remembering russia's pain

before disintegration

of the mighty USSR

in 1991

russians had huge money in circulation

all of which

couldn't be spent in russia itself

simply because the money supply was too huge

for the russian markets

to absorb!

so, russians spent it

in buying from other USSR states!

--

but when USSR disintegrated

other fellow states

became independent countries

with separate currencies!

rouble was no longer

worth anything there!

--

huge money supply resulted into

huge inflation!

products and services became very costly.

simultaneous external liberalisation

(as a precondition to getting huge dollar loans

for buying raw materials and essential commodities)

ensured that costly russian goods

got crushed under cheap imports

small corporates went bust

bigger ones barely clung on.

--

rouble suddenly became very very weak in front of dollar

crushing for inevitable imports

superb for nearly impossible exports

--

with the collapse of businesses

ability to pay taxes went down.

without taxes, government couldn't pay salaries

(most russians were in government jobs)

government couldn't undertake infrastructure development

or social welfare.

--

all this while

government couldn't opt for

deficit financing

as the money supply was already very very high

deficit financing would have driven it to suicidal levels!

so, those who had roubles without salaries

could still manage for some time

while others were on street.

--

all that the government could do was

1) either wait till even the rich russians were penniless

and then release more roubles, or

2) wait till inflation had hit peak (and trade had touch its bottom)

hopefully without serious casualties

and then gradually release fresh roubles.

none of these were good options

despite being nothing more than temporary hopes!

--

best options available were

- default on debt repayment saving precious foreign currency

- stop imports except most crucial

- export whatever was possible

- let russian industry stand up on its feet in the absence of imports

- reduce taxes, tax the rich

- not to stop paying salaries, but reduce them

- reduce ineffciency

- reduce payrolls, give others indirect employment

- let corporations and industries make profit

- let equilibrium come over a period of time

------

almost overnight

the communist

closed-economy

superpower

was reduced to a developing

capitalist

open-economy

struggling to remain afloat!

--

this was to be

one of the most painful economic transitions

in the world history

with no short-cut solution!

--

it was 1991 then

today is 2011

...20 years have past

the giant

has silently recovered

from the nightmare!

--

russia

has been forgotten

on the world economic stage

and it is a big mistake!

--

pray nothing ever happens to dollar

otherwise the results will be

hundred times more painful

for 3/4th of the world!