The Perils of the Russian Ruble

RussianRuble

Recently there have been two big pieces of news were the Russian ruble is concerned.

First, the Kremlin announced it had decided on a new symbol for the currency.

Second, the ruble continued inching towards a historic law value against the U.S. dollar.

As shown in the chart above, back in 2008, before the ruble experienced a massive drop in value due to the global economic downturn and the falling price of oil, one Russian ruble would buy you 0.045 U.S. dollars.

Today, that ruble will only buy you 0.030 U.S. dollars; in other words, since 2008 the ruble has lost a whopping one third of its value against the dollar.

The ruble now is precariously close to to the value it had at the very depths of the 2009 recession, when it plunged to a value of about 0.028 dollars.

So basically, the Kremlin is fiddling while the ruble burns. Instead of undertaking structural reforms that might bolster the Russian economy, the Kremlin is occupied with ridiculous marketing gestures designed to paper over the structural cracks so they can be ignored. It’s a neo-Soviet “policy” that has no chance of success.

Advertisements