The end?

A missive upon the plummeting Russian Rubble. Never one to pass up the chance to say "I told ya".

"November
When I started to harp about November people mostly thought I was a loon. And yes, in some respects they might even be right. But, not in the regards of applying scientific rigor to data and prognostication from said data.
All of my key data points came into play at roughly the point I stated. Oil and Military production dropped more than a month early, same goes with the numbers of heavy military equipment on the battlefield.
Decline in Russian firepower came pretty much spot on. But what had not started to collapse was the Russian economy. Yes, it was not doing well obviously, but we did not see any big effects like what we are seeing now on the battlefield where Ukraine is holding more easily by the day and are now even openly talking about the potential for a new offensive against Russia.
So, let us talk about the Ruble crash while I try to stay awake in Stockholm listening in on meetings involving politicians hellbent on making me snore.

Ruble Crash
Several factors are behind the spectacular crash of the Ruble exchange rate. Let us go through those.
Firstly, the Central Bank under Elvira Nabiullina has ran out of liquidity. They have burned through the available foreign currency and the gold reserve. They have also chewed through the national wealth funds liquid assets and are now desperately trying to sell direct state-owned assets through privatization.
And during the last 1.5 months the Central Bank have not been able to place any State Bonds, and that in turn has made them run through all of the Ruble that they held.
At this point the Central Bank was no longer able to prop up the Ruble exchange rate to limit the galloping inflation in Russia. The other limiter is obviously the interest rate, but that is already at a damaging level for the economy.
Elvira Nabiullina is extremely powerful in Russia and is working on orders of Putin to keep down the inflation to help stabilise the country against economic derived protests.
But there is another even more powerful person that is now fighting against the Central Bank, and that is trying his very best to get Nabiullina ousted. And that somebody is Putins pall since the East Berlin days, Chemisov.
He is the head of the gigantic Government owned RosTec Military Industrial Conglomerate, the one that is feeding the Russian war machine.
Several RosTec businesses are on the brink of failing due to the high interest rate, business loans are at 37 percent right now. But most companies in Russia are struggling with their interest payments, so RosTec is not unique.
And unlike let us say Severstal and Norilsk Nickel, RosTec is getting money directly from the state coffers, so for that reason there’s no reason to start a war with the Central Bank over it.
Let us return to the little bit about the National Bank under Nabiullina attempting to sell out State Assets to get liquidity. Guess who she is trying to sell? Yup, a lot of it is RosTec companies. And that would weaken Chemisov’s standing in Russia.
So, he went to war against Nabiullina and the Central Bank. First he tried to force them to lower the key interest rate. Nabiullina answered by raising it 2 percent.
He then openly attacked her in Russian media. When that didn’t work he decided that he would whack the Ruble to make her look bad.
So, he started to bid on dollars paying above the exchange rate. And that pushed the Ruble down, hard. In turn this caused an exchange run on the Ruble, and I think he is right now s***ing himself due to it spiralling out of control.
The Central Bank attempted once yesterday to get it under control, but that failed fast enough, and now they are trying again, but with the same result. The means is obviously that they try to purchase Ruble themselves to prop up the exchange rate.
Problem is just that they do not have any liquidity available. After all, the only remaining liquidity is the frozen resources abroad that is currently being chopped up and handed over to Ukraine.
This leaves Elvira Nabiullina sitting in her office, with only one tool left in her toolbox to turn the tide against the Ruble. And that is to further raise the key interest rate from the current 21 percent, into truly uncharted territory.
With such a strong downward momentum, another 2 percent would not work. So, either there will be a series of 2 percent hikes in rapid succession, or one big now. When will it happen? Very soon I think.
And that would rapidly make the Russian economy even worse.
Well, unless Chemisov chucks her out of a window in the usual fashion. Let us play along and assume that he has Defenestrated Nabiullina, what would happen then.
First of all, the pending sales of some RosTec companies would be stopped, and that will in turn make it impossible to get liquidity into the Central Bank, ensuring further plummeting of the Ruble.
Next he would probably start dropping the key interest rate. And that would truly blow stuff up on a national economic level, inflation would explode as the Ruble drops like a stone.
There is an economic term for what is happening in Russia, and that is hyperinflation. It is very hard to get out of that, it requires severe austerity measures from the state, otherwise the economy will shrink while inflation at the same time is high.
But austerity is not going to happen in Russia, not with the war churning through every single available (and borrowed) kopek in Russia. So, public services will be dropped, retirement and other social payments will be dropped, schools will not be funded, and so on and on.
Obviously this will not affect Putin and his Oligarch buddies, they will still be billionaires partying away like they always do. No, those affected will be ordinary Russians not receiving their monthly salaries and payments, while at the same time food and other bare essentials will increase drastically each month.
Is it the end of Russian economy? No, but from this point onwards it will become smaller each month, while at the same time the potatoes will get more expensive. I am sure that Ivan Blyatnitsky will be most impressed over this development.
Historic sidenote: No country in the history of mankind has ever gotten out of Stagflation without outside help and financial support. And with the sanctions running, nobody will give that aid to Russia.
Unless of course the Nectarine Diaperman comes to the rescue handing out cash directly to Russia, and something tells me that he will not do that. El Humpo is after all about HIM receiving the cash, not giving cash to others. "
 
