Grubstakers - Episode 240: The collapse of the Soviet Union and Russia in the 90s (Part 1)

Episode Date: July 18, 2021

We looked at the similarities between empires collapsing of the past. Oddly enough we believe we found a pattern in the madness. Sean read a book about domestic Russian actors and asset stripping it's called Godfather of the Kremlin: The Decline of Russia in the Age of Gangster Capitalism by Paul Klebnikov. Many Russian accents, Drago impressions, and dark truths of our futures past?

We find people that basically can't make enough to eat before they go into the fields. I don't believe that. I think that you're looking at other places that are not Central Romana. People actually who focus on and who like getting an orgasm never get one. Pull up your socks and figure out what you're going to do. Any chance we'll ever get to be a complete red state? Oh, yeah. Well, the future is always uncertain. But more uncertain now.

Listen, Blue Ivy is six years old. Beyonce's days, she tried to outbid me on a painting. Everybody in Atlanta right now at the Louis Vuitton store, if you're black, don't go to Louis Vuitton today. In fun. That's why you need to take a meeting with kanye west bernard arnault hello and welcome back to grub stakers the podcast about billionaires my name is sean p mccarthy and today i am joined by my good friends yogi

polly wool andy baller steve jeffries and so we've spent most episodes of this podcast talking about the collapse and living standards, life expectancy, and rule of law in the United States. And now we wanted to mix it up a bit and spend a few episodes taking a special look at Russia in the 1990s, a country from which no modern U.S. parallels can be drawn. Just totally out of left field, no lessons here whatsoever. That's right. And I read this book called Godfather of the Kremlin by Paul Klebnikov, which to my knowledge is the best English language book on Russia in the 1990s that I'm aware of.

It does have some limitations, primarily that it focuses mostly on domestic Russian actors in the 90s and only kind of briefly passes over the role of international finance capital in Switzerland, London, New York City, and acid-stripping Russia. But I also feel like an asshole sitting here in an air-conditioned downtown Brooklyn apartment criticizing this man who was shot to death in Moscow in 2004 for writing this book, which I am talking about the limitations of, knowing that I would probably not be willing to get shot to death for my book about Russia in the 90s.

Yeah, but if you change your mind, we can probably work something out. So it's like, I don't have any actual standing. I'm just saying that this is going to be the primary source, at least for this first part of these episodes, and we will try to supplement that with a more international focus later. But the point that I'm making here is that this book is going to be most every statistic or factoid that I throw out, unless otherwise cited, will come from this book. And I do highly recommend it as i did mention the author was the editor of forbes russia and he was killed in 2004 he was shot to death in

moscow uh most likely for his reporting on organized crime in the russian state do you know when this book was written this book was written in 2000 i understood steven you want to read the opening uh quote by wb yeats well you could just read the opening quote by W.B. Yeats? Well, you could just read the entire book. We don't have to do a podcast. Just read the book to the audience. I was going to quote it. I looked at it for a second. I was like, you know what? These coming out of

Steven's pipes, it sounds pretty good. Things fall apart. The center cannot hold. Mere anarchy is loosed upon the world. The blood dim tide is loosed upon the world the blood-dimmed tide is loosed and everywhere the ceremony of innocence is drowned the best lack all conviction while the worst are fully full of passionate intensity thank you that's the slouching towards bethlehem right what rough beast slouches towards bethlehem, right? What rough beast slouches towards Bethlehem

to be born? Right, really? To put it in other words, we're going to go on a journey for how the chairman of the Presidium of the Supreme Soviet, of the Soviet Union,

Mikhail Gorbachev, went from that position to doing a Pizza Hut commercial in 1998. But what a Pizza Hut commercial. Oh, it was the one hell of probably top three pizza i think it goes what the poem was about it goes the the bigfoot six-footer pizza then the gorbachev commercial and then the third one with this one hot chick from like 2006 that i can't i don't know what

it's about but it has some hot chicken and i took a photo over my phone and every time i look through my photos i'm always like hey who's this hot chick i'm like oh yeah i wanted to text my friend i was creeping on this girl that was in a pizza commercial i don't know her name but i know she was hot and she was in that pizza commercial you don't know her name but you do know her home address and her social somebody should make one of those like uh memes of gorbachev where it's like you know if you weren't there when i was grinding and it's him as the general secretary of the Communist Party, and then it's, don't expect to be there when I'm shining, and it's him doing pizza commercials.

You've got to start from the bottom as the general secretary of the Communist Party before you can do pizza commercials. That's right. You can't just start doing pizza commercials. Yeah. But, you know, I think just like up top here, and we'll certainly take as much time as we need, maybe we'll most likely stretch this over multiple episodes, but we'll just spend five or ten minutes talking about why Russia in the 1990s matters. Because I think a lot of Americans don't know this history, and I do think it is very relevant. I will say one thing, missed opportunity to dress Gorby up as a slice of pizza and use the splotch as a pepperoni.

Not to correct Sean, but I do think that the American education system certainly slacks on the Russian history, but I will say that if our international listeners also want to inform us what they do and do not know about the USSR, that would be wonderful in the comments. Well, it's kind of interesting, like, you know, as an American,

certainly on MSNBC or whatever, especially since Trump has been elected, you've seen Russia painted as this, like, number one international villain. Right, right. And I think the entire history of just what happened between the collapse of the Soviet Union and the rise of Vladimir Putin is forgotten. And, you know, why it matters is is like, first of all, the modern... That can't be intentional. First of all, the modern parallel.

But it's also important to know, if you are an American, why Russians hate you. So, you know, just like that kind of background. Whoa, whoa, whoa. You're telling me if he dies, he dies. Some sort of propaganda to make us hate Russians? He was so mad that he didn't get the Pizza Hut commercial. Should have gone to Drago, bro. Yeah.

That's why they say there's a stereotype about the Russian not valuing human life. That's right. And this is because there is only one opportunity for a Pizza Hut commercial in all of Russia, and Gorbachev got it. But, you know, parallels to the modern U.S. I think we mentioned, or I mentioned at the top, you know, we've talked a lot about the collapse in living standards and life expectancy in the U.S., the deaths of despair epidemic. There's actually been a decrease in life expectancy in the United States for the first time since the Spanish flu a hundred years ago.

Apologies to all our Dago listeners. I shouldn't use that racist terminology for the 1918 flu. It probably started like in Kansas. Yes. Yeah, they were burning turds or something. Yeah, like troop turds. Inflation also. Yes. Yeah, they were burning turds or something. Yeah, yeah, like troop turds.

Inflation also. Yes, yes. It hit 5% year over year today. If it rise, it rise. That was good. Yes. Yeah, so similarities at the beginnings anyway of the 80s inflation for Russia. Right. I mean mean i think i've

made this point on the podcast before i think kind of what we're seeing in the united states is like russia in the 90s but in slow motion sure like in in in russia in the 90s it just with the collapse of the soviet union everything happens all at once you know there's like a 50 percent collapse in gdp over four years there's this massive epidemic of excess deaths alcoholism suicide you know everybody's thrown out of work uh 100 million people are thrown into poverty so all of that all at once but in the united states particularly if you look at these former industrial towns where you know all the jobs have been outsourced you'll see a similar pattern in terms of deaths of despair, in terms

of community breakdown, alcoholism, opioid use. So there's a lot of modern lessons for Americans from looking at Russia in the 90s. One more similarity on the econ front here, balance of payments, not necessarily a crisis, but Russia in its heyday was a net exporter of capital goods and big machinery that people need to the periphery of the USSR. They would sell big machines, people used to manufacture stuff. But then later in the late 70s and 80s, that stopped and it went in the reverse direction. Interesting. Well, they didn't have the petrodollar, baby.

But I think the one thing that we... They lost their petrodollar. Oh, yeah. The petrorubal. Oh, was that in the Caucasus? Yeah, well, during the oil boom, they had basically a petrorubal. Oh, nice.

Yeah, so that went away after a while. One thing I don't think you're going to see in America is that massive drop in GDP. Because I get the sense that America will find some way, someone to invade, or some way to just use

its military to, I don't know, force the international community to do something to keep America's GDP at least level. Yeah. I guess like one difference between Russia in the 90s and the modern US is that the collapse in GDP actually mattered for life expectancy. Whereas here the GDP is growing, but it doesn't really seem to matter for anybody's actual lives yeah hey listen bezos and another billionaire branson are going to space are you telling me that this happens in uh the 90s of russia in the 90s i don't know maybe some shit there's gotta be a parallel yeah no there's i don't see any parallel you know for space no actually there

was some space stuff. There were a few civilian space stuff going on around that era. I do not see any parallel between modern billionaires performing the functions of government in Russia

in the 1990s. This billionaire NASA? Yes. Russia in the 1990s. This billionaire is like billionaire NASA? Yes. There were a couple cosmonauts just stuck on Mir when the Soviet Union collapsed. And they had to wait a couple months for like... It actually kind of works.

