The Russian Ruble has dropped by 50% to the US Dollar
This drop is mainly due to International Sanctions and the Oil price dropping from $107US to $52US in last 6 months. This is now starting to cause serious hardship inside Russia and the ramifications for 2015 are troubling. Certainly it will cause significant inflation and this is one reason why the Russian central bank has raised interest rates to 17% overnight.
About $100 Billion dollars have already left the country during 2014 seeking safer waters which has caused the central bank to tighten capital controls on the flow of money.
Devaluations of this size can cause runaway hyperinflation which is when local owners of Rubles buy up any fixed assets and trade-able goods before their paper money looses more value. This increases the velocity of money ( the speed the paper money changes hands) which further increases the price of goods. This is what happened in Germany leading up to the 2WW.
There are some concerning similarities to what happened leading up to the WW1 and WW2 when you consider the super powers arguing over Ukraine, 100 years from the conflict in the Balkans that started the First World War. Then consider that Japan went to war when the US put an oil embargo on Japan because of Japans expansionist actions in 1930’s.
Oil is again in the center of the issue and again embargo’s are being used to try and coerce Russia to back down over Ukraine.
There has even been some suggestion that the US administration wants a regime change in Russia and this explains Washington’s actions and rhetoric. It is clear that both the Russian President Putin and US President Obama don’t like each other and especially when Putin out maneuvered Obama in Syria. Could it be that Obama is playing a very risking game of Russian roulette?
The question is – why is the West so upset over Ukraine when Russia has such a long history in that region and share a border with the country. It is only natural that Russia will want to secure its borders and would not want NATO living so close. It is interesting to note that the current Kiev Government was supposedly setup by western powers, after deposing a pro Russian elected Ukrainian Government.
Lets be praying that sound heads prevail during these times as we maybe in store for some rocky oceans in the coming years.