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hi welcome back to Joe blogs in today's
episode I want to provide you with an update as to what's happening with the Russian Rubble because there is a lot going on with the currency right now on Wednesday the 27th of November the Russian Rubble had its worst single day for more than two and a half years in fact it was the worst day apart from the day after Russia invaded Ukraine which obviously threw the markets into total turmoil and you may be sitting there thinking well why has it happened now what's going on with the r Ruble that's caused this massive crash on a Wednesday surely a crash always happens on a Monday but the reason why the rubble has been crashing is related to the sanctions on Thursday the 21st of November the USA announced that it was applying additional sanctions against Russia's gazprom bank which is the bank that is partially owned directly by the Kremlin that processes all of the payments for gas prom Russia's state-owned gas business now you may be surprised to hear that gazprom wasn't actually sanctioned up until this point but the reason why full sanctions weren't applied against gazprom was because gazprom was still providing natural gas to some countries in Europe via the pipelines that are landlocked that have struggled to be able to find alternative economically viable resources so these are countries such as Austria Slovakia and Hungary so they don't have any Coastline and so it's been difficult for them to be able to set up regasification facilities and buy in liquefied natural gas so basically this was an exemption that was allowed to continue and gazprom Bank was still receiving in large amounts of foreign currency and the Kremlin was using that foreign currency to be able to go into the international markets and regulate the price of the ruble however the direct results of the additional sanctions that have been applied against gazprom Bank means that the Kremlin no longer has access to that foreign currency and this the main driver of the collapse in the value of the ruble which fell from an opening price of 105 against the US dollar to less than 115 so that represented a fall of around 10% in one day which for a major currency is an absolute disaster and as I discussed in my recent video it wasn't just against the US dollar that the rubble was falling in value it fell against all currencies and at one point during the day it actually fell below 15 against the Chinese Yuan which is the main trading partner for Russia now and that was the worst performance that had been seen since the start of the war in Ukraine under the current Kremlin regulations the finance ministry in Russia has an obligation to make good any shortfalls in foreign currency using the national wealth funds so basically if they're not bringing in enough foreign currency they dip into the national wealth fund now as a result of gazprom Bank being sanctioned the Kremlin has seen a huge reduction in the amount of foreign currency coming into the country and if Russia was to continue with its policy of funding all the shortfalls using the national wealth fund we could see the national wealth fund running dry in a short space of time so in order to address this problem and also to sort out the fall in the value of the ruble the Kremlin has now taken decisive action Tas the official Russian news agency has reported that the bank of Russia has decided not to purchase foreign currency on the domestic foreign exchange Market from November the 28 2024 until the end of the year the decision was taken in order to reduce the volatility on financial markets the regulator said now interestingly this announcement isn't the first time that the bank of Russia has said that it'll no longer be buying any foreign currency in the markets it made a similar announcement in August 2023 when the value of the ruble fell below 100 against the US dollar and if you remember that was the time when President Putin basically told the bank of Russia to do something about it he was very unhappy that the ruble had fallen below 100 level so basically one Ruble at that point was worth less than one US Cent which actually is the same as today it's worth less than one US Cent so the bank of Russia stepped in and basically announced that it would no longer be buying any foreign currency so essentially it closed the market for the ruble and that led to a stabilization of the rubble officially because no trading took place and therefore there was very little change in the value and I think what we're seeing right now is a similar situation the bank of Russia is basically saying it won't be purchasing foreign currency so it won't be trying to stabilize the price of the ruble but the bank of Russia is the market for the ruble because as we've discussed before very few countries globally want to use the ruble it's only Russia that's trying to force that agenda and countries such as China and India which are Russia's two largest trading partners have outright refused to use the ruble they simply won't make payments in Rubles and so the market for the ruble is controlled by the bank of Russia and if they're saying that they're no longer going to be dealing then basically the market is now closed so it's unlikely that we will see major fluctuations in the value of the ruble over the course of the next four or five weeks through to the end of the year because the market is shut so I think what we'll see instead is that the value of the rubble will remain at around 110 against the US dollar until the markets open again but what we're seeing here is basically the closure of information this has been a really useful Source over the course of the last few months that's one of the reasons why I've posted so many videos talking about the ruble because we could see what was going on in the Russian