. Don't skimp man.

Putin was appointed to the head of security services during Russia's last economic crisis as Yeltsin was losing his grip. I don't think that Putin has the same problems as Yeltsin had, he still seems to be firmly in control, at least for now.

Yeah all that nationalism can only carry you so far when you have no potatoes for dinner.

[Mr. Big Dog 10,747]

Personally, I think it's a bit early for the eulogy but it's an interesting point of view nonetheless.

In 2015, Vladimir Putin may witness his empire’s death knell

The year ahead could see the outbreak of the third Chechen war, which, in turn, could be the death knell of the Russian Federation in its current borders.

If, as is imaginable, Russia dismembers itself later this century — the way the Soviet Union did in 1991 — it will largely be a consequence of President Vladimir Putin’s policies.

Putin came to power in the 1990s, when civil war broke out in Chechnya, a constituent republic of Russia in the North Caucasus. The first Chechen war, between 1994 and 1996, was ignited by Muslim rebels demanding independence from Moscow. A second war started in 1999, when Putin was moving rapidly toward Kremlin leadership, first as President Boris Yeltsin’s national security adviser, then as prime minister. With Yeltsin’s health and grip on power failing, Putin emerged as the driving force behind a scorched-earth policy — with massive collateral damage to the population as a whole. That conflict lasted a decade.

For the past five years, the situation has been more or less quiescent, though neighboring republics have been rocked by violence. The lull in Chechnya, however, ended in early December with a series of bloody incidents in the Chechen capital of Grozny.

The group behind the resurgence of unrest is advocating a “Caucasus Caliphate,” with ties to al Qaeda and, more recently, Islamic State. There is at least an indirect tie between outside support for Islamic radicalism in the Caucasus and Putin’s sponsorship of Russian secessionism in eastern Ukraine.

By proclaiming ethnicity and religion as the basis for Russian statehood and aggression against its neighbors, Putin is inadvertently stoking the forces of secessionism in those parts of Russia that are historically and culturally Islamic.

[Operator 1,927]

Yeah all that nationalism can only carry you so far when you have no potatoes for dinner.

I just invested heavily in a Russian pitchfork/torch retailer.

[Mr. Big Dog 10,747]

I just invested heavily in a Russian pitchfork/torch retailer.

Good investment.