Russian ruble used to be worth a dollar (officially), now worth less than a penny. Why?

From "Fortune" magazine, 30 Nov 24:

Russian ruble is worth less than a penny, and their ability to keep propping it up is running low

Since the beginning of this year (2024) the Russian ruble has lost 20% of its value against the dollar, and now trades at around 108 to the dollar.  But the real shocker is that between Nov 21 and Nov 30 it lost 9% of its value--in just nine days. 

The immediate cause is that the central bank's efforts to prop up the ruble have depleted the country's wealth fund--something insiders all noticed.  This means Russia will have little means to prevent a further collapse if it continues to spend more than it takes in.

Earlier in the week the ruble was trading at 114 to the dollar, before improving a bit (to 108) after the central bank halted all foreign currency purchases for the rest of the year.

For the math-impaired, a rate of 108 to the dollar means the ruble is worth less than a penny.  But for decades the USSR claimed the official exchange rate was a ruble was equal to a dollar.  Hmmm...

Bloomberg reports that before the latest drop, liquid assets in the country's "sovereign wealth fund"--roughly the net of exports minus imports--were about $55 billion, compared to $140 billion before Russia invaded Ukraine in 2022.  It doesn't take a PhD to connect those dots.

Of course Russia still earns billions in foreign currency every month by selling oil and gas.  But with western nations having agreed not to buy from Russia (in response to the invasion of Ukraine), most of Russia's energy sales are to China--at a discount from the world price.  Making things harder for Russia is that the slowing world economy has reduced the global demand for energy, which has kept prices lower than expected.

Russia's currency crisis comes as analysts have predicted that the economy will not be able to sustain the war in Ukraine past the end of next year.  For example, Russia is buying drones from Iran and artillery ammunition from North Korea.  Weapons are being used at so high a rate that Russian factories alone can't produce enough to replace supplies.

SO...aside from Russia, this tale should be a strong and effective warning to Americans about how quickly things turn to shit when "your" government mismanages things.  This exact scenario is coming for the U.S.-- almost certainly before 2040--due to our corrupt government absolutely refusing to reduce spending (though Trump may help, it can't be enough).

But of course Dems in congress won't allow anything effective to be done.  The Democrats will stubbornly block any efforts by Trump to cut govt waste--let alone the welfare payments (Medicare/Medicaid) that have doomed us.  And when the government can't borrow enough money in some future month, it'll all turn to shit faster than you can possibly imagine.

Eh, no big deal.  It was a good run while it lasted, and if your kids and grandchildren suffer for it, what does it really matter, eh?   Okay, that's obviously sarcasm, but nothing will happen if we don't win 60 rock-solid senate seats.  And given the Democrat control of 21 states, that won't happen unless Dem voters start to wake up.  Which won't happen either.

Eh, no big deal:  Cuz like the Great Depression or WW2 for Europeans and Japanese, hard times make people tough and resilient, right?  And in the long run everything will be more or less okay--key words being "more or less."  Like Germany or France or Sweden or the U.K:  There will be lots of riots and cars being burned, lots of rapes and murders.  So sort of a blend of Portland and NYC, eh?  But the well-off will still live reasonably well.

Will your kids be in that group?  Hard to say, eh?  You thought you raised 'em with skills and the ability to analyze complex problems, then at Thanksgiving you find they all voted for harris/walz/garland/mayorkas.  So at some point you just have to smile and say "Good luck."

Source: Fortune magazine

https://fortune.com/2024/11/30/ruble-collapse-currency-crisis-penny-us-dollar-wealth-fund-vladimir-putin/