Russian Ruble Turns to Rubble

A number of readers here know that I have sometimes written articles for RT.com, owned by the Russian government. I got paid $200 per article via direct deposits from Moscow into my bank account for each article I wrote. Never did I write anything about the US that I was not willing to publish here or on other US sites. There is always enough corruption and shortcomings in any nation to write about, and you all know this site regularly comments on US financial shortcomings, especially from the Fed.

As soon a Russia invaded Ukraine, however, I terminated that relationship with an email to the editors at RT prior to any sanctions going in place. The termination was not about the sanctions and not about the biases claimed against RT and certainly not about the editors. At no time, had the editors ever tried to get me to slant stories against the US or change what I had to say in any substantive way, and they were always totally pleasant to work with and good to their word in paying for articles they requested or approved based on my query to them.

However, with the commencement of a war perpetrated by Russia against a US-friendly nation so close to US allies in Europe, I do not want any ties with the Russian government. I find what they are doing so reprehensible in so many ways that I have spent a lot of time on RT in the last few days writing copious comments on their articles about how wrong Putin is for invading Ukraine. Those comments, to me, were more important than any article I ever wrote for RT, and certainly were not things RT would have ever published as content. I am surprised, in fact, that they have left my comments alone. It would have been a conflict of interest in my opinion to keep receiving Vlad’s money from Moscow by publishing articles on RT while intending to use their comments section day after day to oppose what the Russian government is now doing on a site where Russians will actually read it.

It was, to my way of seeing things, one thing to write for RT when Russia was not acting so brazenly imperial since I wasn’t saying anything different about the US than I was saying all over the US all the time anyway. After all, numerous US companies were doing business with Russia. Why shouldn’t I? However, my opinion now that Russia has gone full empire in Putin’s invasion speech is that no company in the world should do business with Russia because it feeds their economic engines, which currently feeds their assault on Ukraine as well as their encroachment on all of our NATO allies. I’ve become very clear-cut in my view about this because, in my view, this issue presses one to take a clear side and not waffle about their position or support.

Writing for RT became quite another experience in my heart, which felt sick as soon as Russia began to invade Ukraine, a nation never aggressive toward the nation of Russia that I know of. (Note, I said “toward the NATION of Russia.” I’m not weighing in on what Ukraine may have or may not have done to ethnic Russians in Ukraine because I don’t know how much of that is lying Russian propaganda — like all the nonsense that Vlad the Impaler would never invade Ukraine — and because Ukraine, itself, took that to The Hague this weekend to have the world court try the matter. So, I’ll let the court decide that, but the fact that Ukraine brought the matter to court indicates to me there is more to the story than what Russia has been claim; or Ukraine wouldn’t want to air it all out in court, but we’ll see.)

I want a clear boundary line of my own between me and Russia now that it is attacking Ukraine so that there is no question which side I stand on, regardless of former wrongs on both sides. That’s what I mean by being “clear-cut.” I want a bright red line. So, while my choice meant losing as much as $800 a week in income — significant to me at a time when I also lost my main job due to not taking the vaccine as mandated — as well as the opportunities that were twice given to me by RT for television interviews on major global media (not something I’ve ever experienced), my heart goes out entirely to Ukraine as I am sure the hearts of most Americans do … or, at least, as the heart of every American I know or can imagine does.

There are issues as stake here vastly more important than money, which is why I am not concerned about the costs of sanctions to Americans like myself. I will absorb them as well as the loss of income in preference to watching Vladimir Putin try to resurrect the old Russian empire as he tries to subjugate Ukraine. I am sure most Americans feel the same way. There will be costs; we’ll suck it up because it is the right thing to do.

The hypocrisy of nations, including the US

Here’s another way in which I think we need to be clear-cut: I’ve heard it many times this weekend while I was most likely burning the bridge behind me to Russia for good with my comments on RT: “How can you criticize what Russia is doing when the US has been so imperial for years or when Ukraine’s government came about by a US coup and is run by Nazis? Who are you to talk, being a citizen of imperial America?”