They had to wait a couple months for the Soviet Union to figure out how to... Not the Soviet Union, but the new Russian Federation to figure out how to get a rocket up to them while rebuilding their government. One last thing before we move on to Stephen's point about manufacturing leaving Russia. There are a few things that I

enjoy that are involving glass, like vacuum tubes for amps, as well as glass for cameras and stuff. And in those communities they look at... You say bongs. No, it's literally about nixie tubes and uh and uh cinematography glass for cameras and stuff for tobacco smoke yes of course no but but

outside of shud's joke water pipes you're supposed to say water pipes it's legal now we can say what the fuck we want um but in the 50s 60s and and early 70s russia russian glass is heralded as like oh no this is the good as well as um a few other uh things like that so the manufacturer leaving russia hurts the world yeah but you know they actually it's true that their you know glass production industry fell apart but in the 90s russia made a lot of advancements in the sex trade industry and the trafficked children industry. It made up for all the glass they lost. Yes.

Online multiplayer clans. They learned how to diversify their economy, which is an important thing for a country to have. Right. It's a ransomware hacking-based economy now. And that's actually very specialized, according to economic theory.

But before we start chronological, and what we're going to do with these episodes is we're going to start with Mikhail Gorbachev in 1985. So we'll tell the story of the end of the Soviet Union, but certainly it's a subject that has a lot of depth to it, so we could revisit it later. A lot of people trace the end of the Soviet Union, or at least the seeds of the end of the Soviet Union, even before Gorbachev. He did kind of inherit a bit of a mess, but just for the sake of time, we're just going to start with Gorbachev, and we're going to spend most of these episodes focused on the 1990s themselves and what happens after the Soviet Union is gone. But before we start with Gorbachev, I do... Chris, hit the teen spirit. Don't hit the teen spirit. They will kill us. Before we start with Gorbachev, I just want to give a couple illustrative statistics with regards to those deaths of despair that I mentioned earlier earlier just so you can have some idea going into this of of what russia in the nineteen nineties was actually like

and first i will give the u.s. stats i've given these before but this is just from nbc news in two thousand eighteen some one hundred and fifty eight thousand u.s. citizens died from deaths of despair and this is suicide suicide, drug overdose, alcohol poisoning. 158,000 U.S. citizens in 2018 compared to 65,000 in 1995. So almost tripling, and this is all pre-coronavirus pandemic, pre-lockdown, et cetera, et cetera. In Russia, between 1992 and 1997, 229,000 Russians committed suicide 159,000 died of poisoning while consuming cheap alcohol 67,000 drowned usually the result of drunkenness

you add that up it comes to about 91,000 deaths of despair per year on a population of 148 million so less than half of ours so you know when you adjust for population they were facing even more deaths of despair on an annual basis than we were and then in addition to the deaths of despair you actually had because of the

collapse the soviet union you had a collapse of the health care system in russia so if you want even go beyond deaths of despair like i think the most disturbing statistic is the access deaths by one study there were three million excess deaths in russia between 1992 and 1998 as compared to the same period of time in the soviet system in the 1980s so you take you know uh this is a six-year period 1992 and 1998 you compare it to some timeline in the 1980s the the Soviet Union and the Russian state,

there were 3 million excess deaths, more than we would expect to occur. And as I mentioned, this is because of the suicides, the alcoholism, the job loss, the 100 million Russians being thrown into poverty, and also the collapse of the healthcare system. So all these other old diseases come back. Right, but at the same time,

famously during Gorbachev's time in power, there was a massive vodka shortage. And once they reinstituted capitalism, you had these, you know, these, quote, deaths from despair. It could just be a death from having a good time from vodka. So, you know, you take the good with the bad.

It is true. The fentanyl deaths are all marked deaths of despair. But you know they were having a good time from vodka. So, you know, you take the good with the bad. It is true. The fentanyl deaths are all marked deaths of despair, but you know they were having a great time. I like the idea that like, it's like a person looking at those numbers just be like, well, how many of them were partying though? Because these numbers don't reflect all that.

I mean, were they smiling while they died? Because that's a huge part of it of if the deaths are despair or not. I think the deaths from despair is a puritanical moral judgment. Yeah. Well, we're not going to get accurate statistics until they ask the dying people to rate their happiness on a scale of 1 to 10. I don't believe in any statistics anymore. Is this a thing that's normal? Like, I'm telling you, I don't think anything's true.

I'm, like, so broken that, like'm telling you I don't think anything's true I'm like so broken that like numbers I don't even fucking believe a math no I don't think so most numbers I feel like are trying to portray a story to make you buy or believe something and I'm not buying it anymore am I becoming a Trump supporter you're becoming Rene Descartes Oh Chris can we just get some uh i am the walrus let's get some real psychedelic but you know what though the reason why i feel this way is because like i used to do a job where i had to uh interview people outside of movie theaters to watch a unreleased movie trailer and we'd have to ask them to like give their opinion on the new trailer and

it would take like 30 minutes sometimes we're like i'm gonna leave after a few minutes and then the next manager that came in was like oh you guys are actually asking people no you're gonna make up all this shit no no you can't you have to you have to fake all these numbers and ever since that job i'm like canvassing fucking uh any anything where they went we asked people what they thought and they told us i'm like it doesn't work it just does not work yeah uh just a note for the. This is Yogi's mindset after he stopped smoking. That's also weirdly related to the decline and fall of Russia, maybe. Mistrust. Well, no, faking statistics.

Oh, yes. Well, that's why I brought it up, obviously. Yeah, right. Yeah. I think, yeah, all the problems that are facing Russia are due to a mistrust in institutions, which is now a major problem in the United States, which is why people should trust more institutions again. That's right. But so to kind of start from Mikhail Gorbachev and kind of go the chronological thing here again, unless otherwise noted, all statistics and such comes from the book godfather of the kremlin by uh... paul klebnikov uh... the book talks a lot about a now deceased russian billionaire oligarch

named uh... boris berzov ski uh... he is the the named godfather of the kremlin uh... so the book on a focus is a lot on like his rise to power in the nineteen nineties and and what he did and'll we'll talk about him a bit more later probably at first we're just gonna i'm just gonna focus on the parts of the book that are more structural less about individual uh bad actors uh so to kind of go back mikhail gorbachev becomes the general secretary of the communist party march 1985 so he's the de facto leader of

the soviet union march. And he inherits a bit of a bad situation. I don't think anyone will deny that. The war in Afghanistan had been dragging on, you know, Russia's Vietnam. This is, of course, you know, driving up consumer prices at home, causing shortages, all this stuff. The book points out in December 1985, so this is the same year Gorbachev takes power, Saudi Arabia announces that they'll no longer support OPEC oil prices by limiting production. So oil prices dropped 69% within eight months. And so I knew it was coming. I should have just said 68% or some shit. But so anyways, the point is point is you know russia their economy has always been very dependent on oil gorbachev takes power you know within a year oil prices have collapsed

because of uh opec um the war in afghanistan is dragging uh chernobyl happens in 1986 so he inherits a lot of different crises at once um his reforms, a lot of people know about Glasnow and Perestroika, the political reforms. He allows freedom of speech, freedom of the president of russia in the 1990s and he's kind of remembered in the west as a democrat and uh aside from the fact that he uh rolled tanks on the elected parliament there's a variety of reasons why that's wrong but the main one is just that all the democratic reforms that existed in russia in the 1990s were put in place by gorbachev they were not put in place by yeltsin or these fucking people. So in terms of why the Soviet Union collapsed, and I would be curious for feedback from the listeners on this, because I think this is a topic of debate among leftists generally, but the book Godfather of the Kremlin does seem to attribute a significant amount of the crash to the Soviet Union's vodka prohibition,

which, you know, hey, maybe this is why the guy got shot to death, just stereotyping the Russian people. But it's interesting where, essentially, when Gorbachev came to power, there was this alcoholism problem in the Soviet Union, the vodka consumption, you know. And he came up with the idea of basically doing prohibition, like the United States did in the 20s, except for it wasn't that they made vodka entirely illegal, but they made it very scarce and expensive. And he did that almost immediately after taking office. There was actually a joke that Gorbachev loved to tell. I guess it was a Russian street joke

where there's a massive line outside the vodka store and a guy comes to the back of the line and he goes, what the fuck? I am going to go kill Gorbachev. And he walks off. And then a short time later, he comes back to the line and the person in front of him goes what happened you know so that line was longer well and that's basically it because you know so again gorbachev takes power 85 almost immediately after taking office he tries to tackle this social problem of vodka um and what happens was the soviet union actually had an alcohol monopoly which had been a pillar of the Soviet economy, typically making up, according to the book, about 25% of Soviet government revenues

came from the fact that the Soviet state had a monopoly on alcohol and vodka, and they would collect revenues off of that, and that was like a quarter of their money. So when they didn't prohibit vodka entirely, but they made it very scarce and expensive, unsurprisingly, just like happened with U.S. prohibition, this pushed it into the black market. Might as well be black.

