Russia. Financial Crisis

Good morning, everyone! You all are my classmates so it’s not worth introducing myself because according to one wise saying “time is money”. I am here to tell you about the financial crisis in Russia, its causes and some interesting facts about it. Nowadays with the support of globalization the economy has become one of the most important and influential parts of people’s relations, needless to say that students of our academy have to be abreast of this sphere if they want to advance in their profession. I’ve divided my presentation into three main parts.

First of all I’ll give you some basic information about the beginning of the crisis in other countries because Russian crisis is just an aftereffect of American recession or to be precise an American estate bubble. Then I’d like to move on to some statistics dealing with business activity characteristics. And in the end of my speech I’ll give you a short forecast and I’ll be very pleased to answer your questions.

 So, let’s start with the early beginning. The whole “crisis” thing started in the beginning of 21 century when the American interest rate was lowered by Alan Greenspan(The chairman of the Federal Reserve) from 6,5% to only 1% to keep the economy strong after the catastrophe of September 11th  and the burst of “.com” bubble and let the U.S. banks borrow cheap money from Federal Reserve. Mostly, money was spent on speculations dealing with mortgage-backed securities. Through a couple of years it was getting much easier to get a mortgage loan because the price of real estate was rising and the banks were getting higher profits. As a result a few years later America had had lots of sub-prime mortgages and many house owners that were not able to pay for their debts. That was the turning point. When home owners default on their mortgages the bank became the house owner and for the first time that was pretty good because the real estate price was always rising but when most of bank mortgages turned into houses creating more supply then there was demand house prices weren’t rising any more. That was the beginning of the end, the end of the successful but extremely short-sighted financial system that appeared for less than 10 years. Many banks and funds became bankrupts just because of problems with mortgage.

Now let’s turn to some figures. I am to show you how Russian economy correlates with American one. Let’s have a look at these graphs. You can see that the recession in America began earlier then in Russia.  However when foreign investors realized that the situation was really serious they began to sell Russian assets because Russian economy wasn’t stable enough to keep their investments in. As a result you can see that the capitalization of Russian stock market fell down twice as fast then American did.

As you all know Russian economy is mostly based on selling commodities such as oil and gas. Before the crisis has started everything was perfect: the oil prices were rising and the Russian millionaires were becoming more and more rich. But when the oil bubble had no more reasons to grow the oil prices swiftly crumbled. Do you remember the rise of dollar and euro exchange rate relative to ruble during the end of 2008 and the beginning of 2009? That was mostly the consequence of oil prices fall. And I can simply prove it by showing you these two graphs that are representing the USD/RUR currency pair and the price of oil. Russian economy is just selling commodities so when the world’s demand on these goods became lower the Russian ruble has become more worthless.

Our next step is based on looking through the index of industrial production and unemployment rate in USA and Russia – the most representative indexes that unmasks the real situation in national economy. 

Well, I think that I’ve tell you as much as it’s possible to tell in this ten minutes. I can only add that our government is trying to make us believe in Russian economy and its independence from foreign “problems” but I’ve shown you some statistics which is unfortunately a bit more disappointing then Russian administration want us to think. All in all it’s up to us to change this situation and make Russian economy the most stable economy in the world!

Resource list:

• www.finam.ru
• www.quote.ru