No doubt Amerika is tainted with lies all over its media politics and scandals and imperialism and financial corruption. That’s why I write this blog — to keep a laser light shining on the corruption, the lies, the ineptitude and the bad economic philosophy. So is the UK. So is the European Union and other European nations, AND SO IS RUSSIA! Likewise, Ukraine is far from being a pure country and has as many Nazis as the US … or as Russia.

Therefore, arguments about whether one side is pure enough to stand up against another nation for its wrongs only add up to saying no nation ever has the moral right to confront the wrongs of another, and no one from within that nation has such a right, as all are impure, many in the same imperial ways at different points in time as Russia. In that case, where does imperialism ever stop? (But we still need to stop it in our own nation, too.)

I am encouraged to see the US and its NATO allies and other nations unite around Ukraine. To be certain, this is a perilous situation in that Putin has three times in the past week or so used his nuclear missiles to intimidate any nations that threaten to interfere with his plans — first when he launched nuclear-capable missiles from the Black Sea just before his invasion of Ukraine to flash his power and show off loud and clear, saying, “Remember, we have these!” then when he used them in a potent verbal threat as a tool to keep all nations from interfering with his invasion of Ukraine by saying, “Any nation that interferes with what Russia is doing in Ukraine will immediately experience the gravest of consequences they have ever experienced;” and then when he announced that he was putting all of his missiles on some kind of undefined higher level of readiness that is not written in Russian nuclear doctrine but that sounds like attack readiness. This he did as soon as serious sanctions were imposed.

I am inspired and thankful to see that no nations backed down from Putin’s nuclear threat, perilous as that is. One can’t usually count on such decisive strength from Europe, but Europe has been strong in all of this and has been clear-cut, itself, as one must be with an aggressor like Putin who seeks to exploit weakness. While Europe showed some reluctance on some sanctions, I recognize those will hit Europe much harder than the US so that it has taken a few more hours to work out the details to minimize the damage to Europe. That it only took hours is, in itself, stunning to me, given Europe’s propensity to argue over such things for years.

In just half a week we saw all of this take place: Strengthening of NATO arms and financing and troops increased. More nations asked to enter NATO. Numerous nations sanctioned Russia as intensely as any nation on earth has likely been sanctioned or very close to that, and numerous nations started running arms into Ukraine while the US promised Monday to deliver $350 million in arms to Ukraine.

At the same time, I am equally thankful to see that NATO is not flapping its silo doors as Putin has done, and NATO is honoring its commitment not to fire on Russia unless Russia attacks one of its member nations first. That makes it clear in my mind that Russia has far less to fear from NATO nations than NATO has to fear from Russia. It is Russia that is throwing nuclear threats all over the place to use its nuclear abilities to leverage the world against helping Ukraine. I have heard no hints of nuclear threats from NATO nations during Russia’s nuclear alarms and no NATO soldiers firing at Russia so far, in spite of Putin’s brazen threats. May it remain so. While the nations of the world have laid siege against Russia by financially cutting it off and physically cutting off many transportation routes, etc., they stand down and stand by without firing a shot from their own militaries. May it remain so.

Here is another thing to be clear-cut about: Russia started this war, regardless of the thousands of things in the background that may have inclined them to start it. This actual war — the all-out invasion — began with a pack of lies for weeks on end to buy time for Russia to build up and position and train its forces for the road ahead. It, then, launched an all-out invasion of a nation that didn’t attack it, doing exactly as the US warned the entire time Russia was going to do.

With those events, American intelligence finally began to restore its badly dented reputation. There were no false yellow-cake claims this time or WMD warnings made by the US administration this time — just straight truth, and Putin immediately went about the job of proving it all true, though silly people quibbled over Biden being wrong about the timing of the first day of invasion, as if Putin couldn’t change the day in a heartbeat because Biden had warned about it in order to keep everyone a little off balance.