So instead of 25% of government revenue coming from vodka, now all of this money is going to private black market criminals. And it just so happens this coincides with another Gorbachev reform, which is that he allows, quote-unquote, cooperatives in 1987. And these are private businesses that are allowed by Gorbachev. These are trading companies, banks, restaurants, shops, etc. And what happens is a lot of these bootlegger alcohol sales get reinvested into these cooperatives and his private businesses they're starting to take over the soviet

economy and quoting from the book here as this vodka mafia involved into a national network it relentlessly corrupted the government apparatus starting with local police the courts mayors regional communist party bosses and ending with ministers of the central government and as a result the government the only institution capable of fighting organized crime, began to crumble.

So he does, the author Paul Klebnikov, does attribute a significant factor for the Soviet collapse to being this vodka prohibition, which was undone after a few years. But he says the damage was already done because, you know, so many billions were already transferred into organized crime hands which in turn was pushed back into this private economy where they start buying everything up with these these vodka dollars and you know as andy mentioned with the street joke gorbachev was so violently unpopular because of this policy that he just kind of undermined his own government is there a comparable quarter of

the u.s economy that if it were to be you know demonetized or illegal that it would just funnel itself into organized crime i mean like well we did basically do the same thing with prohibition like but like in the in the modern day era here now yeah? Yeah, right now. Drugs? I mean, that's kind of happening, but on the way around. I mean, well, I was just met with marijuana, but there's more drugs than marijuana. Yeah, yeah. I mean, the ones that they haven't legalized yet, I mean, it's been going on. It's not as acute because it's been going on for decades and decades now.

Sure, sure. You are right, though. I mean, heroin sales do make up 25% of the CIA's budget. It's unfortunate that they released those budget numbers with that included. But so that's like one factor he attributes to the collapse of the Soviet Union. And then the second one is called the ruble overhang, which I and then i was like i don't know if i can explain this i could probably just make steve explain it and he has a master's degree in economics and he might be able to tell us a bit more about the the ruble overhang and why that was kind of the second factor that the author attributes for the collapse of the soviet union

ladies and gentlemen the ruble Overhang with Stephen Jeffries. Sounds like a movie title. Right. We got to get him his own theme music. This is going to be the regular recurring segment. Hang up. The Ruble Overhang is basically an imbalance between the bank deposits in the credit system of the Soviet economy and the amount of rubles that were actually circulating.

People were actually using to buy goods and services in the domestic economy. And so there were a lot more bank deposits that people had. They were saving up their rubles in the form of bank deposits and not really spending them. And in the middle of these economic reforms that Gorbachev was doing, he and his planners in the Politburo were afraid that,

okay, once we liberalize the price system and people start spending shit on imports and whatnot, there's going to be wild inflation if we don't do something else in order to get people to use some of these savings on other things that don't

yield a cost push inflation. So he had all these different ideas and even actually like there's some back and forth between him and like Reagan

on this point actually. Sure. Over the phone about what to do and like his planners. Hello, it's 4 p.m. I have to go, Gorbachev. It's time for my nap now. Reagan, if it

overhangs, it overhangs. To be clear, he wasn't talking to Reagan, but rather one of Reagan's advisors. But Reagan was there also. Yeah, he was watching cartoons in the next room. Yeah, so this was viewed as a problem because it was during the liberalization

they're trying to make it so prices can move a bit. And they're saying, what if everyone just goes out and spins all the rules at once, basically? Do you think when Reagan was fully senile, they would just wheel him into a room and tell him it was the Situation Room? How do I know this is

the situation room? Because you're here, Mr. President. Let's just get him like a smell-proof room and put a couple of maps on the walls and then he'll think he's directing operations. I think they would just hire

Jimmy Stewart to stand around and tell him he was on a film set. The ruble overhang kind of like hides the deeper point of, well, consumer goods were being rationed before, like during the 70s and into the 80s.

And they were perceived as being lower quality than the West. And like consumers in Russia just straight up didn't really want them. Interesting. And they're saying like, alright, well we're going to have all this output that no one wants from

our factories, so what do we do once we liberalize our economic system? And they wanted to say like, alright, we'll give them a higher interest rate on their savings bonds. Huh. That'll be great, so they'll just them a higher interest rate on their savings bonds. That'll be great. They'll just buy those instead of spending.

Right, right. Or they're like, all right, we're going to make it so they can't actually convert over to dollars. Because we're going to allow them to convert to dollars at an official rate for the first time in a while. Because they hadn't been doing that before. And it had actually been another black market that they were dealing with was the underground market for dollars. Because there's an official exchange rate that was only available to state officials and what are called special trade officers who are running overseas businesses to sell exports to get foreign exchange, which was really necessary to get imports. And the average USSR citizen

didn't really have access to, they weren't allowed to convert their rubles over to dollars or other foreign currencies for a while during the 80s. And so employees working for those special trade companies and state officials and the Politburo and the like had this official rate that they would exchange at, and then they would go to the black market and then make a killing off of the difference

between the exchange rate in the official one versus the black market and then make a killing off of the difference between the exchange rate in the official one versus the black market one. Sort of like happened in frankly Venezuela. They have a black market for dollars as well. My high school economics teacher actually

he once showed us a slideshow of his trip to the Soviet Union and he talked about how during that trip... He accidentally has a slide with two 13-year-old Russian girls. He said that him and his brother ran into some Russian guy who was like, hey, you have dollars, right? And offered to trade way more rubles for those dollars than they would have gotten from the standard exchange rate.

And he talked about how scared him and his brother were when they were then leaving the Soviet Union and going through, I guess, Soviet customs. And his brother had stuck the money in his shoe or something. And he was astounded that they actually managed to get away with it. So was the ruble overhang caused by the difference between the black market and the official price then? Partially.

The state needed to defend its fixed exchange rate between dollars and rubles. And it was increasingly having trouble doing that because it wasn't getting as much foreign currency mainly dollars from its from exporting things so it used to be exporting capital goods all over the place and then getting dollars from that but that stopped after a while and they this led to like kind of a like for a while they were food sufficient. They could get pretty much all the grain they needed

either by themselves or by importing food from like the periphery countries. Right. Like their allies in Africa and South America they would get food from them using forex from the oil revenues.

Gotcha. And so like they would get dollars from selling oil to people And so they'd get dollars from selling oil to people and then they'd use the dollars to get food. And so if you didn't have a good harvest, it was okay. But when the oil price declined, they couldn't do that anymore.

Plus, when Stalin wasn't in power anymore, they no longer had someone who was paying the clouds in Ukraine not to rain. That's true. Yeah, so you can see that ruble overhang is a term that kind of covers a lot of different things. Yeah, it seems to be all-encompassing. So it was like, in a technical sense, it has to do with the amount of

savings in rubles that people have that they could use suddenly on consumer goods once they liberalize trade. But it actually encompasses all the other issues that are basically saying, like, there's a lot of these crazy imbalances in the economy that if we just unleash them all at once could create havoc yeah and it's interesting where uh there are a few ideas proposed to fix the ruble overhang but the various governments just kind of kick the can down the road until they settle on the worst

possible way to fix it which is to immediately liberalize prices and unleash 4000% inflation in the price of milk which is you know milk, eggs bread, anything you need

just everything they said like we alright, we're going to take, we're just going to like gradually liberalize certain types of goods. Yeah. And then work our way up to the ones which we know are pain points. Like consumer goods that everyone thinks ours are shitty but

like, you know, we can't really do much about that right now. Sure. I hate when you like wake up from a ruble overhang and remember that you texted your girl a dick pic the night before. No, baby,

that wasn't me. That was my friend, Vlad. Just be like, I'm just not going to mention this and hope I don't run into her in public anytime soon. Babe,

Vasily made me do it or he said I'd have to drink the vodka backwash. The hangover, but 1990 Russia. The crazy night in Vladivostok. That's right.

But we'll get to... See, you didn't call that movie the morning after despair. That would be like a Russian The Hangover movie. The Morning After Despair. During The Hangover is the collapse of the Soviet Union.

You caused it. Right, right. Oh man, last night was so crazy. Yeah, our friend was drowned in the river Volva. But we'll get to the ruble overhang and the explosion of prices there. I did just want to mention a couple other things before we get to that. That's going to happen in the 93, 92.

He said, I'd rather drown drunk than live sober. I don't know why I needed to get that line in there. Look, you got a tag. You got to deliver it. That's right. There's FedEx here. We've got your tag. But anyway, so what should be noted before the collapse of the Soviet Union,

which officially occurs in 1991, and we're about to get to that, but what you should understand is that the KGB had become, if it wasn't before, the primary instrument of the state of. Until 1991, the KGB was involved in industry, transportation, telecom, the army, police, culture, basically every aspect of Soviet society. Rating American elections for Donald Trump. Yes. Must have sprung up overnight. Well, it's interesting, like the book Godfather

of the Kremlin, they have some very fascinating stories about the KGB was involved in establishing fake political parties, political honey traps, just throughout its entire existence. So like, of course, with the liberalization and democratization of Gorbachev, like the KGB helps set up various political parties. In fact, Vladimir Putin, who is, of course, you know, as MSNBC viewers will be aware, a KGB agent. Right, we'll be right back. Yes.

