Bros In The Know: The Russian Financial Crisis

by 6 years ago

Bros In The Know is a new, weekly column from BroBible that highlights a national or international issue which may not be the most exciting topic, but is still important to be informed about. Today we are covering the Russian Financial Crisis. If you have a matter you would like to see covered by Bros In The Know, email the author at david.covucci@brobible.com.

Economic news out of Russia over the past few days has become increasingly dire. The ruble is drastically falling against the dollar, oil prices are sinking lower and lower, and world’s sixth largest economy is teetering on the edge of complete collapse.

Cool!

Well, maybe not to you. You are probably making the pantomime whacking motion for two reasons. One I assume is ‘Fuck Russia,’ and the other is you don’t think this affects you one bit. That’s … sort of true. If Russia’s buying power drops to that of a college kid who has just been issued their first line of credit, it ain’t gonna prevent you from eating 25-cent wings at the bar down the street tonight. It’s 25-cent wings Tuesday, by dammit, and no vodka-swilling, now poor Ruskies are gonna stop you.

You’re right. Nothing that will happen in Russia over the next few hours will change the price of wings today. But, and this is a big but, in 2014, every country’s economy is kinda interconnected, what with the world wide web and all. So if really bad things happen to one, it’s pretty possible bad things will happen to others. That’s what we call the Domino Effect, which is named for when you eat Domino’s and then have to shit later. Not fun.

So, what the fuck is going on with Russia? The biggest issue is that currently the value of the ruble is fucking plummeting. Disastrously so. At the beginning of October, something like 40 rubles were worth a dollar. Today, it’s only 80. Which means that the ruble is like 100 percent more shitty than it was back in the fall, when it was already pretty crappy. Rubles are stupid.

The majority of the decline, though, has come in the past two days and induced a bit of a panic. On Monday alone, its value against the dollar fell a trillion percent (estimated).

Thanks to that, everything in the country is collapsing. From Russian Times:

The Russian stock market also went haywire, dropping more than 15 percent as of 2:30pm Moscow time, after it dropped 11 percent the day before. Sberbank, the country’s largest lender, lost 17.77 percent, and VTB, the second biggest bank, fell by 14.29 percent. State-owned oil and gas companies Gazprom, Rosneft, and Surgut also saw shares plummet.

Not good. In a panic yesterday, hoping to slow the decline, Russian leaders hiked up national interest rates. Tremendously so. It didn’t stop the calamitous price slide, so now it just has the added effect of possibly crippling Russian economic growth for years to come, which is basically like being punched in the face really hard then being punched in the face really hard again.

Why is this happening now? Well, have you bought gas lately? Notice how cheap it’s been? Unfortunately for Big Red, their entire economy consists of nine dudes working a massive oil derrick in Northeastern Siberia. The price Vladistov and Bros (now probably nationalized as Gas Corp) can sell their crude for has fallen drastically this year. Almost in half, from a high of $110 to $60 today. No oil monies for Russia means no economy. So you shouldn’t be surprised to hear that experts predict the country’s GDP will contract by nearly five percent next year.

Which is HUGE. That’s about as much as the U.S. economy shrank at its worst point in the 2008 recession.

So, what’s that spell for the world at large?

Russia is on the verge of complete collapse. That makes for a conundrum. The West is pretty fucking pissed at Russia for its bellicosity in Ukraine, so they are in a tough spot. Bail out a country you just imposed economic sanctions on, or watch as the nation crumbles and possibly takes down surrounding economies?

My vote? Crumble! Russia doesn’t export chicken or hot sauce. Nothing that happens will change the price of those delicious wings.

But, and it’s another big but, as a way of raising national pride during times of crises, Russia has a tendency to saber rattle and also actually invade countries.

So be careful, Kazakhstan. You shouldn’t have built your country so close to Russia.

This Has been Bros In The Know. Did I get anything wrong? Probably! Let me know in the comments.

[Sources for BITK today have been the Washington Post and Fortune]


TAGSbros in the knowinflationRussia