Inflation Ravages Putin’s Russia

russia-inflation-cpi

Above you see a chart (click it to see full size) depicting Russia’s inflation rate between May 2011 and April 2013. The chart shows that over the last year Russia’s inflation rate has doubled, from 3.6% to 7%. The rate of 3.6% is the lowest Russian consumer inflation during the entire period under review, two years.

united-states-inflation-cpi

Above is the same information for the United States. As you can see, the highest consumer price inflation rate experienced by the U.S. during this period was essentially the same as the lowest rate Russia ever achieved. Currently, the U.S. inflation rate is less than one third the rate Russians are forced to endure.

In the U.S., 3% inflation is something to panic about. It is viewed as an economic disaster.  In Russia, 3% inflation is something to be proud of, because that’s what kind of incredible mess the Russian economy really is.  Look at the scales on the left margin of the two charts. The scale needed to measure Russian inflation during this period is more than double the size of that needed to measure inflation in the U.S.

According to Russian pundit Leonid Bershidsky, economic growth in Russia this year is less than half what it was last year and less than one-third what Putin has publicly proclaimed is necessary for the country. Things are so bad that many Russian economists are beginning to argue that Russia should start spending its reserves in order to stave off economic disaster.  But dumping piles of cash from the reserves into the economy would be like pouring gasoline on a fire. It could cause inflation to spiral out of control.

Oh and, by the way, the wicked one-two punch of failing economic growth and rising inflation is known as stagflation. You know, the thing perfected in Russia by Leonid Brezhnev and which led to the fall of the USSR. Those who cannot remember history . . .

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