Russians are reaping what Putin has sown but they are too blinded to see that... WSJ: “The demand is enormous. People are bringing piles, huge piles of cash. It is madness,” said Kamila Asmalova, a manager at a Moscow branch of Sberbank. The branch ran out of foreign currency by 2 p.m., she said. Lanta Bank, a midsize Moscow lender, said its foreign counterparts would be unable to send foreign currency Wednesday as aircraft that typically transport cash are full. Apple Inc. said it halted online sales in the country because of the ruble’s volatility, and IKEA announced it would raise prices there. The ruble’s continued fall despite the Russian central bank’s move to raise interest rates to 17% rippled across global markets Tuesday, fueling a selloff in emerging market currencies and stocks. In the U.S., the turbulence was more muted, as the Dow Jones Industrial Average closed down 0.7%. The yield on the 10-year Treasury, a traditional haven, fell to 2.07%, its lowest closing level since May 2013. Abroad, Russia’s crumbling currency—driven by sanctions and eroding oil prices—raises the threat of a currency market contagion, particularly for emerging economies facing headwinds, such as Turkey and Indonesia. At home, economists say the Russian central bank’s rate gambit is certain to push the country’s faltering economy into recession by raising borrowing costs. Even before the rate increase, the central bank estimated the economy could contract as much as 4.7% next year if oil remains around $60 a barrel. On Tuesday, Economy Minister Alexei Ulyukayev said that the government would introduce some “regulatory measures” on the foreign-exchange market, but that it wasn’t discussing any capital-control measures. The big question is whether Russia’s economic troubles will turn into a real political challenge for Mr. Putin, whose approval ratings remain above 80% and who retains tight control over politics and the economy.
Posted on: Wed, 17 Dec 2014 05:29:11 +0000
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