Full blown Russian currency crisis was entirely predictable. Russian companies & banks must pay back $30 bln to Western banks in this month but crisis still caught Kremlin off the guard. Ruble is in free fall, desperate midnight hikes of key interest rate by Central Bank chief Nabiullina didn’t help.
So what to do & who’s responsible – two eternal questions hotly debated in Russia.
In my view Putin must understand RUSSIA IN the state of undeclared WAR with Ukraine and the West so his government (stuffed by Liberals of old Washington Consensus school) piece-meal approach will escalate financial crisis which will spill over into real sector and jeopardize his regime.
Whenever I listen to economists debating necessary measures they skirt over stand-off with the West by citing “geopolitical risks”. But nobody tell what will happen if the West or crazy Kiev junta will declare real war on Russia? What will Putin do?
I think Kremlin must sack Nabiullina and Ulyukaev (and Medvedev if necessary) & appoint Glazyev’s team into economic ministries & Central Bank. Some Glazyev’s ideas were quite radical, but he sensed coming geopolitical risks long before the current crisis which Nabiullina, Ulyukaev prove to be incapable of dealing with.
But changing personalities won’t calm markets – ONLY PEGGING RUBLE TO GOLD WILL HELP to bring about much needed macroeconomic stability, tame inflation & restore economic growth.
I know gold price is manipulated by US, but unlike oil gold cannot cost cheaper than certain level otherwise Indians will consume all gold of the world. Besides size of US Fed golden reserves many questioned. I don’t believe in a moment US Fed will dump its gold reserves to make damage to Russian currency. If that will be the case Russia, India and China should buy all American gold on the market.
Pegging currency to gold has its disadvantages, first of all regarding emission of money, but advantages of gold pegging in present circumstances seem to be prevailing.
Anyway Russian ruble since 1990s unofficially pegged exchange rate of ruble to another commodity – oil so I see no big moral problems switching to golden ruble, if Nabiullina think pegging to oil is “free floating” while to gold is not, let her to prove first how is that oil different from gold as commodity?