The Russian ruble has lost 50% of its value against the dollar this year. Analysts now predict that the Russian economy will contract by 4.3-4.7% in 2015 which is higher than the contraction which led to the US Great Depression. On Sunday the Russian Central Bank raised interest rates from 10.5% to 17% in a desperate attempt to staunch the ruble's free-fall and capitol flight. It didn't work. There are now three negative forces at play feeding on one another... plunging oil prices, Western sanctions, and panic in the commercial and public sectors to divest portfolio's of the ruble before it becomes worthless. The only choices left now are spending billions in foreign reserves every day to artificially prop up the ruble or to implement capital controls that forbid currency conversions. Neither option is palatable nor guaranteed to staunch the economic bleeding.Russian rouble suffers steepest drop in 16 years
December 16, 2014
MOSCOW (Reuters) - The rouble plunged more than 11 percent against the dollar on Tuesday in its steepest intra-day fall since the Russian financial crisis in 1998 as confidence in the central bank evaporated after an ineffectual rate hike. It has now fallen close to 20 percent this week, taking its losses this year against the dollar to more than 50 percent and stirring memories of the 1998 crisis when the currency collapsed within a matter of days, forcing Russia to default on its debt. The central bank's First Deputy Governor Sergei Shvetsov said the bank would implement more measures to stabilize the currency market, calling the situation "critical".