A date for the diary in December:

Tracking the interest rates tells a pretty straightforward problem as opposed to the Vatnk “But Ruzzia GDP in growth and sanctions aren’t working” messaging.

 
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.
 
A substantial army is now camping around the border of Poland/Kaliningrad
Similar movements made in Karelia/Finland.

The cable cutting boat?

" China was presented evidence yesterday about Yi Peng 3. They are now openly cooperating in the investigation, and have presented data on them not being onboard with what happened.
China Daily "Third Parties have used the good name of China in a plot to harm our warm relations with Europe. China is cooperating with investigators from most friendly countries." I think things are about to backfire spectacularly.
Note, the ship has not only refused orders from Denmark to go a Swedish port, it has now refused a Chinese order to do so."

 
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I've worked there. Russian is very much a second language. It's been nigh on 20 years since I last visited but Russia was despised there. There were still statues of Lenin et al getting kicked around on the floor, having been torn down some years prior.
 
I've worked there. Russian is very much a second language. It's been nigh on 20 years since I last visited but Russia was despised there. There were still statues of Lenin et al getting kicked around on the floor, having been torn down some years prior.

Where were you? In the north, east and the old capital, Almaty, Russian was absolutely the first language, many Kazakhs in these areas barely knew the Kazakh language, although the younger generations will be far more bilingual now as Kazakh is a requirement for many occupations. The west and south were more traditional with the Kazakh language and Islam being more common.

There were still plenty of Lenin statues and Soviet relics standing all over the steppe, I used to photograph them regularly. Many are neglected but there was still a mildly influential communist presence noticeable. Out of the Central Asian ‘stans, only Kyrgyzstan had kept more of its Soviet history. Tajikistan and Kazakhstan it was still very easy to find. Uzbekistan had pretty much erased that part of the history and Turkmenistan was inconsistent.

Kazakhs outwardly prided themselves on being a peaceful multiethnic state. I rarely saw any animosity towards Russians and many friendship groups were mixed. Even when that crank Zhirinovsky was spouting off they would just say he was mad. I do remember tensions with Chinese workers (occasionally leading to violence) and a deep historical distrust of China.

All that said, I imagine in the more traditional parts like the west (where the oil workers are) and the south, there are fewer Russians so feelings might be more negative towards them. Certainly wasn’t my experience in my years there though.
 
Where were you? In the north, east and the old capital, Almaty, Russian was absolutely the first language, many Kazakhs in these areas barely knew the Kazakh language, although the younger generations will be far more bilingual now as Kazakh is a requirement for many occupations. The west and south were more traditional with the Kazakh language and Islam being more common.

There were still plenty of Lenin statues and Soviet relics standing all over the steppe, I used to photograph them regularly. Many are neglected but there was still a mildly influential communist presence noticeable. Out of the Central Asian ‘stans, only Kyrgyzstan had kept more of its Soviet history. Tajikistan and Kazakhstan it was still very easy to find. Uzbekistan had pretty much erased that part of the history and Turkmenistan was inconsistent.

Kazakhs outwardly prided themselves on being a peaceful multiethnic state. I rarely saw any animosity towards Russians and many friendship groups were mixed. Even when that crank Zhirinovsky was spouting off they would just say he was mad. I do remember tensions with Chinese workers (occasionally leading to violence) and a deep historical distrust of China.

All that said, I imagine in the more traditional parts like the west (where the oil workers are) and the south, there are fewer Russians so feelings might be more negative towards them. Certainly wasn’t my experience in my years there though.
Atyrau and Bautino
 
Where were you? In the north, east and the old capital, Almaty, Russian was absolutely the first language, many Kazakhs in these areas barely knew the Kazakh language, although the younger generations will be far more bilingual now as Kazakh is a requirement for many occupations. The west and south were more traditional with the Kazakh language and Islam being more common.

