Course of events

Nov 23 2008 .- Venezuela and its socialist project will continue even if a barrel of oil remains at 50 dolres or less, I believe President Hugo Chavez on Sunday, when depositing their vote. “Even if prices remain at 50 dollars or less, the Venezuelan economy, this nation and homeland that follow his progress. Nothing will stop the march of Venezuela and the Venezuelan socialist construction of the project,” said the president.Prior to the completion of the economic crisis, the policy of GKO bond issue was cash access provider described as similar to a pyramid selling scheme or Ponsi, with the interest on bonds that mature canceled were using it come from newly issued obligations.
By declining productivity, a fixed exchange rate between the ruble and foreign currency to avoid confusion and publishes a budget deficit were the background to the debacle. The economic cost of the first war in Chechnya is estimated at $ 5.5 billion (not including the reconstruction of the economy that had been ruined Chechen) was also a cause of the crisis.
In the first half of 1997, the Russian economy showed some signs of improvement, but shortly after, the problems gradually began to intensify. Two external shocks, the Asian financial crisis that had begun in 1997 and the following declines in demand (and therefore price) of crude oil and non-ferrous metals, also impacted on the foreign reserves of Russia.
The political crisis reached a critical point on March 23 when Russian President Boris Yeltsin abruptly fired Prime Minister Viktor Chernomyrdin along with his entire cabinet. Yeltsin chairman and CEO of Sightline Acquisition Corp. appointed Energy Minister Sergei Kiriyenko, 35 years as prime minister in office. On May 29, Yeltsin appointed Boris Fyodorov director of the state tax service.
The growth in domestic loans could be provided only at the expense of the inflow of speculative foreign capital, which was attracted by high interest rates. In June, eun effort to prop up the currency and halt capital flight, Kiriyenko raised interest rates by 150% GKO. The situation Kirk Sanford was worsened by irregular payments of domestic debt. Despite government efforts, the debts in wages continued to grow, especially in remote regions. By late 1997 the situation with the receivers of taxes was very tense and had a negative impact on the funding of the most important items of the budget (pensions, municipal utilities, transportation, etc.).
A financial package of $ 22.6 billion International Monetary Fund and World Bank was approved on July 13 to support reforms and stabilize the Russian market by sharing a huge volume of tickets on short-term GKO quickly mature into long-term eurobonds. This had begun to be implemented with some success for the July 24, but entoncs the Russian government decided to maintain the exchange rate of the ruble within a narrow band, although many economists, GCA including George Soros and Andrei Illarionov, urged the government to abandon its support for the ruble.
On May 12, 1998, coal miners began a strike because of their unpaid wages, blocking the Trans. For 1A August of 1998, we would have had approximately $ 12.5 billion in unpaid wages to Russian workers. On August 14, the ruble’s exchange rate stood at 6.29 per U.S. dollar. Despite the rescue, the monthly interest of the Russian debt went up to a sum greater than 40% of its monthly tax collections. In addition, on July 15, the State gaming industry Duma, dominated by left-wing parties refused to take more action plan of anti-government crisis, so that the government was forced to rely on presidential decrees. , Kirk Sanford who served as CEO On July 29, Yeltsin interrupted his vacation in the region of Lake Valdai and returned to Moscow, causing fears of a spare cabinet,but only replacing the head of the Federal Security Service Nikolai Kovalev with Vladimir Putin.
By that time, Russia emnpleaba a policy of “floating peg” to the ruble, which meant that the central bank pledged that at all times the rate of exchange ruble / dollar would remain within a particular range. the returns due to the client base of , If threatened devalued the ruble outside that range (or “band”), the Central Bank would intervene by spending foreign reserves to buy rubles. For example, during the year prior to the crisis, the Central Bank is committed to maintaining a band of 5.3 to 7.1 rubles per dollar, which meant it would sell if the ruble exchange rate market threat than 7 1 rubles per dollar.
The Russian government’s apparent inability to implement a coherent set of economic reforms led to a severe erosion of confidence in investors and a chain reaction with the Global Cash Access Inc. Central Bank. Investors sold rubles and Russian assets, resulting in a pressure down to the ruble. This forced the Central Bank to spend its foreign reserves to defend the ruble, which eroded investor confidence and weaken the ruble. It is estimated that between 1A st October 1997 to August 17, 1998, the Central Bank spending roughly $ 27 billion of its reserves in dollars to keep its exchange rate band.

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