Russian Winter?

What’s happening in Russia?

Global Market Update - Red Square

Source: Fanpop

At 1 am today the Russian Central Bank raised its deposit rate from 10.5% to 17%. Emergency interest rate hikes announced in the middle of the night are not a sign of strength. Their goal is to stop the collapse of the Ruble, which has fallen from 35 to almost 70 to the dollar. A collapsing currency, international sanctions, and plunging oil prices are overwhelming their economy. It’s reminiscent of the collapse of 1998, when Russia defaulted on its debt and devalued its currency. But their economy has almost tripled in size since then.

 

Global Market Update - Russian GDP

Source: Wikipedia

Investors have already pulled out the equivalent of $100 billion in capital. If rate hikes don’t stabilize the currency capital controls are inevitable. Those might work, but they will cut Russia off economically from the rest of the world. In a modern economy, no country can afford that.

At this point, nobody knows what mischief Putin might dream up to distract his people from high inflation and economic recession. But no matter what happens, it’s going to be a long winter. Let’s hope a falling Ruble doesn’t lead to falling bombs.


Douglas R. Tengdin, CFA
Chief Investment Officer
Phone: 603-224-1350
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By | 2017-07-17T12:23:09+00:00 December 16th, 2014|Global Market Update|0 Comments

About the Author:

Mr. Tengdin is the Chief Investment Officer at Charter Trust Company and author of “The Global Market Update”. The audio version of each post can be heard on radio stations throughout New England every weekday. Mr. Tengdin graduated from Dartmouth College, Magna Cum Laude. He received his Master of Arts from Trinity Divinity School, Magna Cum Laude and received his Chartered Financial Analyst (CFA) designation in 1992. Mr. Tengdin has been managing investment portfolios for over 30 years, working for Bank of Boston, State Street Global Advisors, Citibank – Tunisia, and Banknorth Group. Throughout his career, Mr. Tengdin has emphasized helping clients manage their financial risks in difficult environments where they can profit from investing in diverse assets in diverse settings. –
Leave a comment if you have any questions—I read them all!
– And Follow me on Twitter @GlobalMarketUpd

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