Why is there little talk about it? Because it is the ruble and the West, in its arrogance, pride and blind pure stupidity, of all things Russian, still for the most part, thinks of long lines for toilet paper when they think of Russia. That Russia has joined the devaluation game, by letting the ruble float free, has yet to fully sink into the European public mind. But it will soon enough and when it does, a new tightening of the throat and then the belt and then possibly the panic.
Why? Why will the ruble, which has been in a steep devaluation, loosing over 12% in the past 4 weeks, going to cause so much trouble? First a side note: when the Russian central bank decided to float the ruble, a decision that they reached back in 2011/2012 and aimed at 2014, they counted on a slow 10% devaluation over the entire year. The fundamentals of the Russian economy are sound enough, but between the strengthening dollar and euro and the fact that the Ruble was artificially high, the slide has been on. What they have now gotten is a full on slide of over 12% in under 3 weeks and there is no bottom in sight.
Now the upcoming Olympics will slow that slide, as half a million tourists coming in in such a short period will increase demand for Ruble. But this will only last about 1 month and is already starting to appear. Once the Olympics factor is done, the slide will return.
Europeans will start to feel it in a delayed action. First, tourism. In 2013 Russians made up 31.6 million tourists visiting Europe. Russia alone represents 6% of all European tourism and Russians tend to spend big, even when they do not have large means, they do have large savings and Russians tend not to count their pence when on vacation. With the Ruble at all time historic lows against the Euro, that tourism will travel else where, either to European nations who have not adopted the Euro or to SE Asia, Russia's new favorite destination.
Worst hit will be Europe's worst Euro economies: Greece, Spain and Italy. In Greece alone, Russians represent 10% of the Greek tourism. If that cuts in half, Greece's fragile, withered economy will suffer much more. Russians spent over $34 billion on tourism last year with 2/3rd going to Europe. Now Europe may get its wish, to be rid of the Russian tourists. Of course that wish will cost Europe dearly, but the snobbish Humanists will not realize their folly until much later. They never do.
Now the other hit, European exports to Russia, will become much more expensive to the average Russian, while Russian exports to Europe will flourish as Russian products, such as food products to Germany, already popular for higher standards than German domestic production and lower prices will become that much lower priced.
German meat exports to Russia had already fallen by 70% in 2013, due to much stricter sanitation standards, which caught most German producers hold their substandard products. A sharp drop in the Ruble, coupled with a fast growing mass swine production industry at home, will mean a very tight and tough market for German pork, as already happened to US chicken. US pork will equally be hit.
German machinery, chemicals and automobiles will equally slump, only accelerating the trend of German companies setting up shop and major production inside of Russia. In turn, this will cost Germany jobs and Germany is now, by plan, the main and only engine of Europe. Except by converting the rest of Europe into impoverished vassal states, in the longer term, where we are now at, the Germans deprived themselves of markets capable of buying their production and with Russian on the decline sharply, the German economy will feel pain and with it the rest of Europe. Smaller European exporters will be hit even faster as they are already living on the margin.
Will this cause a final run on the banks and collapse of the Euro economic folly? Maybe, but which ever the effects, they will be delayed, as that is how economics reacts, in delay. So if it does, it should make for some interesting TV watching in Summer....make sure you get plenty of popcorn.