The Russian Economy: A Ticking Time Bomb
The Russians are boasting about the ruble’s strength against the US dollar. However, this is nothing more than a product of the "delayed economic catastrophe" strategy. To understand the situation, let’s take a closer look at the factors contributing to this impending disaster.
The Strong Rouble: A False Sense of Security
Perhaps some people remember the strong Soviet ruble in 1990, with an exchange rate set by the State Bank of the USSR, when 1 US dollar cost 60 Soviet kopecks. A year later, both the exchange rate and the USSR collapsed. The situation is quite similar, but it requires an explanation. The Central Bank of Russia is fighting inflation with high interest rates on loans and deposits. This is killing the Russian real sector, which has already reached a crisis of non-payments, and this is the first phase of economic destruction.
The Consequences of High Interest Rates
High rates encourage companies not to take out bank loans, but to delay payments (it is cheaper to finance working capital this way). Delayed payments lead to a slowdown in production. At the same time, high rates are killing real lending. The inefficient Russian economy cannot withstand such monetary pressure for long. Therefore, the Central Bank of the Russian Federation needs to move to a cycle of rate cuts. However, due to the high costs of the war, the Russian Central Bank has started financing an ever-increasing budget deficit.
The War Effort: A Catalyst for Economic Disaster
The intensity of the war also plays a significant role in this vicious cycle, which is sucking the Russian economy into an economic catastrophe. If Ukraine is "richly" shelled with "Kinzhal" and "Iskander" missiles every week, military spending becomes a catalyst for the growth of the budget deficit. To suppress inflation and accelerate the onset of macroeconomic conditions for lowering rates, the Central Bank of the Russian Federation strengthened the ruble, thereby reducing the revenue of exporters, who are the backbone of the Russian economy.
The Vicious Cycle of Economic Destruction
With a strong ruble, the Russian budget’s revenues from exporters fell, which, against the backdrop of a decrease in the "tax" price of oil, is pushing Russia towards disaster and further inflating the deficit that the government has to finance. If the ruble exchange rate is allowed to reach 120 rubles per dollar, inflation will rise, and the high interest rate will have to be maintained for a longer period. Under these conditions, it is better to use sanctions and intensive combat operations to push the Russian Federation into the next phase of the crisis, when the Central Bank will simply be forced to weaken the ruble and will no longer be able to raise rates, because there is already a crisis of non-payments.
Conclusion
The unfolding of such a scenario is quite real, and the longer the Central Bank of the Russian Federation maintains a strong ruble, the harder it will be for Russians to climb out of the economic death pit. The Russian economy is a ticking time bomb, and it’s only a matter of time before it explodes, causing widespread economic devastation. The international community should be aware of the impending disaster and take necessary measures to mitigate its effects. The Russian people will ultimately bear the brunt of this economic catastrophe, and it’s essential to consider their welfare in any future economic or political decisions.
