To borrow a phrase from former President George H.W. Bush, Russia appears to be in very "deep doo doo."
The country's central bank raised a key interest rate by 6.5 percentage points, to 17 percent, Monday night in a desperate attempt to control a plunging ruble and soaring inflation.
So far the move hasn't worked. The dollar traded 73.02 rubles Tuesday morning, up 13.7 percent from Monday. And the greenback has more than doubled against the Russian currency this year.
Economists expect Russia to face a recession next year, especially given the nation's dependence on oil, which has dropped to a five-year low. Higher interest rates will hurt the economy too.
And now the financial system is in danger.
"This is essentially a panic situation. The central bank took the most drastic action they could think of," Uwe Parpart, head of research at Reorient Financial Markets, told
CNBC.
"You can expect credit issues facing various companies and banks, so there's a real issue of financial stability for Russia," he said. "It's a pretty bad situation, the only place worse off is Venezuela."
And things might not get better for a while.
"I think there's a lot further downside in the Russian situation," David Riedel, president and founder at Riedel Research Group said. "I have nothing but sympathy for you if you own a lot of Russian stocks."
Ian Hague, founding partner at money manager Firebird Management, told
Bloomberg, "This move [of raising rates] symbolizes the surrender of economic growth for the sake of preserving the financial system. It's the right move to make, and it wasn't easy to make it."
Daniel Tenengauzer, head of emerging-markets research at RBC Capital Markets, agrees it was the correct move. But he told The Wall Street Journal www.wsj.com/articles/russia-moves-to-help-lift-sinking-ruble-1418690337 that a sustained ruble rebound is unlikely without central bank intervention.