Value Of Russian Ruble Turning To Rubble, And Bankers Can't Defend Putin's Currency

Over the course of a few weeks, Vladimir Putin has collapsed the Russian currency and brought the country to the brink of default.

Photo Insert: "All ruble convertibility is over. Putin has destroyed the ruble."

On Wednesday, Mar. 9, 2022, as trading in the ruble resumed on the Moscow Exchange, the currency continued its descent. It’s lost 40% of its value against the US dollar this year, Allison Morrow reported for CNN Business.

At the same time, Russia banned its citizens from buying US dollars, completing the isolation of an economy that once had ambitions to join the global club of financial powers.

All banks were ordered to cap withdrawals from foreign currency accounts at $10,000 for the next six months, moves that could help preserve some of the country’s dollar reserves and support the ruble. Sergey Aleksashenko, a former Russian finance ministry, and central bank official, described the strategy as “incredible foolishness.”

He added: “The biggest mistake monetary authority may make in Russia is to touch private savings — if there was no bank run until now, it’s going to happen.”

The clash between Putin’s ambitions for Russian legitimacy and Russian empiricism are a classic tale of unchecked hubris. As recently as the 2008 global financial crisis, Putin and his merry men were promoting the ruble as a potential alternative to the US dollar, arguing that it should be an integral part of the global financial system.

Russia would become one of the world’s five biggest economies, they claimed, but it is now actually at No. 11. But Putin’s quest to dominate his neighbors — starting with his assault on Georgia in 2008, the annexation of Crimea in 2014, and last month’s invasion of Ukraine — has undermined Russia’s economic ambitions at every turn.

The ruble on Wednesday hit a record low: One US dollar buys 117 rubles. In early 2008, by comparison, one US dollar would buy roughly 25 rubles. The collapse of the currency will be a major test for Putin’s regime. Inflation is rising, depleting the value of its citizens’ savings.

And in an economy heavily reliant on imports for finished consumer goods – smartphones, computers, plus all manner of apparel and food – everyday Russians are in for a punishing era of forced austerity. Charles Riley of CNN Business also reported in Moscow that costs are adding up.

The central bank’s decision to prevent Russians from buying US dollars marks the end of the ruble, according to economist Anders Aslund, a former adviser to the Russian government. “All ruble convertibility is over. Putin has destroyed the ruble,” Åslund tweeted.

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