Financial Crisis Will
Dr. Koryagina is senior economist from the Institute of Macroeconomic Research at the Russian Ministry of Economic Development and Trade. Her speech has been translated from Russian. Subheads have been added.
And maybe it really would be better for women to sit in the kitchen, if it were not for the fact that our people so often have to see so many idiots among the men coming across their television screens, and if today's brilliant presentation by Vladimir Volfovich had not been just as incoherent as always—. But, it's too bad he's not here and I have to talk behind his back.
In a short presentation today, I shall try to sketch the development of the research done by our group, which is a group of independent experts studying the world financial crisis, but in a more global context than merely financial.
Our Three-Level Forecast
In the Autumn of 1997, we were requested by a major industrial finance group in Moscow, to draw up such an analysis. We delivered our product to the client at the end of March 1998. In the framework of our analysis, we made a three-level forecast.
Our first forecast was optimistic, and envisaged a devaluation of the ruble, as we calculated, within a factor within the range of one-and-a-half to two, by the Fall of 1998. Our middle version suggested a three- to fourfold devaluation, and our most pessimistic forecast suggested devaluation by a factor of five to seven.
It should be noted that our clients, who were quite well-qualified people—otherwise they wouldn't have ordered such a study in the first place—were skeptical about even our most optimistic prognosis. By June , however, when I had occasion to speak at an open practical-scientific conference, organized by the Ministry of Internal Affairs at the Institute for Combatting Organized Crime, I limited myself to outlining only the pessimistic version, i.e., a devaluation of the ruble by a factor of five to seven that Autumn. To say that the audience was shocked, would be to put it mildly. During the first half of the day, I was sitting at the dais, but after my speech, they were scared to invite me back up to the dais, although the rest of the colleagues, who had been sitting next to me, were still there. I was denounced in the mass media.
Why did I need to discuss only the pessimistic version? In May, the cabinet had been broken, and Mr. Kiriyenko was named Prime Minister. For us, as analysts, this means that history was picking up the pace, and that events would be unfolding in the relatively graver ways we had identified, and possibly somewhat sooner, than our concept of a "black Autumn." And, so it happened. True, it was close to September—but still in August.
The figure of Kiriyenko was worked up quite splendidly, by the forces, who were playing out this scenario. This person was rather widely dubbed on TV, "The kinder-surprise." We called him a talking head, or a talking parrot. This is a totally peremptory person, absolutely sure of himself, who knows absolutely everything about everything. Almost like Vladimir Volfovich, one might say. Although Vladimir Volfovich is still smarter than Kiriyenko, it seems to me—a bit deeper.
In the framework of that June  conference, I hesitated to name the person, on whose behalf the game was being played. Literally ten days after my speech to our policemen, I was invited to appear on REN TV, where I again laid out the pessimistic "black Autumn" scenario, and said that we would have a new Prime Minister by the end of Summer. And when all the relevant events had taken place, and REN TV invited me again, they said: You seemed to have guessed that the default was going to happen, but the Prime Minister hasn't changed. And I said, "It's not yet evening." Two days later, Kiriyenko was out.
Thus, one of the hypotheses about why this game was being played, and which figures were acting in the open, was that the beneficiary was Yevgeni Primakov.
The only unexpected element, when this person really did emerge as the candidate for the premiership, was that Grigori Yavlinsky was the first to bring him up. I have known Grigori for a very long time, since our work together in Nikolai Ivanovich Ryzhkov's working groups at Sosny. He is a very cowardly person, who absolutely lacks his own point of view. He is the original "floating exchange rate"—but a political one, rather than for currency. Furthermore, and I say this as a person who has been living her political life somewhat in parallel with Grigori Yavlinsky—having sat with him, Gaidar, and Volodya Orlov at the conference table in Sosny—it is the case, that with Grisha Yavlinsky there always comes bloodshed.
There was the blood of the Pugo couple, and then some other incidents. Therefore, this was a very frightening prospect. I shall not go into details, but the fact that ultimately Putin came to power, I consider to be positive.
Let me say a little bit, about why our forecast was so accurate, down to the part of the month, even to the day, with the ruble falling already in the first days of August 1998—threefold, and then 4.3-fold. This was very close to the lower boundary of our pessimistic forecast.
Many colleagues here know me, and that I have studied the "shadow" economy of the Soviet Union and then Russia, in parallel with studying the ordinary, normal economy. So, when I was dragged by the ears into politics, as well, while studying our domestic "shadow" economy and expanding that to the study of the transnational "shadow" economy, I unavoidably landed in the realm of analysis that is sometimes called conspiracy theory. This is an analytical technique, a methodology, which makes it possible to fine-tune research and quantitative evaluations, both with respect to time, and with respect to certain other kinds of parameters.
I shall not go in detail into the basis for our forecast, which I shall now present to you. Just take my word for it, as some colleagues in the Ministry of Internal Affairs audience did back then.
My forecast is that major events will unfold, once again, in August. In a strange way, it seems to me that the date may even be known. It will be on Aug. 19. I have provisionally called this scenario, "Tidal Wave XXI," where XXI denotes the new century, in Roman numerals.
The Main Blow Will Hit the United States
Many of the preceding speakers mentioned financial figures, on the magnitude of financial assets, which had reached around $400 trillion in 2000, as against $30 trillion world GDP, and on capital flows. But it is consistently treated as unnecessary to analyze who is transferring that money. Who is the non-resident, with respect to the American economy? Where do these investments come from? If here we bring in our supplementary analysis and methodology, the picture becomes fairly clear, and can be observed, including with respect to the persons involved.
Thus, I make this determination. It will be the United States this time, and it will be a crisis developing at a different rate than the one in 1997-98. At that time, the action was drawn out. Here, it will be more of a precision strike. It will be like the explosion of the Universe. And it will spread throughout all continents. Many governments will be swept away. The monetary and financial system of the world will change.
In Russia, beyond a doubt, the free exchange of currency will be shut down. And the approximately $100 billion, now circulating in cash inside our country, will suddenly cause an enormous shock to Russian citizens. (It should be mentioned that the quantity of foreign currency, functioning in economic exchange to transact deals, is 1.5 times the ruble money supply, servicing economic activity.) It will be impossible to change money. Those who have a lot of money (and I told this to our policemen not long ago, at a follow-up conference held in May 2001) will use their greenbacks to wallpaper the bathroom, where they'll be able to admire the portrait of a past President of the U.S.A.
There will be a change of leadership in the U.S.A., and early elections in Russia. By this Fall, there will be a new Parliament, a different government, but the President will remain the same. Insofar as I nevertheless fear to say too much—and I could say very much—thank you for your attention. God grant that my forecast turn out to be wrong. May God grant that!
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