December 19, 2014

MEGAN MCARDLE: Russia’s Problems Are Everyone’s Problems.

“Cyprus with nukes.” That’s how someone, maybe me, referred to Russia in an IM conversation this morning. It’s not really a fair comparison; Russia is a vast country loaded with natural resources, not a tiny island banking haven. But it does express a very real fear: that the world is about to experience a major financial crisis in a country that seems to deal with its internal troubles by slicing off bits of neighboring countries.

The ruble is plunging, for reasons that have roots in the falling price of oil. Yet the trouble now runs deeper than that, so the ruble’s problems will continue even when the price of oil recovers a bit. As our own Leonid Bershidsky explains, markets are no longer just worried about oil prices, but also about the Russian Central Bank’s apparent decision to bail out a suffering oil company by printing money.

Luckily, our government would never do that.

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