Russia's steps to defend the ruble, which has plunged 45 percent against the dollar since the beginning of the year, are doomed to fail, Steve Forbes, editor-in-chief of Forbes Media, tells
Newsmax TV.
The country's central bank lifted a key interest rate by 6.5 percentage points to 17 percent this week and has intervened in the currency market to buy rubles.
"The rate hikes alone won't [work] because you got a collapse of a currency. You can wipe out the income you might earn from that 17 percent interest rate in a day or two," Forbes tells Newsmax TV's "America's Forum."
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"The key thing is whether the Russian central bank knows how to defend the ruble. It is very simple to do." What the central bank needs to do is buy rubles and then keep them out of circulation, he argues.
"But what Russia has done so far is to pump the rubles they bought back into the domestic economy," said the author of
"Money: How the Destruction of the Dollar Threatens the Global Economy – and What We Can Do About It."
So the money supply isn't shrinking. "If you want to defend the ruble, you've got to reduce the supply," Forbes explains. "They've got ample resources to reduce the supply. But the real enemy for [Russian President Vladimir] Putin here is not a lack of resources, it is ignorance. "
Russia's economy has turned into a "plutocracy" to the benefit of Putin's favored oligarchs, Forbes notes.
"The Russian people were willing to tolerate this as long as their own standard of living was going up, but Russia's overly dependent on oil," he explains.
"It has suppressed other parts of its economy that could diversify that economy. So with the collapse in oil prices their economy is in very bad shape."
Putin's bluster can't hide that fact, Forbes maintains. "Plutocrats always end up stealing too much, just like politicos in Washington always ending up spending too much."
Putin was able to divert Russians' attention from the economy with his invasion of Ukraine, Forbes notes. "But the economy is still in deep trouble. He alone cannot raise the price of oil. And if oil stays below $90 to $100 a barrel, he's in trouble." Brent crude traded at $61.91 Thursday morning.
"They get most of their revenue from oil and gas, so he's in trouble no matter how many speeches he gives or how many times he rides on a horse without a shirt," Forbes points out.
As for President Obama's decision to normalize relations with Cuba, "he gave up everything and got in return nothing," Forbes insists.
But he's no fan of the trade embargo. "It worked in the sense that it deprived the government of a source of revenue, but in terms of what difference it made to the Cuban people, zero," Forbes says.
"Remember, the rest of the world ignored the embargo. Europe, Asia, Latin America, Canada have invested money in Cuba and has that lessened political repression? Has that improved the standard of living of the Cuban people? Absolutely not."