Economics/Class Relations

Russia, Rubles and Gold

by Peter Zeihan on April 12, 2022
The Russians are leaning on a tried and true mechanism of sanctioned economies: GOLD! I’ve heard from several corners that this somehow means the Russian ruble is now a gold-backed currency. This is simply not true. Nor does it mean that the Russian Central Bank – and, broadly speaking, the Russian economy – is not in a place of desperation.

Russia is a hoarder of gold. Russia is also a significant producer and exporter of gold ores and boullion. Russia has the gold to prop up its currency for the short term, but instead the central bank is engaged in a very different game: replacing the ruble with an untraceable medium of trade. To do that the RCB needs more gold. A lot more. And so the Bank is competing with Russia’s own citizens in buying gold and dumping the ruble.

The task facing Russian Central Bank Chief Elvira Nabiullina – who I am on the record saying is likely the smartest central banker currently working in the world – is not an easy one. While the ruble’s free fall was largely halted and corrected, Moscow must cover imports, fund its activities abroad, stabilize its currency, and find inventive ways to prop up strategic industries and secure whatever export income in can. All this in the face of the most comprehensive sanctions program in modern history.

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