Black Tuesdays scar Russian economy for decades

"Black Tuesday" in 1994 became one of Russia's most memorable events in a series of economic shocks that followed the collapse of the Soviet Union. The epic collapse of the ruble against the dollar by 27 percent occurred exactly 18 years ago, on October 11. The event caused panic, the inflation rate skyrocketed.  

If we carefully follow the media reports of the time, the term "Black Tuesday" referred to a number of slides that occurred in the currency market. The first, most catastrophic "Black Tuesday" marked the official beginning of the Great Depression in 1929.

In Russia's post-Soviet history, the first financial "Black Tuesday" occurred on September 22, 1992, when the ruble collapsed dramatically against the dollar on the MICEX (Moscow Interbank Currency Exchange). The U.S. currency jumped by 35.5 rubles immediately and reached the level of 241 rubles per dollar. The demand on currency set new records, the trading volume set a record for that year too - $68.8 million.

Afterwards, "Black Tuesdays" reoccurred in Russia with alarming frequency. The cause of instability of the ruble was the surge of inflation provoked by rising energy and food prices.

A few months later, another "Black Tuesday" took place - on January 26, 1993. Knowledgeable people made a lot of money from that. Those who bought dollars before the weekend at the rate of 493 rubles per dollar, were able to sell their bucks on Tuesday at 568 rubles per dollar. The profit thus made up 15% in a couple of days.

Just a week later, on February 2, 1993, the press sounded the trumpet about the "Black Tuesday" again: the voucher rate at the Russian Commodity Exchange dropped. The event, however, had a local significance, as the voucher course was conditional and did not have any importance for the majority of citizens.

The most memorable for many Russians "Black Tuesday" took place on October 11th, 1994. The fall of the ruble exchange rate that day was catastrophic. It triggered national shock and currency panic across the country. The rate of the national currency dropped to the level of 3,926 rubles for one dollar, which was 845 rubles lower as compared to the previous trading session on October 10th,  1994.

Thus, the Russian currency lost more than 25 percent of value. The dollar rose from 3,081 to 3,926 (non-denominated) rubles, which was the biggest drop since January 1992, when the liberalization of prices was announced.

Then-chairman of the Central Bank Viktor Gerashchenko and Finance Minister Sergei Dubinin were dismissed from their positions. The short period of the collapse of the rate made many talk about the artificial nature of the event. Already on October 14th, 1994 the dollar fell to 2,994 rubles.

A report from a special commission named the main cause of the collapse: the absence of coordination, timeliness, incompetent decisions and actions of the federal government. Despite the fact that the exchange rate subsequently stabilized on previous levels, prices continued to grow nationwide.

After the "Black Tuesday" of October 11th, 1994, the state took steps to limit the circulation of foreign currency cash in the country and intensified control over operations with non-cash foreign exchange.

Some experts tend to believe that the collapse of 1994 was one of the causes of the crisis on the interbank market in August 1995. At that time, many banks announced their inability to fulfill their obligations to private investors. A little earlier, on July 1st, 1995, the currency band was introduced.

The next "Black Tuesday" struck in August 1998. The US dollar gained 10 percent on MICEX at once and reached 7.86 rubles per dollar.

The last "Black Tuesday" occurred in Russia on September 16th, 2008, when the Russian stock MICEX index lost 17.45 percent.

British scientists in their usual manner discovered that "Black Tuesday" were normal for various countries around the world. A survey conducted among 22,000 people representing 14 nationalities revealed that the majority of respondents feel sad and depressed on Tuesdays, rather than Mondays.

Vitaly Salnik


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Author`s name Dmitry Sudakov