‘Russians Grow Desperate’ – thanks to Putin & his cronies – that’s how the Russians are doing. After the 2/24/2022 Russian reinvasion of Ukraine, the ruble plunged to around 130 against the dollar. By summer of 2022, it was around 60 against the dollar. By 1/15/2023, it was around 66 against the dollar. By 8/11/2023, it was almost 100 Rubles against the dollar:
It is only going to get worse for the Russians, but Putin only cares about his legacy—not the Russian people.
The Russian ruble has continued its steep decline, reaching 95 rubles against the dollar and 105 against the euro this week. For Russians, this is more than the usual psychological blow (many are used to using the exchange rate as a barometer for the economy’s fortunes): it is a tangible problem. The falling ruble accelerates inflation, which was already on the rise due to a mix of high budget spending, rising internal demand and a labor shortage. To ease pressure on the ruble, the government has been pushed into abandoning one of its key budget principles: using windfall oil profits for current spending.
The currency’s decline since the end of last year is based on foreign trade conditions: a growth in imports, which collapsed in the early months of the war due to the impact of sanctions and a stabilization of global oil prices. Since then, the foreign trade situation has only gotten worse for the ruble. In mid-July, for the first time since the invasion of Ukraine, the Central Bank recorded a current account shortfall in Russia.
The overall situation with the Russian budget has not changed: the deficit (projected at 2-2.5% of GDP in 2023) will in any event be partially offset by the National Welfare Fund. The fund currently holds 6.8 trillion rubles ($71 billion) in gold and yuan. By the end of 2024, based on Finance Ministry data, there will be 2.3 trillion rubles ($24 billion) left.
Why the world should care
In itself, the government’s deviation from budget rules is not such a big deal. Indeed, it could be a sign that the government anticipates good revenues in 2023, economists say. However, the fact that Russia’s economic authorities are having to rapidly move the goalposts as the game progresses is a sign that things are spinning out of control.
Yeah, Putin has been trying to ‘move the goalposts’ since 2/24/2022, but all he has done is to expose Russia’s military & economic weaknesses to the entire world—no matter where he moves the goalposts to.
And, his military has been reduced to conscripts and “Mammoth’s Crap” obsolete T-54 Tanks…