The events unfolding in Russia are beginning to turn ominous and the stock market and newspapers have responded accordingly. Well, the latest crisis began about a month ago when the International Monetary Fund supposedly bailed out the Russian economy. Instead Boris Yeltsin went on a prolonged vacation, and the Duma adjourned for the summer after passing only about a third of the reforms the IMF wanted. This puzzling response was then followed by a fall in the price of oil.
Oil is Russia's major export.
Then came a run on the Russian ruble. Soon the run became a stampede. Government bonds running at 150 percent soared to 200 percent and still could not attract the capital needed to cover its budget deficits or prop up the ruble's value. Then the Bank of Russia announced that the government would let the ruble fall and delay repayment of billions of dollars of debt. That signaled to nearly everyone that Russia was in default.