[MUSIC] So, hello everybody, once again. We move on with the lessons of transition as regards Russian economy. And today, we will undertake still another intellectual effort to understand some of the lessons of transition. There will be more lessons to come and more conclusions to be drawn. Eventually, this time, some more lessons will be analyzed. And this time, I want to focus on lessons of crises. We have already analyzed the experience, Russian experience of two economic crises, and that provides a lot of material for some of the conclusions. So lessons of two economic crises in Russia. Those were a different crises, although the scope of those crises and the influence on economic development was somehow similar, but the reasons for those crises were very much different. And let's try to draw some lessons, to draw some experience from this experience of those two crises. Let me remind you that 98 crisis occurred after years of heavy borrowing by the state. You remember that we have taken a lot of credits from IMF, World Bank, from Paris and London club of creditors. We issued a lot of GKO short-term bonds. We sold them to local investors, and eventually, we started to sell them to foreign investors. So the state has accumulated a lot of credits, a lot of debts, and that was a period of heavy, I would say, insane borrowing, so many resources have been accumulated just because of those policies of the state. And it resulted in a heavy indebtedness, high level of debt of the Russian state. So when we passed on to another decade, to the so-called golden decade in Russian economic development, step-by-step, debts were repaid to foreign creditors. Although, by the way, it seemed at certain period in time back in the year 98, not many people consider that that's why IMF and World Bank would be repaid, eventually repaid. And well, the way they did with the domestic debts, that they have announced the technical default, and they have not repaid a lot of domestic debts. So international community was, to a certain extent, prepared, I would dare to suggest to prepare of not being repaid for those Russian debts. Somehow, as we remember, due to the fast rise in energy prices and in general mineral resource commodity prices, we managed to repay all the debts to IMF, to World Bank, well, major debts there. Some small proportion of debts still remain, but major debts have been repaid. And what is even more significant, Russia didn't want to get more credits. There was a kind of a U-turn in governmental policies as regarding the debts, which happened after the first economic crisis. That's one first point to take into consideration. We as a Russian government, we stopped taking massive credits, although we could. Because within those years of development, as Russia started to get out of the crisis and as there was the golden decade and everybody believed in energy, abundance within the Russian federation, so I guess foreign creditors would easily and happily would credit Russian economy. So that was deliberately done not to have more credits, not to have that dependence from external and domestic creditors. So Russia learned somehow the first lesson of having indebtedness and crazy politics and stopped undertaking those policies of heavy borrowing. And that means that there is a dilemma. When you start planning new economic policies, people in the governments started to think, probably we have to save in order to feel better, in order to feel safe, before we start financing certain major projects within the national economy. So this time, after the crisis of the year 98, no new major borrowings have been taken by the government, not from outside of the country, not from within the country. And of course, a policy could have been undertaken at a domestic level, not only at external level. We could have revived GKO bubble, and the time when everybody was happy, that the new government came, and that the new era of economic welfare started to be introduced in Russia. Then, probably a lot of domestic investors would bring their money also to the government, but that was not done on a massive scale neither. In contrast, the government started to accumulate reserves, hard currency reserves and stabilization fund that happened exactly during the period of the golden decade. But even when they started to accumulate such enormous, such huge reserves, and they managed to do so, even this could not help to avoid the new crisis as deep and comparable to the crisis, to the previous crisis of the year 98. So deep crisis, again, irrespective of the two absolutely different strategies. One strategy, to borrow heavily from where it was possible, and another strategy, not to bother at all, vice versa. To accumulate reserve funds, to accumulate hard currency reserves and stabilization fund reserves. But again, this didn't help to avoid crisis. You can better compare those two different patterns, those two extreme budgetary policy, which led to the equal result. On the left hand and on the right hand, you can see the pre-crisis borrowing policies before the crisis 98, both heavy borrowing money from abroad and from within the country in hard currency and in domestic currency, and it led to 98 crisis. Absolutely different strategy before the second crisis, before the crisis of the year 2008. Radical reduction of borrowing from within and from without the country, accumulation of reserve funds, high incomes in hot currency from exports reserves both accumulated in rubles and in hard currency, but still, result was the same, deep economic crisis. That again, as usual, we try to understand why, we try to undertake an intellectual effort to compare those strategies and to draw up some conclusions, which one of the policies was better? [SOUND]