Hey there, I'm Chris Hayes. He was actually the chief aide to one of the primary liberalizing Democrat politicians in the late 80s, early 90s. They also, the book talks about how the KGB set up some ultra-nationalist, like right-wing anti-Semitic party that, like, you know, criticized the Soviet system and all this. intelligence agency gets so involved in the modern political process to the fact where in the first elections in 1990, the KGB actually fielded several thousand candidates, the majority of whom were elected. This is for the Russian national parliament in 1990. They have these first elections since the revolution in 1917, and the KGB fields thousands of candidates, several thousand candidates, the majority of which were elected.

And of course, there is no parallel in the United States when every other Democrat is a former employee of the CIA or the National Security Administration or whatever the fuck. Or Andrew Yang. uh national security administration or whatever the fuck or andrew yang yes so it's just kind of it's just kind of interesting the the way these intelligence agencies shape domestic politics in various ways uh and you know create these various political parties but the relevant thing in addition to like their let's say psyop activities is that in 1990, things are getting a little bit bad in the Soviet Union. That's short for psychological operation. That's true. So by 1990, things are getting bad in the Soviet Union.

By the late 80s, people know the collapse is coming. 1989, of course, the Berlin Wall falls, but the Soviet Union is still there. So in 1990, the KGB circulates a policy memo among higher-up people and among some members of the Central Committee of the Communist Party of the Soviet Union. This policy memo states that the KGB should collect billions of dollars of Soviet government funds during the quote-unquote period of emergency and transfer them to a network of captive banks and trading companies, then keep them for connected Communist Party members until a better moment arrives. So it's kind of interesting where the phrase Paul Klebnikov uses is that the ruling Communist Party in 1990 decides

they can't crush the black market that has been created by these cooperatives and by the vodka prohibition and all this. They can't crush this black market, so they might as well join it. They might as well suck funds out of the state, you know, billions of dollars, and have their little network of captive banks and businesses and just kind of transfer these state funds and use it to take over the private entrepreneurial system that is springing up at russia now were these cooperatives like actual cooperatives or was it like uh no this is a real question or was it like a propagandistic name for like small businesses it seems like it de facto became the latter i mean like i don't know when they first set it up. It was probably more towards the former.

It's just because of, like, corruption and all these factors we've mentioned. It very much just became, well, mafia businesses. No, it's amalgamated bank. Don't worry. Welcome to legitimate credit union. Yeah. That's an East German accent.

Yeah. All the hitmen we hire worked for worker-owned cooperatives so we're actually still leftist one one hitman one vote yes uh but so the book talks about many of the new uh entrepreneurs who are chosen by the central committee of the communist party in the kgb to represent their investments you know they're getting startup capital to go into banking or whatever else many members of the communist youth league get startup capital this way so it's it's just kind of an interesting transition point from the collapse of the soviet union to the beginning of russia in the 90s because something we always look at on this podcast is who gets startup capital and how. So what you see is

there are these billions in government funds that technically belong to the Soviet state that the connected central committee insiders and the connected KGB higher ups are siphoning off and then kind of handing out to be like, hey, you know, this person at the Communist Youth League, they have an idea for a computer company or something. Let's give them some startup capital. It's just entirely about what your connections are to either the Communist Party or the KGB. That kind of affects your access

to this particular pool of capital. There was a guy in the 90s in Russia that got caught cheating by his girlfriend. Babe, it wasn't me cheating. It was a honeypot by the KGB. I don't even know Sonia like that. She just showed up at a bar and said, hey, I'll suck your dick.

And I was like, well, I guess I know what it is. That was one of these people, Thorbjörg Olsson. Yes. Yes. I mean, like, well, those kind of,

we've talked about a few different, like, foreign... Icelandic billionaire who's recovered in a previous episode. I mean, like, well, those kind of, we've talked about a few different, like, foreign. Icelandic billionaire who's recovered in a previous episode. I believe he comes in in the early 2000s from my research. So it's slightly. No, I think he's in the 90s, but I think he's in the later 90s. If I recall, he and his dad arrived in the late 90s. Yeah. Yeah, but I think it booms in the early 2000s.

I think you guys are right. I do believe that as the uh usr is collapsing i'll listen to our thor brooklyn beer golfing episode for the correct facts that we can't remember right now let's not fucking well drug you up the past it is like interesting where we talk about russia in the 90s and it's just this massive period of just wholesale looting of a nation but it's divided into different periods of looting. So you have the first looters and then you have the, uh, the first looters are like more international.

And then like the, they're like the pixies, right? They're like the people from Switzerland and London and Mark Rich, another person we did an episode about, uh, he is definitely like one of the early, he's mentioned in the Godfather of the Kremlin.

He definitely made a lot of money, kind of acid stripping Russia. And then these like you know uh entrepreneurial domestic russians with a can-do spirit said you know on pearl jam yeah but they said if these foreigners are ripping us off we could rip us off just as good as they could that's right you know it's just uh anything an american can do a russian can do just as well so that's kind of the second wave of ripping off. And then you have the 96 election, which is the third wave of ripping off. Harvey Danger. And then you have the economic collapse in 98, which is like one last hurrah.

And then kind of... Audioslave. Imagine Dragons. Yes. Green Day. Green Day? Green Day. But so, just to kind of like put a button on the KGB role here, there's a quote from a former... Is it a red button? Yes.

To put a red button with the hammer and sickle in the form of a star. Yes. On the KGB role here. The book quotes the KGB general, Oleg Kuligin, who defected to the West. He says, quote, as the KGB was leaving the scene,

it didn't simply disappear. It left behind various political and commercial blocks. Don't forget, the party maintained a significant fortune and a huge amount of property. Technically, of course, a huge amount of property. Uh, technically of course this was Soviet government property, but as the Soviet union dissolves and becomes the Russian state, this property becomes property of the communist party members and their private

orgs rather than the Russian state. So, you know, billions of dollars get transferred into the hands of these now private actors. And it should be noted the cia according to this book was aware of all this kind of like money laundering because you know of course billions were being moved offshore according to the book godfather the kremlin there was a cia note in 1992 where the russian government asked them for assistance in

tracking down the funds and the cia said they didn't want to endanger their network of assets. But I would say, you know, it's kind of a convenient excuse. I think it's pretty clear. It's like, well, they had connections with these KGB people who were smuggling the money. They didn't want to fucking, you know, it's used... Niches get stitches. Exactly.

So, if not with, like, the direct permission, or, this is certainly tolerated and de facto allowed by the CIA and something we've emphasized before, but it can be should be emphasized again, is that though this country is being looted by domestic actors, it's all Western banks, you know, Switzerland, London, New york city western accountants western lawyers these people are very happy to take the fees off of stealing all this money and aiding and abetting these crimes under u.s law under international law whatever just billions of dollars wholesale being embezzled out of out of the country as the soviet union collapses a couple illustrative statistics as to how this went down the entire soviet union's gold reserve is liquidated between 1989 and 1991 so every single drop of bullion in the soviet union manages to disappear overseas in a two-year period

part of that uh i mean some of it was just theft yeah like a lot of it was but another part of it was they needed the gold to pay for food oh really yeah she got that dire yeah it was like i mean uh the planners in in the the special period quote uh after the after the fall of the soviet union there was what looked like there could be like a famine almost like oh their inflation was like really rampant and nobody wanted rubble they have gold they use the gold to get food so stock stock up on gold now, Americans. Right. At the time, didn't they also

were like, quote, unquote, liberalizing the economy by basically taking the state businesses and giving every citizen I guess of the Soviet Union or the Russian Republic, I guess, of the Soviet Union or the Russian Republic,

I don't know which, stocks in these companies, supposedly distributed evenly, but then people were just exchanging these stocks for vodka or whatever. For sure, yeah. And then the people who kind of collected all of them, those ended up becoming the oligarchs. They were liberalizing the economy by drinking soy milk and putting an no human being is illegal sign in their yard. Putting their coexist bumper sticker on their

SUV in a walled neighborhood. Gated neighborhood. On a market's menu for food, they're increasing all the prices by like 50 times. But they also put like a BLM thing on it. Another statistic in terms of this capital flight from the book, the party bosses and the KGB smuggled out at least 20 billion U.S. dollars in capital flight just between 1990 and 1991.

So, you know, there's a lot of rats fleeing the Titanic and, you know, all this money either gets sequestered overseas in a Swiss bank account or it gets reinvested into the domestic Russian economy. So what's going to happen is basically you're going to have this transition from a Soviet system where the state owns everything to a private system where these private entrepreneurs own everything. But it just so happens that the entrepreneurs are mostly the people who were in charge of the state when the state collapsed. But to kind of move on to the Soviet end times, this is 1990 to 1991. This is where it's beautiful that a former Soviet state kind of checks the Marxist boxes for primitive accumulation.

