For some time now, we've been hearing from our Russian friends how poorly the Ukraine economy and currency are doing, but they fail to mention that their economy may not perform any better next year, and their currency is now performing worse. Earlier today, the Ruble had lost more value than the Hyrvnia over the past year. At one point, it had lost about 13% of it's value against the dollar today, and this despite oil rising initially. Over the year, the currency has lost half its value, and today, it exceeded the decline of the Ukrainian currency, falling to record lows. A precipitous drop, which may have imperilled the Russian financial system, was only reversed when the central bank hiked interest rates to 17%! Some are comparing the current situation with 1998, when Russia defaulted on debt and sent interest rates soaring. Russia needed an 18 billion dollar bailout from the IMF, who initially refused to help. That decisions was only reversed under American pressure. Here in the west, we've been basking in Russian gratitude ever since. Isn't it great?! It's fun watching the Russians here mock Ukraine for getting financial aid from the same people they asked for help sixteen years ago under very similar circumstances. Such a high rate is going to smother an economy already heading into recession. The central bank predicts that the Russian economy may shrink up to nearly 5% next year. That was before the huge rate hike. So what's next? This may not help for long. As high rates smother the economy, there will be additional pressure placed on the Ruble. The only remaining tricks the bank has now are capital controls. The rising threat of getting cash stuck in Russia, should controls be implemented, may drive many, including Russians themselves, to convert their Rubles into anything else. Hell, you'd be better off converting your Rubles to cheese. It would hold its value longer, and in a pinch, you could eat it. Biggest rate hike since '98 And the award for worst performing currency goes to... An unorthodox solution? ;-)



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Massive Rate Hike to Halt Ruble Freefall

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