Hello and welcome. You are listening to Patrick Boyle on Finance, a podcast exploring ideas from quantitative finance, examining events occurring in markets right now and financial history to see what lessons can be taken away, including interviews with some of the most interesting people in the world of finance. To learn more about the podcast, visit onfinance.org.

On Christmas Day in 1991, the Soviet flag was lowered over the Kremlin for the last time.

Thereafter, it was replaced by the Russian tricolor. Earlier that day, Mikhail Gorbachev

had resigned his post as President of the Soviet Union, leaving Boris Yelsohn as President of

the newly independent Russian state. People all over the world watched in amazement at the

peaceful transition from the former communist

monolith into multiple separate nations. Over the next few years, Yelsen and his team embarked

on a course of reforms known as economic shock therapy, aiming to transform the Russian

economy by selling off state assets.

While most Russian citizens lost all of their savings in just a few weeks,

a group of enterprising and often rootless young businessmen managed to buy up state assets often in rigged auctions.

The result was huge wealth concentrated in the hands of a few men whose

fortunes were closely tied to those of President Yelsohn. And together they ran the country.

This is how the nickname oligarch came about. It comes from the Greek oligarchy, meaning rule by the

few. The profound changes of the economic shock

therapy had extreme effects in Russia and left many Russians entirely disoriented. Their

country was no longer a great world power. The economy had shrunk to the size of Poland's.

Doctors found themselves moonlighting as cab drivers.

In 1992, the first year of economic reform, retail prices in Russia increased by 2,600%.

By 1993, inflation had declined to 240%. It fell again in 1994 to 224%. The worst off were the elderly

whose fixed pensions didn't even begin to cover the new cost of living. By 1999, almost 38% of

Russia's population were living below the poverty line.

...