You really do get to see the theory play out in real time. It's like the Benjamin Button of states. They do socialism, and then they go backwards, and they do primitive accumulation. This is a lot of Finngoff also. But so the Soviet end times,

this is 1990 to 1991 according to the book in 1991 the grain harvest is down 23 percent uh the food stores get emptier than usual and there's a lot of popular discontent there are hijackings of you know food trucks and such there are bread and tobacco riots uh some people might be familiar with with bread riots you know famously throughout history when people are hungry you know they'll riot and smash up shops but apparently tobacco right apparently at this period in the soviet union cigarettes became extremely scarce and uh angry smokers would engage in tobacco riots where they would you know smash shops and kiosks and bus stations uh because they'd be waiting

in line for cigarettes and then get told we're out or whatever. So these kinds of... They'd be told, I think you've had enough, buddy. I'll tell you what I've had enough! They'd be told, this is messing up your skin and they would get very angry. They should have found a corner shop

that had black market Virginians. Yeah. The problem was everyone in the Soviet Union looked like an undercover cop. So nobody in the bodega would give them the $10 Virginia cigarettes.

But so, you know. I'll tell you what though. Yeah. For for me it takes some building trust when I go to those bodegas well you just got a haircut you gotta let your hair grow long and then you can get the you can save $5 on cigarettes

not for me man I do it right you go in you get something you give them like a dollar tip you get a good impression and then you walk right back in and go oh hey man can i get one of them you build a report but then you you almost act like oh hey i forgot there's one thing one more thing i wanted here and that guy has to be cool with you because he was just cool with you about you buying a sandwich for 12 or whatever the fuck you do i will say i have like you know now that the pandemic is over for

the next two weeks before it starts again i have been going back out to like new york comedy shows and like hanging out and i you know it's it is kind of like a prison economy sure where cigarettes are a good form of currency oh yeah like if you want to like have a conversation with comedians you just like pay your ten dollars to buy a pack and then go to a show and eventually drunk comedians will be like hey man man, can I bum a cigarette? And this is how you accumulate favors and power in a real Frank Underwood kind of reading of the New York comedy scene.

Oh yeah. This is how you've gotten to know several headliners based off of $400 worth of cigarettes. Do you know how many powerful comedians I have helped give lung cancer to? And the thing that is great about this is you're killing them yes while actively building trust with them exactly so that they're gonna like set me up to take the spots that they will get as soon as they die

house of cards but it's a new york comedy scene that's how demetri martin did it the most low stake house of cards possible you you immediately get spots at like the biggest club and the next day they all go fucking out of business it's like oh yeah sean's headlining the stand the cellar and eastville oh yeah they just shut down that's crazy yeah you buy like a couple of like cartons and new ports and suddenly you're in Madison Square Garden. How do you get to Carnegie Hall? Cigarettes, my boy. Cigarettes.

Menthols, menthols, menthols. As a result of these and other social disruptions, the Soviet Union's deficit continues to grow and Gorbachev decides to reduce social spending. And, of course, austerity always makes the problem better. These social spending cuts result in the first mass labor unrest in Soviet history, which is actually pretty interesting to know. You know, it's like designated such a totalitarian system, but they managed to go almost 100 years without any massive strikes or anything

until they hit this particular period. Coal miner strikes break out, strikes across entire industries because of these reductions in social spending and the austerity and the squeeze on normal people. And also the Soviet army, with the Berlin Wall falling in 89, the Soviets lose their Eastern Europe client states. The Soviet army is forced to reduce spending and retire 500,000 officers. And something we're going to talk about in later episodes in this series is how the cutbacks in the army and the police for the Soviet Union are part of what kind of builds organized crime. Also, like, bodybuilders. Oh, yeah.

It's interesting, like, you know, the Soviet... Wait, they laid off their bodybuilders? Yes. Because, you know, the Soviet state used to have, like, a great Olympic bodybuilder and weight training. I mean, they literally had a state-sponsored steroid program, which still exists.

But they would have, you know, these bodybuilders and weightlifters and Olympic athletes and boxers and all of this who were just like paid by the government and suddenly the government is an austerity and the soviet union falls apart well we can't pay them anymore so you just have all these like buff roided out dudes and it's like okay i can be muscle for a gangster oh yeah and that's pennies yeah yeah oh those state actually those state programs were so successful that well back when they were actually in a official like olympic thing right right that

uh even without the doping they would beat u.s people it's like u.s wrestlers have like they they're just poor as shit they get no support financially. I think there's actually... I was watching a thing about this billionaire who was like, I'm going to fund the US team because the government won't do it. Sean, do you know what I'm talking about? Vaguely. I don't

remember which billionaire. We can look it up. We have time. I can do a silly bit while you look it up uh you have like a guy that's like at like a uh wrestling like tournament or something and he's just in the audience selling like peanuts but steroids it's like steroids steroids get your steroids yeah and then like the state department shuts it all down. And it's like, Nikola, I've got bad news. The state's not funding us anymore. So you'll have to pack up your steroids. They need us to have a bathroom in order to sell steroids.

They need all sorts of ADA requirements. I'm just trying to battle on the street. I can't afford this. I'm an immigrant. You're telling me I can't sell steroids at the stands anymore? What will the people put in their buttocks during the matches? There won't be any matches anymore Nikolai. Wheelchair ramp?

I'm selling steroids, I don't need a wheelchair ramp. Listen no state rules. Even the people with their legs don't work, they still have upper body muscles they need to push the wheels. If they can't get up They still have upper body muscles. They need to push the wheels. Yeah, if they can't get up the stairs, the steroids are working. Nikolai, they want us to do diversity. We need more women,

more little people. I don't know what we're going to do. You know who I feel bad for? Who's that? Anatoly Karpov, world chess champion. He probably got his bread basket cut when they... He definitely didn't get any steroids. Yeah, he didn't get any steroids.

And also, what's the world chess champion going to be able to market to the mob? Yeah. I think you'd be surprised. I think that motherfucker must have strategized some hits. It doesn't apply to the real world. If a Russian mob can't figure out how to use a chess master, we're all fucked if you ask me. I mean, if you want to...

He's like, could you have one of your snipers move diagonally? Okay, you're my bishop. My name is Vasily. Just go with it. So if you have these hitmen moving in L-shaped pattern, they can actually jump over the police officers and be unobstructed it was actually sorry the wrestler the millionaire who funded the

wrestler guy was actually an heir to the DePond fortune oh really this is the Steve Carell guy they made the movie there's a documentary also yeah anyway he actually went fucking insane though yeah I know about that, too.

Murdered a guy. That's what the movie's about. On the team, yeah. No. I saw the documentary, but not the movie, because for some reason the documentary's a lot easier

to find on streaming. Yeah, that happens sometimes. I think it was on Prime for a while, but regardless. Yeah, like his motivation, though, anyway, to connect it to what we're actually talking about. I don't know.

I forgot. His motivation was the Soviet team was way better. So I was on Decider.com, and I was trying to figure out how to watch Foxcatcher, and it's always Team Foxcatcher coming up, and I'm like, I want to see the Steve Carle version. That's good.

All right. But yes, to somehow plug back in to the connective tissue of this episode, to plug back in, is that the Soviet army is downsized to plug back in is that these, uh, the Soviet army is downsized. The police force is downsized.

The Olympic wrestling team is downsized and, you know, 500,000 officers laid off. So it's like, you have these people who are all paid and trained by the state to do various forms of violence, state sanctioned violence. And then you just cut them all loose onto the private market.

Well, of course they're going to end up in the private market for violence which is organized crime and the mafia which is also exactly what happened right after the united states invaded iraq hell yes uh brennan the guy who was basically made viceroy of the country uh had the brilliant idea that he was going to do debathification remove everyone under Saddam Hussein from power, including the entire military. So you had a lot of unemployed people with weapons training

and no job. So that went great. It's always a good idea to put the people with guns out of work and give them no alternatives. That's probably

the biggest complication in the Defund the Police program, which I support, but it's also a big complication. I mean, it's something where you just have to give them other government jobs, basically. Don't just be like, here are your walking

papers and feel free to keep that 9mm. The devil finds work for idle hands. That's right. Don't just be like, here are your walking papers and feel free to keep that nine millimeter. The devil finds work for idle hands. That's right. But so, you know, this is kind of the situation we're dealing with. And this comes to a boil in August of 1991. The Soviet state is in like full on collapse. And the Soviet military actually attempts a military coup against Gorbachev to kind of like head this off. August 1991, the Soviet military storms Moscow, puts Gorbachev on house arrest. And what happens is

this is what makes Boris Yeltsin's career. Because in 1990, as we mentioned, there had been the first national elections for Russian parliament since 1917.is yeltsin becomes the elected president of the russian federation so gorbachev is still the head of the soviet union still ahead of the communist party which is you know at this point made up of fifteen nations of which russia is one part but yeltsin is the head of russia the president russia right so gorbachev is under house arrest by the military

uh... uh... yeltsin and his advisors come up with the idea he's actually outside of moscow at the time this coup takes place they come up with the idea of sneaking him into moscow and getting him into the the russian white house in moscow where the president lives getting him in there so that he can become like a symbol of resistance to the coup basically that's uh saint. Peter's Cathedral, right? Something like that. Yeltsin's in the locker room listening to Lose Yourself on repeat for four hours.

