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Tuesday, December 02, 2014

Russian Economy Going Down The Toilet

The Russian economy, as a result of sanctions, is going down the toilet; the rouble is falling and inflation is kicking in.

Thusfar the Russian Central Bank has staved off using capital/currency controls. However, there is growing internal political pressure within Russia to stave off the decline in the rouble.

It is of course only a short term solution to artificially prop up a failing currency, in the end market forces (or in this case, closed market forces) will have their way.

As to whether it is wise to destroy the Russian economy via sanctions, is of course another question. Whilst the West thinks that this will persuade Moscow to pull back from its Ukrainian adventure, the policy in the Kremlin is geared to a long term (ten year) siege. This is a very dangerous situation for both the global economy and global peace.

Let us hope that the policy makers in the West and in the Kremlin know have plans to pull back from the abyss.

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