So, to be clear, the nuclear threat is already in play. It was launched by Putin, who has now fully demonstrated the need for NATO as that is all that keeps Putin from taking more. Notice that he has not ever tried to invade the nuclear-armed NATO nations as he has so many others around him. Meanwhile, NATO has still made no nuclear threats against Putin — not a breath. You can say, as Putin does, NATO’s presence is a threat; but NATO has behaved itself with respect to the sovereignty of Russia within Russia’s own boundaries for decades and even largely when Russia has reached outside those boundaries. Even now, it does not talk of using its nuclear weapons like Putin freely does.

The war was also launched by Putin. Neither NATO, or the US independently, committed any act of aggression or provocation for this particular event here and now. Of course, if we want to dig back through history for claims of provocation, it is abundant against all sides. There is no pure nation; but this is a time to say all over the world, “These are the boundaries, however rightly or wrongly they got there, as all boundaries have, and it is time to learn to live with them,” or we can just fight wars forever trying to change boundaries to endlessly right the perceived wrongs of history over which none of us will ever fully agree nor over which, unless quite recent, we had any influence or responsibility.

For that reason, I don’t care about all the history Putin has laid out in his invasion speech and earlier speeches as his basis for taking Ukraine back in one form or another — most likely as a vassal state with a Putin puppet government in place. That includes the coup against the democratically elected pro-Russian government of Ukraine the US wrongfully sponsored in 2014, which I have spoken against and sometimes written against. Russia has an extensive history of its own imperial aggression, and Putin has made clear he wants to restore some form of the old Russian Imperium. So, I’m thankful to see the world surround him and say decisively and immediately, “That all ends here.”

Blaming other nations for your own aggression is a kindergarten argument that says, “Mommy, Johnny hit Eric, so it was OK for me to hit Sammy.” No, it doesn’t work that way. You don’t get to justify your own invasion because someone else has invaded nations at other times because that path of reasoning is nothing but an argument for eternal war. Those of us who are US citizens can try to stop the US from its entrepreneurial invasions and foolhardy adventures in the future, and I hope we will, but we can never undo those in the past, and we should not allow that past to hinder us from standing against imperial ambition in the present while we stand against our own from our own leaders.

US or NATO sins in the past do not give Russia carte blanche to do the same. If we only let pure nations take a stand, no nation is eligible. If we only let pure people judge the actions of other people, there are no fit judges. So, it is inevitable that Russia is being confronted by hypocrites who have done the same kinds of things, but at some point the imperial ambition has to stop, and letting Putin conquer Ukraine and, in one way or another, tuck it into his imperial belt would be, in my opinion, gross negligence on the part of the rest of the watching world. That is why I am encouraged to see so many nations take decisive action.

Sanctions are an act of war!

Let us also not assuage ourselves by thinking sanctions are not an act of war. Sanctions are nothing but a modern form of siege. Since when has laying siege to an entire nation not been an act of war — cutting it off financially, cutting it off physically? We know that will have the effect of starving out the people. Sieges and sanctions always oppress the people of any nation where they have been enforced. These sanctions will certainly cause great human suffering, so let’s not pretend they are not a modern form of warfare. They may not be fought with weapons or shed blood, but they are as much warfare as cyberwar is. We don’t hesitate to label international cyber shutdowns by one nation against another as a from of war.

However, it is Putin who began this invasion against Ukraine and Europe’s flank. The siege is our response to take the war back to Russia on Russia’s own turf. So, as most of the world lays siege against all of Russia, it might be good to note that Putin’s threats of nuclear attack may very well be over the sanctions as being “interference” with Russia’s plans. It would be shortsighted to say it is just about moving arms to Ukraine with the idea that, if we avoid supplying weapons to Ukraine, we can avoid nuclear war. Putin warned very generally against “interference,” and sanctions are major interference against his war effort, seeking to cripple him back on his own home front.

For clarity’s sake, we should not delude ourselves into thinking, then, that sanctions are less warlike or safer from Putin’s threatened nuclear reprisal — that, if we just steer clear of helping Ukraine with arms, we’ll be safe. If the sanctions don’t hurt much, Putin may weather them out, having weathered many others out. If, however, they result in thousands of Russians starving to death in the cold, as sanctions are actually intended to do and must do if they are to succeed, things will get pretty desperate, and desperate men do desperate things.

