The Russian Ruble has broken through the 100 Rubles = 1 US Dollar milestone. If it continues to decline in value at the current rate, it will be worth nothing by around the end of next year.
Assuming western support continues and the current pressure on the fascist Russian regime is kept up, what will happen to the Russian economy going forward?
It looks like it dropped lower than it is today in early 2022. Aren’t there things Russia can do to prop it up? They still have a lot of oil and gas reserves. If people around the world stop trading in Rubles will the economy completely crash, or just drag along the bottom for a while?
Yes, that was the beginning of the Russian invasion of Ukraine. Following the sudden drop in the exchange rate this caused, Russia undertook some measures to boost things, which someone with a better understanding of economics would have to explain, but those measures have clearly run out, or are no longer effective.
If the world stopped trading with Russia completely we / they would return to say Kruschev-era Soviet autarky. Any concept of “exchange rate” becomes nearly meaningless between economies that do not trade either directly or indirectly. Of course even 1960s Soviet Union was not hermetically sealed against all Western trade. So there was an exchange rate, in fact a couple. But by and large they were meaningless as to the functioning of the Soviet economy.
So one potential future is the West quarantines Russia completely and/or the Russians embrace autarky on their own much as NK does now.
An much more plausible future is the West does not successfully quarantine, and even if they tried, China would be enough of an intermediary with one commercial foot in each commercial camp that exchange rates would in fact represent real flows of real goods and capital, not just totalitarian fiat.
In that world we need to look at balance of payments and balance of capital flows to derive a “natural” exchange rate. One thing we can say about that natural rate is that it isn’t zero. Albeit, currencies can trade far off their “natural” rate for a very long time based on non-financial reasons.
Russia remains a continent-sized country that can achieve economic self-sufficiency at great cost to financial efficiency. So a smaller economy, a poorer populace, but no need for that to mean Depression, bread lines, etc. Of course the more of their total blood and treasure they feed into a military meat grinder the else is left for anything / everything else.
No need to worry about the USD losing fiat money status to Russia or China
That’s what happened the last time Russia tried to be economically independent, no?
Thanks for the chance to expand a bit.
As always, the outcome depends on how quickly they try to make the transition, how much they try to maintain a back-breakingly expensive military versus their true GDP, and how much criminality is skimming how much off the top, bottom, and both sides.
I could certainly see them ending up with 1929-style Depression, bread lines, etc. I was trying to assert that that outcome is not fore-ordained as a matter of economic science. It may well be all but inevitable as a matter of national and governmental character.
I think we’ll get a chance to see which over the next few years.
Thanks for the replies.