An exterior view shows the headquarters of Russia's Central Bank in Moscow, September 13, 2013. To avoid a US debt default Washington might be well served by looking at Russia's experience 15 years ago as 'a lesson, that's the best you can say about it,' says Sergei Dubinin, who was head of the central bank at the time. Maxim Shemetov/Reuters
US Debt Default: Russia's Experience Holds A Lesson -- Fred Weir, Christian Science Monitor
Policymakers considering the consequences of a US debt default might be well served by looking at Russia's experience 15 years ago.
"Default" is one of the scariest words in the economist's lexicon, conjuring up images of government paralysis, financial panic, currency collapse, and social turmoil.
The United States may be peering into the abyss, but Washington might be well served to also look at what happened in Russia 15 years ago, when Moscow suddenly defaulted on its treasury bonds, valued at around $40 billion, much of it owed to foreign investors.
Within weeks, many banks shut down, wiping out depositors' savings. The ruble lost almost 80 percent of its value, the stock market went into freefall and Russia's fledgling middle class was plunged into poverty just years after the Soviet collapse all but destroyed the country’s economy.
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My Comment: I was in Russia when this happened .... it was not pretty. The money quote in this report is the following and one that Washington's politicians should heed ....
.... "I think the 1998 default was a lesson, that's the best you can say about it," says Sergei Dubinin, who was head of Russia's Central Bank at the time. "Both elites and business, as well as the population, can draw conclusions from it. They are that you cannot go on accumulating debts, the budget has to be balanced and taxes have to be paid.
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