IN THE spring of 1992 one U.S. dollar fetched five Russian rubles in front of the old Metropole Hotel, only a few blocks away from Red Square in Moscow. Today, the value of the ruble has plummeted to 3,000 per dollar. This is bad money and inflation on a grand scale. And it spells big political trouble for Russian President Boris Yeltsin.
One analyst who predicted this development is Judy Shelton, senior research fellow at Stanford’s Hoover Institution and co-author of The Coming Soviet Crash, first published in 1989. Mrs. Shelton tells me that “no one should be shocked that the bills are coming due.” The pension system and the old Soviet state-run industries (defense, farming, manufacturing) fell deeper into debt and turned to the central bank for support. After stalling during the spring and early summer, perhaps to lower inflation temporarily in time for Yeltsin’s summit with President Clinton, central-bank head Victor Gerashchenko restarted the ruble printing presses to bail out the old Soviet state system. Hence the ruble collapse.
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