Get at the game, Yeltsin. While he's thinking this up. But yeah, so they get the idea to smuggle him in there and apparently the Russian troops had orders to like not... Sorry, St. Basil's Cathedral. Yeah, the Russian troops had orders to like not... St. Basil's Cathedral. Yeah. The Russian troops had orders to not allow him into the White House. But for whatever reason, he's able to sneak his way in there.

And he gets into the White House. The Soviet troops surround the White House. There's this tense two-day standoff. However, several army units refused direct orders from the military to storm the White House and take Yeltsin prisoner and everyone else prisoner. And actually, two of the commanders of those units, one of them would go on to become Yeltsin's Secretary of Defense. Oh, wow. And the other would become his Secretary of the Security Council. So these two army commanders who refused to storm his place and take the Democrats hostage.

And, you know, because of this, the coup falls apart after three days. There's celebrations in Moscow. Hundreds of thousands of people take the streets. And it's, you know, understandable because nobody wants the military to take over the government. And they assume, hey, Yeltsin, he was elected. This is our democracy. We're going to have like civil liberties and things are looking up now. And, uh, you know, this is like the, uh, this is like where you get to the

very top of the roller coaster and everything is down from here to the point where I think it's arguable that things would be better for Russians had the coup succeeded. Like, I think the military probably would have been a better actor and steward of the nation. But who can know such things? Yeah, I mean, you know, someone might be tempted to say that those commanders were traitors to the worker. But so the coup falls apart after three days. And with the coup falling apart the soviet state itself mostly fall apart which is because the kgb remnants you know uh some of them were loyal to the coup of course that for the most part they recognize neither yeltsin uh his government nor

do they recognize the reconstituted communist party right because it's like the former leaders of the communist party they all go either underground or into private business or some former kgb generals they set up their own private intelligence agencies using the skills they have from the kgb do you think any people played both sides yeah there were a few of them but it's like like for the most part uh the kgb was so involved in the Soviet state. And after this coup fails, they kind of just go into the private sector. They go underground. Yeah.

Like, uh, uh, Gorbachev's head of security originally reported to the KGB. And, uh, after the coup, he reported directly to Gorbachev.

And yeah, like another interesting thing, the, uh, godfather of the Kremlin book points out is we, we spent a fair bit of time talking about these billions of dollars in, you know, Communist Party and KGB funds and property and all this. After the coup, several unsolved murders start to follow that appear to be related to these billions of dollars in kgb and soviet property uh the the one example here is several days after this attempted push uh nicolai kuchina uh who is the man who controlled communist party property at the central committee headquarter headquarters at old square quote-unquote jumped

out of his office window to his death yes just a few days after this is the guy who like knows where all the communist party property is and has all the receipts and stuff and he's mysteriously thrown out of a window. By himself. Of course. I learned a word for this. He defenestrated. Defenestrated. Definistration? Fine, there's another vowel in there. Whatever. Go fuck

yourself. Go fuck yourself. He was defenestrated. Or he self-defenestrated yes auto defenestration just so sad that I have all these billions of dollars in looted property

so some of what you're mentioning here I feel like ended up in terms of these billions of dollars in western multinational banks such as Goldman Sachs among others was that just hey we got to get this money out of this country, funnel it into any place that will take it? Similar to a car breaking down and wanting to use the gas for the next car. You just fucking suck it all out.

You know what I mean? Chinese or Venezuelan or whoever, you know, billionaires or government functionaries will park their stolen money in Miami condos or New York City condos or in the United States or banks in the United States or wherever. They just want to get it away from the state so that if their assets are come at, if they come after their assets, they have assets sequestered overseas. Even when the Soviet state was functioning perfectly fine, it was still having to do this. Oh, interesting. It had foreign banks, like a couple banks in the UK

that it would use to do foreign currency loans so that it could get imports and stuff like that. Because like the US, from time to time, the US would just completely cut them off from the dollar market. Sure, sure. And in an earlier episode, when we weren't over the euro dollar market,

that was one way in which they circumvented the US cutoff of the dollar market. Yeah, I'm not surprised that countries and oligarchs would do this regardless if the state is falling apart or not, just to hedge their bets on how to invest their money wisely. Funnily enough there are plenty of people in the Politburo even at the very end of the Soviet Union

who would be very adept at doing this type of thing. Makes sense. But so yes, the coup falls apart after three days. Boris Yeltsin emerges as the Russian president victorious. He had stayed firm in the White House while surrounded by these soldiers, and he didn't

back down, and he represented the hopes of a Russian democracy and the Russian people and all this bullshit. I'm sure he celebrated with a nice soft drink. Yes. Yes, he kept it Mormon. Many people said, put the square block where the skinny piece should go,

but Boris knew if you stack just correctly, it will eliminate the whole board. Boris Yeltsin, he's the man for the show. Yeah, you try to interview Yeltsin about Russia in the 90s, and he just talks about Tetris the whole time. I am a relatively big uh tetris head and uh alexey did have like a whole bunch of issues with releasing the game because of the ussr essentially they wanted like the ip of the game and because of this there were just so many like dummy copies all over asia because people are like oh i'll pay for this fuck that noise we don't this is a very

simple game we can make this game. And so, yeah, he got fucked out of... I mean, honestly, it's one of the most played games in the world, probably. Yeah, he eventually got his nest egg, but he'd moved to Seattle, and his son, unfortunately, decided to go skiing on Mount Rainier, and he did the thing where you put the long brick into...

Why are you looking at me about skiing, dog? I don't know this shit. Yeah, he was skiing and he did that thing, you know, you put the long... He did that basically by falling into a crevasse and disappearing. Oh, really? Yeah.

I did not know this. Yeah. Because he didn't fit properly, the blocks didn't disappear. If he had positioned himself correctly the snow would have disappeared and the line would have been cleared out and he would have been safe but he went

horizontal rather than vertical and that was his fatal mistake Pajitnev would eventually make Bejeweled and a few other games really? yeah yeah yeah Microsoft hired him. Microsoft was like, we know you can make a game. How about you make some for Xbox?

He's like, sure. Another Russian working for organized crime. We'll be right back. Hey there, I'm Chris Hayes. But yes, Yeltsin, he emerges victorious. The Russian president, but the only other obstacle to his power right now in 1991 is, of course, Gorbachev, who represents the of Ukraine and Belarus. Together, the three of them

decide to abolish the Soviet Union on December 8, 1991. Only nine months earlier, a referendum on all Soviet citizens in all 15 nations had voted by 76% to keep the Soviet Union intact. So the dissolution of the Soviet Union was un unconstitutional undemocratic and totally illegal and it's just the three leaders belarus ukraine and russia unilaterally decided to dissolve it you know that leaders have ukraine and belarus have their own reasons boris yeltsin did it entirely to just cut the nuts out from Gorbachev to make it so that he didn't have any

competition for power. He was the sole authority in the Russian state. Yes. But this brought the free market to the evil empire. Yes, it did indeed. And so the Soviet union is unilaterally and illegally dissolved. The Soviet state becomes 15 different kind of nationalist governments. And it should be noted here, like the book makes a good point. The end of the Soviet Union destroys a unified market and distribution service between these governments. Like each of these 15 now sets up their own borders, their own tariffs. Some are taken over by, you know, corrupt former communist party functionaries such as in the Ukraine. The GDP

in all former Soviet states, except for a few tiny baltic ones plummets uh and that's like just partly an inevitable result of that where you did have in the soviet system of course it wasn't perfect but you did have a distribution system set up to get you know food and medicine and whatever else right to all these 15 different states and that just disappears overnight and now every state kind of has to like figure 15 different states, and that just disappears overnight, and now every state kind of has to figure all this shit out, and all these complicated trade regimens are brought back. So it brought a lot of economic damage just on the face of it, but what should be emphasized,

and I think a lot of people don't know this, is that the aforementioned referendum where 76% of Soviet citizens wanted to remain in the Soviet Union. They wanted to keep this bloc going, and it was just unilaterally dissolved in order to cut out Gorbachev. To our listeners, I actually made a mistake. It wasn't Bejeweled, it was Hexic that Alexey Pajitnov made. Hexic, as well as Pandora's Box, the Microsoft game similar to Encarta. So my apologies on confusing listeners if they thought it was bejeweled. Yogi has forfeited all of his Patreon money for the month.

