Back in 1929?

by Daniel Shen ’23

Source: Getty Images

Published Apr. 8th, 2022

The stock market is perhaps the most powerful force in economics. Recently, Russia reopened the stock market to reinvigorate its economy and help the nation rebound from its economical crisis. 

Following the start of the Russian invasion of Ukraine, Russia fell from its economic power in the global economy as governments around the world imposed sanctions and blocks on Russian goods. The RTS index — which is denominated in dollars — had plunged 42%. This caused Russia’s economy to plummet in power and the Ruble to significantly fall in value. As it currently stands, the ruble is worth almost a hundredth of one US Dollar. When money significantly loses its value like this, we call it a serious case of inflation. 

During this time period of Russian economic unrest, the war has waged on and sanctions have no sign of lifting. In addition to this, the Russian stock market remained closed. 

The Russian stock market was dominated by the International market as more than 80% of all shares trading on the Moscow Exchange were owned by foreign powers. Of this eighty percent, the United States and Canada accounted for 54%  with 22% coming from the United Kingdom. This foreign influence was a major reason for the severe damage to the Russian economy that opposing nations were able to do with the sanctions.  

However, after a month of fighting in Ukraine the stock market has reopened for some controlled trading of stocks. During the brief period of the stock market being open, 33 stocks were able to be traded for a brief time. 

Blue-chip stocks Gazprom, Lukoil, VTB Bank, Sberbank, Rusal, and Rosneft were among the equities that traded. 

This, while not a complete rendition, is a similar economic disaster as what happened to America during the 1929s and began the American great depression. That depression was only solved by a great economic upturn caused by the World War and brilliant leadership from the president of the time Franklin Delano Roosevelt. However, for current Russia, it remains unclear what the future will bring and how the economy will recover. The reopening of the stock market appears to signal the Russian need for more economic activity. However, with the current state, it seems unlikely that the reopening alone will be enough for the economy.

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