Russia has braced itself against future financial storms.
Analysts from the Bank of America (BofA) Corp. believe that the global stock market is in for a crisis that will echo the events of 1997-1998. Bloomberg cites the BofA’s strategists, led by Michael Hartnett, who wrote in a recent note that “US decoupling, flattening yield curve, collapsing EM — all echoes of 20 years ago.” IMF Managing Director Christine Lagarde holds the same opinion, stating, "The clouds on the horizon ... are getting darker by the day." She believes that "[t]he biggest and darkest cloud that we see is the deterioration in confidence that is prompted by [the] attempt to challenge the way in which trade has been conducted, in which relationships have been handled and the way in which multilateral organizations have been operating," obviously referring to the United States. George Soros, the US financier and business magnate, also thinks a major financial crisis is brewing, triggered by a surging dollar and the capital flight from emerging markets. Addressing the German parliament in early July, German Chancellor Angela Merkel raised the specter of a financial crisis provoked by US-launched trade wars.
It looks like the US economy has been cursed to relive a crisis every ten years, thus negatively affecting the whole world. Back in 1997-1998, Russia took a hard hit, but it learned its lessons and took steps to prepare for contingencies in advance. There seems to be some wisdom behind Russia’s policy. Others would do well to take a leaf from Russia’s book. Christine Lagarde has described the financial situation in Russia as “good news.” In her remarks at the St. Petersburg International Economic Forum in May, she praised Russia for “admirable macroeconomic framework—saving for a rainy day, letting the exchange rate float, introducing inflation targeting, and shoring up the banking system.” The country has virtually no fiscal deficit, a solid current account balance, and very little debt.
Strategic Culture
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