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Custom The Russian Ruble Crisis and Its Aftermath
After the collapse of the Soviet Union in 1991, Russia has faced a severe Ruble crisis. Due to the changes, which have occurred in Russia in 1990s, its economy was in the total chaos. The communist regime with its centrally planned economy was destroyed, and the government made an attempt to transform the old economic system into a market economy. This process led the country to the ruble crisis. The Russian government was in charge for the inflation, which was extremely harmful for economy and people of the former Soviet republics. The former Russian economic structure began to cripple, meanwhile a new one was not built yet. It was rather dangerous to conduct business with Russian firms, because of corruption, ethical and cultural challenges. As a result, the Russian Ruble crisis has occurred on August 1998.
The research asserts that during the communist regime the government kept prices under control, but after the collapse of the Soviet Union this control was removed and free price system was established. This led to serious negative consequences like high prices, high inflation and limited supply of food and goods. The inflation rate was out of control, what led to the instability of the ruble. Due to the false activity of the Russian government and its new economic reforms, many businesses began to fail and people lost their jobs. Because of the severe instability of the Ruble, global businesses did not want to possess business with Russia. The Russian government made different attempts to improve the situation. They printed more money, what only worsened the situation. Another step was to request IMF loans. The IMF gave the loan, but enabled the Russian government to accept the list of expectations, such as to increase government tax revenues, limit the growth in its money supply, peg the ruble to the dollar and reduce public-sector debt. To reduce the ruble instability, Russia printed new currency, which equivalent value was 1,000 of the old rubles. Because of the high corruption rate many international businesses refuse to make business with Russia. Not only economic problems made business with Russia a risky one. Global business owners were scared to provide long-term contracts. Ethical and cultural problems stopped foreign investors to make business in Russia. The available information reports that very often Russian enterprises provided unfair business.
According to the research, there were four ingredients that could trigger the Ruble crisis, i.e. fiscal deficit and debt, a fixed exchange rate, expectations of impending default and the conduct of monetary system. During this period, many Russians were working without pay for months. Employees survived mainly because they bartered goods and food instead of payment. On 17 August, 1998, Russian citizens realized the Ruble crisis by losing all their money that were saved in banks. The consequences of the Ruble crisis are still vivid today. Most Russian citizens could not take their money back. Thus, a great number of Russian employees were suffering from illegal and unethical actions of the government. Many individuals made suicides, because they did not have money to feed themselves and their families. Thus, the Ruble crisis is a bad experience in the Russian history.
Nowadays, different protective techniques, methods, ethical codes are undertaken by governments with the aim to protect their citizens, if financial crisis occur. For instance, the World Financial crisis in 2009 was not so destructive for Russia and other countries, as the one that took place in Russia in 1990s.