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Ruble in Rubble
Author: BobR    Date: 12/17/2014 14:47:50

If there's one thing that both America and Russia know well, it's that war is a costly endeavor. Back in the Reagan-80s, we propped up the Taliban as the USSR tried to annex Afghanistan. Between the cost of that war and the faltering Soviet economy, everything collapsed and the USSR retreated back home to try and solve their own internal problems.

The U.S. felt that same pinch when we tried to colonalize Iraq. As the dollar figure on the weekly Ask A Vet blogs here on FourFreedomsBlog attest, we poured over 1.5 trillion dollars into the bottomless pit of Mideast war. We too have mostly left the area after a financial crisis that started in the fall of 2008, and recurs every time Congress can't decide whether to even fund the government.

It's only been about 8 months since Putin got shirtless on his horse and rode westward, annexing Crimea and making the move on Ukraine. At that time, Russia was flush with funds, and their economy was humming along. A funny thing happened on the way to Kiev, however. The price of oil started dropping... and dropping... and dropping... to the point now where gas is almost to $2.00/gal again. The problem for Russia is that their economy is heavily reliant on oil exports. As the price of oil drops, so does the value of Russia.

As does the ruble:
The Russian currency crashed to unprecedented lows Tuesday trading at 80 rubles to the dollar and 100 to the euro, testing Vladimir Putin’s ability to ride out both the economic storm and his clash with the West.

Moscow’s midnight move to raise interest rates to 17 percent failed to arrest the collapse of the currency. To make matters worse, the White House announced that US President Barack Obama plans to approve tightening sanctions against Moscow.

Western sanctions over the Kremlin’s support for the separatist insurgency in Ukraine have all but closed access to foreign borrowing for Russia and contributed to the crisis.

Some economists have predicted similar negative effects to our economy. However, ours is not so heavily dependent on oil. The oil-based companies will suffer losses, but we have very diverse industries contributing to our GDP. And in Russia's case, it's not all about the oil - it's also Russia's (Putin's) bad decisions, with regard to its neighbors and the whole "invasion" thing.

It's too bad for Putin too - he's had his eyes on Poland, and I'm sure he would like to add Hungary to his trophy collection. And waddaya know - Hungary is ripe for the picking:
A protest movement in Hungary over corruption and an increasingly pro-Russian leadership broke out this week, raising questions about whether the former communist nation is on the verge of becoming the next Ukraine. Hungary is more stable than Ukraine, which has been besieged by sectarian conflict for months, and seems less likely to fall into violent conflict, but growing anti-government demonstrations could become another battleground between Europe and Russia.

The wave of Hungarian protests is focused on Hungarian Prime Minister Viktor Orban’s increasingly pro-Russian governance. Many shouted “Europe, Europe!” at Monday’s “Public Outrage Day” protest and one protester told AFP demonstrators "don’t want Orban to take us towards Putin and Russia.” Others chanted for Orban to resign.

On the other hand:
While Hungary was never as close to Russia as Ukraine, an astounding 72 percent of Hungarians said in 2010 most Hungarians are worse off than they were under communist rule when they were intrinsically linked to Russia and the rest of the Eastern Bloc.

You have to know Putin is crying in his borscht over this. So near and yet so far... and expensive. What a lousy time for the ruble to go down the toilet. That's something that can give the pro-western protesters in Hungary a sigh of relief.

34 comments (Latest Comment: 12/17/2014 22:07:31 by wickedpam)
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