Yeah, it certainly isn’t untenable in Russia right now. The main issue is that they are running out of levers to pull, so conditions that exasperate the issue don’t have solid counter-balancing options.
Two solid levers are to defend the currency (requires spending forex reserves to buy up rubles) and raising central bank interest rates. We see the reserves are drawing down in OP’s post and the central bank rates are already at 18% (compared to ~5.5% in the US). The high interest rates increasingly handycap your economy as you push them up. At 18%, it is already nearing credit card levels of interest simply to finance safe loans.
Things aren’t dire for Russia today, but they are getting closer and closer to a situation they may not be able to pull out of in the future.
Yeah, it certainly isn’t untenable in Russia right now. The main issue is that they are running out of levers to pull, so conditions that exasperate the issue don’t have solid counter-balancing options.
Two solid levers are to defend the currency (requires spending forex reserves to buy up rubles) and raising central bank interest rates. We see the reserves are drawing down in OP’s post and the central bank rates are already at 18% (compared to ~5.5% in the US). The high interest rates increasingly handycap your economy as you push them up. At 18%, it is already nearing credit card levels of interest simply to finance safe loans.
Things aren’t dire for Russia today, but they are getting closer and closer to a situation they may not be able to pull out of in the future.