That's right. I'm going to harakiri my Patreon money for this month, and I'm going to invest it in gold after this episode's content. That would be like a fun Grubstaker's policy is, if you make one factual mistake, all of your money for the month disappears. And in fact, we'll have bounties with the listeners. So if you find a factual mistake, you get half of our Patreon.

Oh, shit. You know when you play Fallout on nightmare mode and one death or hardcore one death game over? Yes. That's like podcasting. We're podcasting on hardcore mode. You would not hear a fucking peep out of me for the rest of the episodes

it'd be like Yogi what do you think of this I don't know and I don't care to respond no comment fallout staying in bed yeah just like talking about a Madonna song like yeah she recorded that sometime in the 80s

or like some months I'd just be like fuck it and i'd just be like you can take my money for this month and be like oh this bitch yeah this bitch ate his bitch's ass out every fucking night someone emails us documentary evidence this billionaire has never ate someone definitively proves by the way Gorbachev that man's munching on some butt Pizza Hut man that man knows the taste of a butt

oh yeah it's like one of those like hair follicle swabs that you can do to like detect if somebody has ever eaten ass and a bunch of billionaires do them to like debunk our podcast so we cannot be taken as liable because these tests have not been done yet and obviously if the tests were done then as liable because these tests have not been done yet.

And obviously, if the tests were done, then maybe we could but the tests have not been done. Yeah, this podcast is either going to last until we get all the billionaires, until one of us goes crazy and shoots the rest, or until the technology comes to prove whether or not a billionaire has eaten ass.

But yes, so Russia in the 90s. So Boris Yeleltsin he gets rid of the soviet union he's the russian president now he's the sole authority gorbachev is not relevant anymore and uh this is where um the nightmare begins uh and uh we're gonna we're gonna break this up because it's so much depression that you just can't really put it all in one episode but we'll give you a bit of a preview of like kind of the first stage of collapse thanks to the free market they now have access to zoloft that's true uh so the uh the main transition and i think this is kind of interesting uh the uh paul klebnikov points out the main transition from the soviet

state to the r state is monopoly. Services are provided by in the Soviet state. Services were provided by essentially monopolies with regulation, whereas in the Russian state, services start to be provided by monopolies that have zero regulation. Because, of course, you know, the Soviet state, it was the state control the entire economy so they would just set up what are essentially state-owned corporations to do you know make cars are make televisions or radios and all this stuff starts getting privatized all of the uh... monopoly power continues to exist in these now private actors so it just creates the absolute worst form of capitalism imaginable.

And a few different kind of like hot shot young economists basically take over the Russian state and run the economy in the 1990s. And we'll talk about a few of them later on. But the first one is a guy named Igor Gaidar. He's a 33-year-old economist at the time in 1991. And he takes over Yeltsin's economic policy. And he's dealing with this ruble overhang that we mentioned earlier, and he knew that freeing prices would unleash hyperinflation. All the same, on January 2, 1992, all prices save for a few strategic goods were freed and immediately they skyrocketed as some examples by the end of 1992 the price of eggs went up 1 900 the price of bread went up 4 300 the price of milk went up 4 800 and bread bread was like a better investment than like the S&P 500 over a decade.

You're getting Dogecoin's returns on bread. That's right. It's just like shitcoin returns, basically. You think fucking GameStop's hot? Should have checked out Yeast back in the day, bro. I'm trying to get like Elon Musk to tweet about bread. The price will go up 4,000%. But in addition to these massive hyperinflations and these consumer goods,

the savings accounts that Russians had yielded only a few percent interest. Salaries only increased slightly. So basically in 1992, because all these prices were freed all at once, the lifetime savings of millions of Russians were immediately wiped out. I believe, again, around this time, Russia has a population of about 148 million. Something like 100 million Russians are almost immediately plunged into poverty. This is what shock therapy was. It was just an absolute nightmare and the worst possible way of dealing with any of this that unleashed absolute deprivation and misery on the people of Russia.

And, you know, of course, this is called shock therapy. A common joke at the time is that it was all shock and no therapy. The Russian GDP drops 19% in 1992, drops another 9% in 1993, another 13% in 1994, and so on for the most of the 90s. As we mentioned, drops about 50% in four years after this price liberalization. I'll tell you what, Russians, way funnier than Americans. Oh, yeah. You ever follow the Russian memes account on Twitter? I recommend it. I like their work on the Steele dossier.

I like that was, you know, that was some creative stuff about Trump liking watching women pissing on beds that Obama sleeped on. That was some good stuff. But anyways, these reforms, these shock therapy reforms, there is one other kind of government department that is abolished as part of all this that ends up being particularly relevant. This is actually the Russian Ministry of Foreign Trade. So like these thousands of commodities, the prices are all totally liberalized at once, you know, not gradually as the most sensible non insane people would recommend you know kinda like a slower transition like china made they all liberalize these prices all at once several thousand percent inflation people are starving and hungry and all this however

the government still controlled the domestic prices of key export commodities such as oil gas aluminum timber coal and fertilizer so the main of key export commodities such as oil gas aluminum timber coal and fertilizer so the main uh... export commodities that the russian state sells in the global market they do control the domestic prices of but not you know food and bread and and eggs and such right the russian ministry of foreign trade had operated throughout the soviet union as

essentially a corporation that handled soviet trade you know it had represented up offices and trading companies all operated throughout the Soviet Union as essentially a corporation that handled Soviet trade. You know, it had representative offices and trading companies all over the world. They worked on commission about 0.5% of sales. So, you know, Russian oil sales, they'll have a Ministry of Foreign Trade office in the Netherlands or something. And if you sell oil there, you can get a little 0.5% commission. This fills up the state coffers. It's like, you know, it's the Soviet way of doing things, essentially. Between 1991 and 1992, as part of these shock therapy reforms, the Ministry of Foreign Trade is abolished and the state withdraws from the import-export business, the Russian state entirely. This step is urged on by the imf and other western interests we'll talk

a bit more about some of these harvard economists who come over in future episodes including jeffrey sacks who's like still an annoying woke guy on twitter but he's like one of the people who advised uh this economist igor guider to essentially commit mass murder of the russian people based on you know a couple graphs he put together while he was at harvard wild and it's just sort of funny like these fucking people come around like with you know black lives matter in their twitter bio now like nobody knows what they were doing uh in the 1990s but it's like that that slavery lawyer who argued that Nestle had a right to inadvertently use

slavery in front of the Supreme Court by saying, well, you know, the people who made Zyklon B, they weren't prosecuted. And like in between doing that, he's like a woke scold on Twitter. It's like he has a BLM like lawn sign.

Hilarious. It's like imagining if Heinrich Himmler had his cover photo on Twitter, be him shaking hands with Stephen Colbert. That's basically who these people are. But yes, so this step, abolishing the Ministry of Foreign Trade, is urged on by the IMF and other Western interests. And, you know, the Ministry of Foreign Trade actually functioned quite well. Within two years of its abolition, the country, Russia's official exports had fallen 40%. Because what happens is a lot of these private exports are done on the black market, are not reported, taxes are not paid on them, etc so officially russians exports uh fall 40 percent and uh there's a major drop in import export tariff revenue as well because the state gets out of the import

export game and turns it over entirely to private actors to the point where by 1994 the majority of russia's foreign trade is being handled by private trading companies rather than the state and the thing is when we talk about you know these monopolies that used to under the soviet system have regulation but now our monopolies without regulation this is kind of how the looting of russian state assets is allowed to occur because these price controls,

they don't go away. The Ministry of Foreign Trade goes away, but there are still domestic price controls on oil, gas, aluminum, timber, coal, fertilizer, key export commodities, among others. So of course, these connected private actors are able to buy the above-mentioned commodities from the state at a subsidized cost and then resell them on the export markets and pocket the profits rather than have them go into the coffers of the state. It all goes into private actors now. So this results in massive commodities looting throughout the early 90s. And as we mentioned earlier, Mark Rich, we did an episode on him. He's now dead. He was a a billionaire he made some good money in

this particular period off you know uh... helping sell russian commodities uh... the new foreign trade companies tend to hide most all of their profits abroad capital flight from russia at this time is estimated at fifteen to twenty billion u s dollars per year of course zero taxes would be taken on all of this. A large-scale pattern of fraud, embezzlement, and tax evasion emerges. And of course,

the natural resource wealth of Russia is looted by insiders and stashed in overseas foreign accounts because of this dismantling of the Ministry of foreign trade and these price controls uh as a result of the price liberalizations over 100 million people on a population of 148 million were plunged directly into poverty uh so this went really well uh the citizens start to appear along the streets of russia pawning everything they own to try to survive. There's many instances of heroes of the Second World War who held off the Nazi invasion, the genocidal Nazi invasion, having to pawn their hero of the Soviet Union medals in order to eat food. You can also buy those at the Hell's Kitchen flea market to this day, including Nazi paraphernalia that was

clearly not taken off of a living person. Yes. Yeah, it is interesting. There are these Soviet knick-knack shops all over where you can just buy these heroic medals that had to be pawned and ended up in the West because of shock therapy. Yeah.

