How did it all begin?
I have been glancing at the USD/RUB charts now and then.
These last few days though, I cannot help but stare at them.
All the charts of the currency pairs with the Russian Rubble look like they´ll break the screen at any moment. Most of the big name brokers have suspended trading on all Rubble pairs, except for closing the open positions. The rest who are still allowing trading on this pair, have set their bid/ask spreads at 400-500 pips. The demand for foreign currency in Russia has increased 3-4 times, but 20 massive cents in spread in banks and exchange kiosks in the streets of Moscow has kept the public from dumping the local currency in exchange for US Dollars or Euros.
So, people all over Russia are rushing into shops to buy furniture, jewelry, cars and electronics instead, in order to save on price hikes that without doubt will happen later on this week.
Tuesday was the most dramatic day in this issue as the price fluctuated in a 2,300 pip range.
and it hasn´t stabilized since. The ranges for Monday and Wednesday have been 1,000 and 1,100 pips respectively, so this crisis is far from over.
Many economists and analysts see an inevitable default and a possible recession coming up.
It feels like we´re back to 1998, when a similar crisis occurred and it sparked a soft “revolution” which brought Putin to power.
Could this December 2014 crisis be the catalyst for Putin to be overthrown?
This certainly crossed his mind since he held one meeting after the other with Russia´s Finance Minister, Economy Minister and the Central Bank of Russia board.
The latter decided to make a massive hike in the interest rates, from 10.5% to 17%.
But that only helped the Rubble stabilize for a couple of hours as it resumed the mad volatility afterwards.
How did it evolve?
But how did this happen in only a few days?
How can an enormous nation´s currency and possibly economy collapse in less than a week?
Well, all the factors that contributed to this crises have accumulated and picked up pace during the entire year.
First, was the annexation of Crimea, the Ukrainian conflict and the sanctions imposed on Russia by the US and Europe. The sanctions started out lightly with Russian and Crimean officials being banned from traveling to these regions. The authorities in Russia were too stubborn to acknowledge the commitment of the west and especially Europe on this issue.
Then they expanded the sanctions to companies and tycoons who were in business relationships with the government.
Since then, there have been many other sanctions, with the last batch passing the US Congress on Wednesday.
Russia has a vast amount of natural resources, which have heavily contributed to their economic revival from the 1990s abyss. But they have failed to diversify its economy and this makes it very vulnerable to raw material, energy, gas and oil prices. Most of the ...
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