The alternative to arms and sanctions is to let Putin walk right over Ukraine because of his very real nuclear threats. He’d love that, and we’d be showing the whole world that doing that works. If you do that, how often will nuclear threats be used by Putin to take more and more of the old imperium back under his control to right the wrongs he perceives from the past? Where does it ever stop if not right here, right now?

Oh the other hand, if these sanctions don’t result in financial cataclysm that leaves Russians to starve, ugly as that sounds, then the entire enterprise will be completely useless because the hope of sanctions or siege is really always that you eventually starve the enemy into compliance by attrition. Sanctions have no magic; that is why they so seldom accomplish anything. They work only if they inflict great pain even to the point of death. As we’ve seen with North Korea and Iran, sanctions are almost useless even when the pain is severe.

That is why sanctions do not obviate the need to supply arms to Ukraine so Ukrainians can fight their own battle with enough force to win. Sure, even Ukraine is far from pure as the driven snow and has done its own vile acts that helped get things to this horrible point; but we’re here now, and nothing that has been done justifies Putin’s CLEARLY EXPRESSED imperial ambitions of restoring Russia from the greatest catastrophe in modern history and righting the wrongs of innumerable past border changes, etc., etc. by slaughtering Ukrainians and severely damaging their nation.

We’re in this, and the situation is even more dangerous than the Cuban Missile Crisis in my view because it is right on the border of Europe, threatening all nations that try to interfere with Putin’s current plans, and many of those nations are, unlike Cuba, already armed with nuclear missiles and are at short distance from Russia’s missiles, allowing little time to respond. This is the Cuban Missile Crisis on steroids.

That doesn’t mean, however, the best answer is to cower and let Putin intimidate the world into standing back while he seizes control of Ukraine, which he has blatantly stated more than once does not deserve to be a sovereign nation. His invasion speech made it abundantly clear that all of this is as much about righting what he sees as the worst calamity of the last century — that being the fall of the Soviet empire with respect to which he is particularly obsessed about getting Ukraine back. It is also more dangerous because, frankly, Putin looks a little unhinged, but letting an unhinged man seize more power does not make an unhinged man less dangerous.

The goal, of course, is not to starve Russians for the sake of hurting them but to starve them until they rise up and fight their own war internally, whether politically or violently, to end the scourge of oppression Putin has brought upon them. It is their government. They elected it. They must wrest it back under control. As they cannot take up arms against the numerous nations laying sanctions, their choice is to suffer greatly, maybe even to starve in some cases, or fight the war, themselves, on Russia’s turf.

The ruble crashed into rubble

While the so-called “peaceful” sanctions are anything but, the good news is they are wrecking considerable havoc overnight. They have actually had leveraged impact due to Putin’s War, itself, and the existing fragility of the global economy, and especially Russia’s long-starved economy.

The ruble has fallen off a cliff in just a few days to its lowest level ever against the US dollar!

Russia’s central bank was cut off from most international transactions, sparing only those transactions that would hit European allies as hard or harder than Russia. To stop the crashing ruble, the Russian Central Bank (RCB) doubled already high interest rates that had been set against already high Russian inflation to a whopping 20% to stem further collapse of the ruble.

That move saved the currency from further decline and even bounced it back up some, but that solution means Russians will be under greater strain, regardless, because most credit costs will soar at a time when prices are also soaring all over the world and when economies are sinking into recession everywhere, Russia’s in particular now that it is under near total sanction. So, the RCB was forced to tighten very quickly into a rapidly deepening recession.

“It’s going to ripple through their economy really fast,” said David Feldman, a professor of economics at William & Mary in Virginia. “Anything that is imported is going to see the local cost in currency surge. The only way to stop it will be heavy subsidization.”  

