I am having lunch with Mikhail Kasyanov, the former Prime Minister of Russia, just across the bridge from the Russian White House where his old boss (Vladimir Putin) now works.

(Putin moved out of the Kremlin this year when he handed the Presidency to his Lt. Dmitri Medvedev, and he took Kasyanovs old title – Prime Minsiter – although everyone understands Putin still runs the Country.)

Kasyavnov tells me “the ruling regime is breaking it’s contract with the elite.”

What he means is vitally important in a country that has the largest nuclear stock pile in the world and is increasingly challenging Americans… again!

The Russian economy is melting down.  There are high level rumors of currency devaluation (the ruble in a nose dive). Behind the scenes, Russians with money are dumping the ruble and buying dollars. In fact, banking insiders say they are going to stop taking dollars in deposit accounts, because they can’t take anymore.

The stock market is down more than 70 percent; billions of dollars are lost.

Sources say that of the 1,500 or so banks in Moscow maybe two dozen will be left standing in the next year. Banks will fail in a big way.

Oil is down, affecting the Kremlin’s ability to spend its way out of this mess.

Capital flight – over 50 billion dollars has been transferred out of Russia in the last month, and Putin recently called in top bankers and ordered them to stop it somehow.  How?

In a country that imports 80 percent to 90 percent of its food, inflation will run 20, 30, even 40 percent next year. People who have jobs are suddenly not being paid on time, and many companies are laying off 20 to 40 percent of their employees.

Russians are used to bad news, but this is seriously bad.

So, what does that mean politically for a regime that appoints its presidents and controls press to the point that the crisis has barely been talked about?

Well, it goes like this.  Putin and his St. Petersburg KGB clan have always had a “contract,” as Kasyanov points out, with the inner and upper circles of Russia.  They could do what they wanted to democracy and human rights and, well, just about anything else while everyone got rich on oil money and corruption.

But now that everyone is getting poor very quickly, or at least falling off the ‘Forbes 500′ list like flies, the contract is broken.

That means the Russian elite are starting to look at this regime in new ways.

So, a financial guru friend of mine here says the winds of change may be blowing down the Moscow River yet again next year. But he also says to remember that when powerful regimes get cornered and are under pressure, they become extra dangerous.

It’s getting to be a dangerous time in Russia now.