There were still plenty of Lenin statues and Soviet relics standing all over the steppe, I used to photograph them regularly. Many are neglected but there was still a mildly influential communist presence noticeable. Out of the Central Asian ‘stans, only Kyrgyzstan had kept more of its Soviet history. Tajikistan and Kazakhstan it was still very easy to find. Uzbekistan had pretty much erased that part of the history and Turkmenistan was inconsistent.

Kazakhs outwardly prided themselves on being a peaceful multiethnic state. I rarely saw any animosity towards Russians and many friendship groups were mixed. Even when that crank Zhirinovsky was spouting off they would just say he was mad. I do remember tensions with Chinese workers (occasionally leading to violence) and a deep historical distrust of China.

All that said, I imagine in the more traditional parts like the west (where the oil workers are) and the south, there are fewer Russians so feelings might be more negative towards them. Certainly wasn’t my experience in my years there though.
Russian is the 1st language. No doubt about it. As mentioned, kazakh is being pushed as the nation searches for its own identity. There is a program to change street names and city names to now be spelt in Kazahk.

I spend a lot of time in Aktobe (North West, short distance from the border) in an area Russia shafted a long time ago. The stories get passed from generation to generation and they haven’t forgotten the land and food grabs etc leaving Kaz tribes starving. Similar to how many of the Irish look at Britain over the last few hundred years.
 
Russian is the 1st language. No doubt about it. As mentioned, kazakh is being pushed as the nation searches for its own identity. There is a program to change street names and city names to now be spelt in Kazahk.

I spend a lot of time in Aktobe (North West, short distance from the border) in an area Russia shafted a long time ago. The stories get passed from generation to generation and they haven’t forgotten the land and food grabs etc leaving Kaz tribes starving. Similar to how many of the Irish look at Britain over the last few hundred years.

That’s interesting as when I moved to Kazakhstan I assumed it would feel like a Britain/Ireland situation, but that wasn’t what I found, I thought anti-Russian feeling would be common. I was in Astana and travelled mostly in the more Russified regions around the north, east and Almaty, so it seems there’s a different undercurrent of anti-Russian feeling in the west.

My experience was that most people remembered that the Russians were initially invited in as protectors (obviously the Kazakhs got shafted), the Chinese were the ancient enemy that might not send hordes over the hills onto the steppe anymore, but could economically take over - hence close ties to Russia and friendly relations with other major nations. The moving of the capital from Almaty to Astana was partly to get away from the Chinese border in the south and to reign in any Russian separatist feeling in the north, hence insignificant Tselinograd became Astana.

The horrors of Soviet rule in Kazakhstan, where the holodomor is an under appreciated tragedy, the Red Terror, environmental disasters, becoming a mass human dumping ground for the gulag and a nuclear test site, were very well understood, but the feeling was that Russians were imprisoned, oppressed, worked and murdered along with Kazakhs and other Soviet nations, so to blame them didn’t make sense.

Anyway, it was a fascinating place and I’d love to return.
 
I was in Astana 3 weeks ago, great city. Almaty needs to sort its air quality out to be great, the mountains are beautiful and cheap as chips to visit. I work in Tengiz so spend time in Atyrau.

All the cities are growing fast as young folk want to be in the cities, not in villages.

If the weather was less extreme i’d live happily in Astana.
 
I was in Astana 3 weeks ago, great city. Almaty needs to sort its air quality out to be great, the mountains are beautiful and cheap as chips to visit. I work in Tengiz so spend time in Atyrau.

All the cities are growing fast as young folk want to be in the cities, not in villages.

If the weather was less extreme i’d live happily in Astana.

I had 5 years (and 5 winters!) in Astana, absolutely loved it. The city was growing as we were there, it wasn’t everyone’s cuppa but I was at home there, and I loved heading to places like Karaganda etc. Winter is harsh and long but still plenty to enjoy.

Yeah I used to head out to the steppe villages a lot, many were almost empty. I visited the sleeping sickness village of Kalachi and the area was like a ghost town. Met so many fascinating people on my trips and the hospitality was humbling.

Almaty is fantastic, had some great visits and the mountains are stunning, Lake Kaindy is well worth the effort to visit. Got to say that Kyrgyzstan was amazing too, one of my favourite places.
 
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