AP

But subsidization with what money when most money has been sanctioned out of circulation already? Printing more rubles inside financial institutions that still function to make up for those rubles frozen out of circulation is the likely answer, but that may easily overshoot mere replacement and cause more inflation, making the problem worse. It may also be more easily said than done.

As a real cost of the sanctions, Monday saw runs on Russian banks, leading to temporary bank closures and long lines around the block at ATMs where money is dribbled out on demand. That is instant on-the-ground pain. As a result, the European subsidiary of Russia’s biggest bank came to the brink of collapse over the weekend.

Russia’s government was also frozen out of $630 billion in emergency funds, including foreign currency and gold, which Putin had set aside to fortify Russia’s financial system precisely for times of financial meltdown like this under sanctions or the weaponization of the US dollar.

Russia’s stock market continued to crash so badly it had to be shut down completely on Monday. Shares of Sberbank in London plunged by 70%. Gazprom, down almost 40%.

Here is the leveraging effect: The fall of the ruble relative to most currencies due to financial sanctions will make the cost of imported goods from the few nations still trading with Russia much more expensive as will the greatly diminished supply of goods going to Russia due to trade sanctions. Cutting supply of goods via trade sanctions raises prices all by itself; cutting off financial institutions makes it hard to find ways to pay for the goods you can find. Inflation was already high, but raising the cost of credit so those without money can’t get more money compounds all of those problems. In one day, Russia was handed a massive mess by the majority of the word. Now it gets to sort it all out … as even more sanctions are likely figured out and put into place day by day, tightening the noose.

SWIFT, of course, was mostly cut off, which cripples international financial transactions, but perhaps more meaningful and interesting, even if far less potent, is that SWISS was also cut off. Switzerland broke with its resolute neutrality stance for the first time in history and sanctioned the Swiss bank accounts of Russian oligarchs, one of whom was already ranting on Russian television over the fact that he no longer has access to two of his Italian villas — poor billionaire — and two of whom are now publicly pleading with Putin to find a path to peace. The nearly immediate determination seen by Switzerland to squeeze sacrosanct Swiss bank accounts at the cost of ending decades of neutrality had tremendous symbolic value for demonstrating just how intensely Europe and the world stands behind Ukraine and against Russia’s Putin government. That was a sanction I think few if any saw coming.

Putin and his buddies have now all been sanctioned by multiple nations, including the US, which puts Putin in the rare ranks of only three other national leaders — King Assad of Syria, Khameni of Iran, and Kim of North Korea, the KKK of the new axis of evil. Since they are coincidentally all Putin’s best buddies, with him being the last to join and make a foursome, they make a cozy country club of maniacs. That won’t hurt Putin much financially because he lives in palaces bought and paid for by the Russian government with elaborate services also bought and paid for by Moscow in spite of reportedly owning comparatively little as part of his own personal wealth; but it symbolically assigns him to some pretty low company in the world’s eyes, so it is personally disgracing to enter this low-life club of world-sanctioned cast-offs.

The great petroleum-exporting nation may even find its tanks running out of fuel. I don’t mean the storage tanks at petroleum tank farms. I mean the tanks running on tracks across Ukraine. They may run out of fuel before they make it to Kiev as Ukrainians have successfully slowed their advance to such a meager crawl they idle away their fuel along a highway that has piled up into a now seventeen-mile column of bumper-to-bumper tank traffic, lining both sides of the road, which may make it hard to move fuel supply trucks to the tanks and food and water. One can only hope Ukraine somehow manages to strafe the perfectly tidy line with stinger missiles and take out the whole column so neatly lined up for them and stalled in place as it is. That would be an astounding battle victory as Russias tanks and armored vehicles sit there like a row of ducks, but I’m sure there are plenty or factors that make that harder than it looks via satellite.

With his emergency reserve fund cut off and the RCB cut off and so many other banks cut off and SWIFT — the system used internationally to move money between banks — mostly cut off, Putin may even be out of money by the time his long column of tanks reaches Kiev. Well, that may be a little wistful, but at the slug’s crawl they have been creeping along at, it’s not impossible.

