Post script
"November Addendum
As I was sitting down to write a short addendum I found an email from ~~~~~
In it he pointed out that there have been new sanctions against Russia, and that Chinese banks are turning down Russian transactions. And he also asked which factor was truly behind it.
So, let me begin with Gazprom Bank being sanctioned and cut off from the SWIFT Banking System. It is indeed a hard blow for Russia since it was their remaining “vent” to the Western Economy, at least the last one large enough to handle transactions in gas and oil.
But, the real point I have been trying to get a lot of people to understand is this: There is no single item that is causing the problems, national economy is so complex that there’s a myriad of factors influencing it.
It is if like Russia had suffered a million papercuts from a million papers. Individually Russia could shake off one, or even a thousand papercuts, but in the end it overwhelmed Russia’s economic defences.
At the heart lies that Russia is entirely depending on foreign trade, and with that trade slowly being strangled over time is devastating. And at the same time two other economic fundamenta have changed. Let me explain.
The Russian volume of its economy has remained the same, and it even grew with a few percent. But, it grew by increased military spending, while at the same time the true income diminished. In other words, the Russian economy became dependant on burning its savings account.
And at the same time the Russian war-spending increased, the civilian internal economy dwindled at the same pace. If the civilian economy hadn’t dwindled over time, the Russian economy would have increased by about 30 percent, but it didn’t. Instead, it grew with about 7-8 percent over the period of 2022-2023 and is at a standstill now.
Another metric that is important to keep track of Russia just announced that its tax-revenue is shrinking by 7 percent for 2024. At first sight this is baffling.
How can the tax revenue decrease while at the same time Russian industry wages have skyrocketed due to lack of available workers? The reason is simple, Russia made a mistake, it made the salaries and bonuses tax free for their soldiers. And if you transfer people from working to become soldiers, less taxes will indeed be paid.
It also didn’t help that so many got themselves killed or maimed in Ukraine, and then we can add those 3 million that left Russia on top of the Russian tax-shitcake.
My long-winded point is that there is indeed not one thing that made Russian economy go into literal blood-red, there’s a huge number of factors contributing to the collapse, and in the end what was needed was a catalyst, and economically inclined historians will spend the next century happily arguing which specific factor that sank the ship.
I’m here reminded about what sank the Battleship Bismark, and the argumentation about that. Was it that the crew opened the proverbial bungholes to scuttle her? Was it the hundreds of shells that sunk her, was it the torpedoes that sunk her? And so, on ad nauseam. The reality is that it was the sum of the kicks to the balls of the ship that made it go down. Same goes for the Russian economy.
Reaction
Yesterday I stated that I believed that Russia would increase the interest rate to try to arrest the fall, or just give up and let it slide.
Russia picked a different option. An utterly insane and very Russian option. It closed down all exchange on the internal market for the rest of the year.
From now on no Russian company or citizen can buy foreign currency on the stock exchange. Yes it solved their problem, the Ruble is now deadlocked, frozen in time. All of Russia is now rejoicing over how intelligent the Arseboils of Putin are, and how it saved them from doom.
There’s just one problem, one tiny little problem. Nothing really to mention, nothing here to see dear Russian’s, you just drink your breakfast vodka because the Arseboils have truly saved the day. It is just that…
All Russian civilian goods imports just stopped. You can’t trade goods when you can’t exchange into foreign currency. In other words, for at least a month Russia can’t import potatoes, butter, phones, Christmas dildos, etcetera.
Companies are no longer able to import even unsanctioned spare parts and commodities, and the Russian hospital industry and pharmacies can’t import drugs, medical supplies and medications.
Just a tiny little problem as I stated. “The Dildo of Consequences rarely arrives lubed”, this famous NAFO statement turned out to not be true in the end. Russia neither got lube, nor any dildos. If you catch my drift.
Obviously the Russian government has made sure that the defence industry can continue to purchase goods and commodities that are not sanctioned, and that there’s ways to pay for sanctioned goods on the black market.
But that just got a whole lot trickier and more costly. For quite some time Russia have paid for that with their foreign deposited unfrozen currency, and in gold. But, that cash is almost gone, and the gold is a very rare commodity in the Russian coffers now.
The Central Bank has tried to buy up all civilian gold in Russia, but Ivan is having none of that, he is not selling his gold. Ivan knows that if things truly go to **** that is all that he will have to fend off starvation.
Russia truly looked at all available options, and true to form it picked the single worst option and giggled maniacally while deploying that solution.
So, my answer to ******* about what is killing Russia’s economy, and also Russia as a whole is this. Russian stupidity and stupid Russian decisions from 2014 and onwards, we just helped them along on the way.
Russia did it to themselves. "
And another thing to add.
ruble fall triggers cancellation of food export contracts to russia. https://www.freshplaza.com/north-america/article/9682087/ruble-devaluation-triggers-fruit-export-cancellations-to-russia-amid-soaring-inflation/
bsky.app