economy the value of the rubble was linked directly to what was happening in Russia and as the value was falling it gave us that message that the economy was really struggling the fact that the bank of Russia is now closing the market and we won't get that data means that we won't be able to see what's going on on a daily basis in the Russian economy but fundamentally it tells us that there are serious problems going on in Russia now so what's the summary and conclusion today well I wanted to post this video because I think what's going on with the Russian Rubble is absolutely fascinating and is also really important because it shows us what's happening in the Russian economy and as we've discussed in many of these videos the problems in the Russian economy are manifesting themselves in the fall in the value of the ruble and this is causing serious problems for Russia because as we've discussed previously if your currency is falling that means that the price of all of your Imports is rising the current value of the rubble is somewhere around 110 against the US doll compared to around 85 around 3 months ago so an item that costs $1 3 months ago would have cost 85 rubles in Russia Today that same so that represents inflation of more than 30% and that compares to the official inflation level of 8.5% so we've got a real mismatch here and I think what's going on is that there's further and further pressure being applied against the Russian economy which is actually causing the economy to contract because interest rates are being pushed up to offset that high rate of inflation so we've got a real Vicious Circle going on in Russia right now and that would cause the value of the ruble to keep crashing Ing and it's likely that if the bank of Russia had taken no action that we could see the value of the rubble getting closer to 150 against the US dollar now the reason why the USA recently implemented sanctions against gazprom bank is because Ukraine which is the transit that's where the pipelines actually go through to get to places like Austria and Hungary Ukraine has said that it won't be renewing the transit agreement so basically it's closing all of the Russian pipelines it won't Russian gas to pass through Ukraine previously Ukraine was being paid handsomely for that it was receiving large amounts of money but it's decided that it doesn't want to take that money anymore it wants Russia to actually suffer in terms of losing all of that Revenue so the USA has taken this as the opportunity to increase the sanctions against gazprom bank because gazprom recently said that it was going to cut off all of the gas to Austria anyway as a tradeoff against Ukraine saying it was closing the Pipelines it's a bit like saying did you dump me or did I dump you everybody wants to be the dumper rather than the dump e in a relationship and this is a relationship but it's more to do with gas and pipelines so slightly different metaphor but anyway that's why the USA has implemented these sanctions now and what we are seeing is within one week of these sanctions being ramped up Russia has run out of foreign currency the Russian Central Bank was unable to stabilize the value of the ruble it's running short of cash to be able to do it and as a result we saw a crash in the rubble on Wednesday the 27th of November and the direct consequence of that is that the Russian Central Bank have now announced that they're no longer dealing in foreign currency they're closing the market and the market for the ruble is closed so we won't see massive fluctuations over the course of the next few weeks but that doesn't solve the problems that are going on in Russia right now the reasons why the rubble have been falling are all related to what's happening with Russian industry and everything in the economy and so just because you stop releasing the data doesn't mean that the problems have been solved in fact the problems may be getting worse we just won't be able to see the real data because the Russian Rubble movement has been a live piece of information that we've been able to access so I wanted to post this video really to give you an update on the situation to explain why the rubble crashed in such a dramatic fashion and why it's likely over the course of the next few weeks that we'll see a stabilization and I'm sure well I'll get lots of comments in the section below from people saying ah the rubble's now stabilized it's at 110 you're talking a lot of rubbish uh it's all a lot of nonsense but the reason why that figure won't be moving much is because Russia is no longer releasing information and it's no longer trying to protect the value of the ruble because the market won't actually be disclosed to anybody so the overall summary of today's video is that the reason why the rubble crashed on Wednesday the 27th of November is directly related to the sanctions which have now been applied against gazprom bank one of the largest financial institutions in Russia that was still receiving large amounts of foreign currency which the Kremlin was using to support the value of the ruble the loss of that foreign currency meant that the bank of Russia was no longer able to support the ruble it started crashing in value and as a result the bank of Russia has decided to close the market it won't be publishing any live data so we won't see any major fluctuations in the rubble but that doesn't mean that the problems in the Russian economy have been solved it just means that we won't see any information telling us that the problems are getting worse so hopefully you've enjoyed today's video you found it useful informative and thought-provoking if you've liked what I've said then please give me a thumbs up thank you for watching this video all the way through to the end and here's something to put a 
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