In fact, their pace is so slow that Putin is reportedly enraged at the bogging down, so to speak, of his barely advancing army. Who can know for sure if he is enraged, however, since he has lived throughout the COVIDcrisis as a holed-up hermit, rarely taking meetings in person, sitting at the far end of extremely long tables to face the few people he does meet with because he is so paranoid about getting COVID? Many speculate his COVID paranoia may account for his mental decline. (It also may explain why the only topic I was told by RT was expressly off limits was anything contrary to vaccines or the CDC position on COVID. Apparently, Putin is a big believer.) He’s hardly seen. His generals and others have to do routine stool samples to prove they have no infection before meeting with him. No wonder they had such grumpy looks on their faces when he was informing them of the possible need to go full nuke. There are few acts more disgraceful than giving stool samples. That alone may give them reason to rebel, though one would hope greater sense about nuclear war would cause them to find a reason and a way to remove Putin from power as non compos mentis.

All of that and so much more, really is not bad for just a weekend’s work! And many of the sanctions haven’t even had time to be fully implemented yet!

Here is what I find most impressive: In just one week’s time, Putin has turned Russia into the lowest pariah state on the planet with very few nations even slightly hesitating from taking action against Russia and with the citizens of all nations that have imposed sanctions strongly behind their governments in spite of the fact that sanctions will mean even more inflation on top of the inflation we already have when we cannot afford more economic disruption.

Putin has succeeded in nothing so much as superbly and tightly uniting the world against Russia and in support of Ukraine faster than any global response any of us have ever seen and to a broader extent than ever before. If he is the genius TheRump claims he is, he has become a demented genius, particularly talented at destroying Russia.

It is no wonder Putin has tried for years to insulate Russia from dollar dependency. He new what he was eventually going to do, and had some idea of the increased sanctions he would face. It just didn’t work out for him as smoothly as he thought he had prepared for because he clearly underestimated the unanimity and the visceral outrage most of the world would have toward his aggression against Ukraine. The success of his Trumped-up genius is that, by trying to diminish NATO via attempted conquest of Ukraine, he has managed to reunite NATO to a level of vigor, financial empowerment and expansion and vigilance within a single week that it hasn’t demonstrated in decades, making sure he has a LOT more NATO for the rest of his life than ever before. Now that is some genius at playing the world, as Trump said.

In just one week’s time, we have also seen the most stunningly rapid decline of a nation I have ever witnessed, and I lived through the collapse of the Soviet Empire in my thirties when I spent a summer with a group of Russians who were sailing in replica wooden ships on a voyage commemorating Vitus Bering. They arrived in Seattle where I lived before I moved to Hawaii. They had a broken mast and a few other problems and could not get their ships repaired because their 2,000,000 rubles became worthless in the US under Gorbachev’s devaluation of the ruble during their journey. So, they were entirely dependent on local hospitality and fundraising for their repairs. I spent the summer having them over for dinner or dining in their galley on scary-looking canned Russian meat, sharing our condo with them and the swimming pool, letting them use the phone to call their wives or girlfriends in Russia and even sailing the one ship that was still in good shape around Lake Washington. Because we spent a lot of time together right at the crux of the ruble’s collapse, I saw what the Russians went through back then.

That was nothing, financially speaking, compared to the present unfolding catastrophe. Putin has single-handedly thrown Russia into a total economic collapse worse than the one he railed against only days ago when he began his attempted conquest of Ukraine. Russia will end up in the dust bin of history unless and until good Russians unite against Putin to rapidly turn this around and say, “This is not our war!” The world is not going to let up otherwise, so time is not on Putin’s side.

Therefore, thank God, tens of thousands of Russians are now trying. May they succeed before the sanctions cause them great harm as sanctions are fully intended to do if they are to work at all because I’d like to sail with my Russian friends again some day if we can ever put this behind us. For Ukraine, putting it behind them will be a lot harder, and my heart fully goes out to them in their struggle, and I admire their courage.

My next post will be for my patrons only on the housing bubble bust.