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by hogFeast
1688 days ago
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Correct, four things can trigger a crisis...in addition to many other things. And that occurred after the currency crisis had started (the debt swap into Eurobonds was because of the GKOs). I am not sure what the US has to do with it. I am not sure what "Soviet-era debt" has to do with it (that debt was very soft, was rolled over multiple times in the early 90s, and wasn't related to Russia's problems). I am not sure what the IMF has to do with it (the IMF came in after it started...that is why the IMF came in). Yes, it would have...that is self-evident. The reason the peg collapsed was because the free market/floating rate was lower. The only purpose of the peg is to stop the currency going down (again, this is a weird, self-evident proof...saying that the currency wouldn't have collapsed if they had a floating rate makes no sense, it would have collapsed faster). |
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A large portion of their foreign denominated debt was from the Soviet era -- just a few years prior to 1998 they committed to repaying nearly $100 billion of that old debt. Russia was accepted into the "Paris Club" based on a valuation of their sovereign assets -- 1/4 of which were loans due to them from the Soviet era from Cuba/Vietnam and other satellite countries that had no capability to repay those loans. So the Soviet Era debt was a big portion of their liability and made up a substantial portion of their assets.
None of these things are remotely similar to the US situation of almost universally US debt denominated in USD. So I think GP is spot on when they say there's 0 chance of a currency crisis.