There's this one guy just like full of like, you know, hammer and sickle memorabilia and then one Nazi thing. And it's like, I know how you got that one or how your uncle got that one. For only $10,

you can have the piece of tin they gave to that guy who held out in the siege of Leningrad. Feel like you actually did something for the world. Also, German flea markets really do have a lot of Nazi memorabilia. People are trying to get rid of their grandpa stuff.

I'll just let that pass. The police are coming for your Nazi jokes. But so, in addition to pawning medals, between 1990 and 1994, male mortality in Russia rises 53%. Female mortality rises 27%. Got to close that gap.

Between 92 and 98, 3 million excess deaths as compared to the Soviet period. The healthcare system collapses. There were over 1 million abandoned children in russian streets by the end of the nineteen nineties in fact four percent of all births were abandoned by their parents uh... of course the sex slave trade comes back in force in russian the nineties

as all of these people are thrown out of work thrown into poverty uh... some you know so 90s as all of these people are thrown out of work, thrown into poverty. Some, you know, so. The oldest profession prevails. Survival sex work. Some are forced into organized crime. Some are trafficked. The West. Why does that make you laugh, Stephen? Prevails.

Well, it's fucking, that's what happens. And, you know, this is all just like up until 1994. So, you know, this the Soviet Union ends December 91. They do this insane price liberalization January 1992. They just unleash hyperinflation. And basically, 92, 93, 94. Every one of those years is absolute hell on earth for everybody living within Russia. And and you know most of the other former soviet states and i wouldn't say everybody some people had a good time some people got to experience the maserati form of capitalism a few tourists got uh book deals and uh some very fun and memorable experiences of which they have written. But for the majority, things are not so good. And it's just kind of like

one of those things where we're going to kind of end this episode here in around 93, 94, but we're going to continue it on the Patreon and we're going to... It gets worse. We're going to tell how it gets worse because, you know, you have

93, 94, and then 96, 98. There are so many more collapses waiting to happen within Russia in the 1990s. And it's just so bizarre because let's say the version given to Americans of Russian history is that there was the Soviet evil dictatorship and then the soviet dictator empire the evil empire the evil empire falls apart in 1991 and then there's a brief period of democracy and freedom and prosperity that lasts from 91 until 2000 and then uh vladimir putin comes into power and he restores the evil empire and now it's the soviet union again and it's a dictatorship but there was this brief window of freedom and of course what you actually see when you take the slightest look at it is that ninety one to uh... two thousand was the worst period in russian history literally since the nazi invasion like these three million access desks that is comparable

to russian deaths in the entire first world war and this is in a time of peace run like this is absolute mass murder on a scale totally unseen in world history outside of war and again in the u s the deaths of despair are not quite as bad it is just so striking to see these economic policies that are pursued, you know, supposedly,

um, not out of any malice just because like we're following the graphs, we're doing what's right. And they result in these literal mass murder of human beings. These mass casualty events that are comparable to, to, uh, flu pandemics that are comparable to literal world wars result from these economic restructurings

and still you will see people justify them and support them. And, you know, like... I would argue that indifference is a form of malice. Like, I think there were some people there who knew what was going to happen and they were like,

well, I mean, I need a new car. Right. I need a new car. Right. I need a new car. And it's so cynical because you always hear these Western people, particularly the well-paid pundits or whatever, will talk about, let's say there's protests in Cuba now. People, of course, have the right to civil liberties. We all support that freedom of speech expression. But they always want to Trojan horse in economic liberalization. right to civil liberties. We all support that freedom of speech expression, but it's always,

they always want to Trojan horse in economic liberalization. Of course, they're saying when they're out in the streets chanting for freedom or, you know, those people, a hundred thousand, some in Moscow celebrating the coup being overthrown by Yeltsin in 1991. Those people were, you know, celebrating freedom. Well, of course, these Harvard IMF guys all come in and say, well, freedom is a free market. Freedom is like, we can't have these inefficient state monopolies. We have to turn these over to more efficient private actors. We have to get rid of the state. We have to restore everything to the market and these private literal gangsters. And it's just such a depressing story that plays out again and again.

But I think like, I think why I wanted to do this episode and why I'm excited to continue it on the Patreon is we are going to do more episodes about Russian billionaires in the future. And I think this episode and the subsequent Patreon ones will be some good introductory background because these people are always just dismissed as, know oligarchs in the Western media and and they are but that context of Russia in the nineties and the fact that for all his faults Putin did end this collapse in standard of living that was occurring he did kind of like bring the privatizations under control to an extent he's of course corrupted his own ways.

But it's just one of those things where it's like the Russian people aren't stupid. They know what the 90s was. It was mass murder to them, and they don't ever want to go back. And if you're an American looking at Russia, you can't understand Russia without understanding the 90s. In conclusion, what do you think killed those kids in Dyatlov Pass? What is this?

I don't know about this. Was it the avalanche? That's the official story. Yeah. A slow avalanche. What year was that? I don't know, 78 or something.

Was it... Aliens? Aliens? That's one thing that's floated. Was it a fire from their stove? That's one theory, even though the stove was shown not to have been used.

Here's a big theory. A Yeti? Oh, abominable snowman? A Russian missile test that they saw inopportunely, and then they were, I don't know, shot at until they died in the snow. They all died deaths of despair. Yeah, they all died deaths of despair. I read that the snow simulator for

frozen or some bullshit was used to oh yeah i heard about this yeah i know what you're talking about simulate their conditions and i think they decided it was an avalanche because of this snow simulator basically steven the snow simulator for frozen was so advanced that they decided to use it for fucking mysteries like this where movie yeah movie? Yeah, the movie froze. It's similar with Jurassic Park and dinosaurs, but they put so much money into making it look... Oh, it had like a physics engine or something? Yes, that's right.

That's exactly right. Yeah, yeah. With Jurassic Park, fucking Spielberg and DreamWorks put so much money into fucking dinosaur studies that they figured out dinosaurs move like chickens. That was the big discovery that came out of Jurassic Park because it was like, oh, wait a second, I've seen shit like that move before. And they looked at chickens like that was like the big discovery that came out of jurassic park because it was like oh wait a second i've seen shit like that move before and they looked at chickens like holy fuck it's the same and that like allowed the whole bunch of i mean it's so

funny that capitalistic art is so science and detail oriented like a movie a movie inspired like an actual science yeah exactly i mean have you seen have you seen early cgi before they did this shit like it looks like shit it's it's garbage it is garbage but the idea that the only way we're able to get new knowledge on basic things that should have been solved by just people being like let's put more money into this is an eccentric rich artistic engineer of a person is like i want to know why salt is like this on crackers and because of that we now know how like fucking cocaine dust can affect people brains or something you know

just fucking random shit like that yeah but so basically according to the good scientists at Disney it was an avalanche and then they got like chewed on they got chewed on by some wolves after the avalanche or something I don't think the wolves got to them i think they're actually their bodies were pretty well

preserved you can look at these pictures we'll talk about this and more on part two on our patreon uh we want to say thank you to all our listeners joining us on this uh episode and our russia profile as well as uh the part two that will be on Patreon in a week or so. I really appreciate you guys checking out our show. It's been a joy to make and a pleasure. And honestly, it's one of the few things I like to do with my life. And also big thanks to our editor, Chris. I like to smoke Delta-8. I think that's pretty fun.

You're not getting paid to do that. That's the only issue. You get a Delta-8 sponsor and fucking you plug them all you want on the show, bro. I'm pulling out on Delta-8. I don't like it anymore. The goal of being a political dissident is to become enough of a problem for the regime that they just have to pay you to smoke weed.

So I'm just going to keep tweeting about the government until they're like, all right, let's just shut this guy up. Let's just give him an ounce a month and say no political tweets and I'll make that deal. I'd like the government to know that good acid will shut me up. Yes. And mushrooms. Shut you up after your flight from a 15th story window.

So I'm tweeting become ungovernable. And you're just like coughing your ass off. Well, unlike my co-host, I'm like Randy Moss. Straight cash, homie. You fucking put it in the bank. I'll do whatever you don't want me to do yeah but uh thank you for listening please check us out on patreon if you want to continue this depressing journey through the 1990s of russia we're going to take

you all the way up to the rise of vladimir putin and then we'll in the future explore some other russian billionaires and listen to our other episodes if you'd like to take a separate depressing journey and with that this has been Grubstakers. I'm Yogi Poliwool. I'm Andy Palmer. I'm Steve Jeffries. I'm Sean B. McCarthy. And look, you know, you're going to get that experience soon because Biden economics, that's

going to mean that eggs are going to cost 1,800% more. Bread, 4,000%. You've got to save that stimulus, baby. That's all you've got to fucking hope on. Buy bread, future's them. Should not have blown that stimulus, baby. That's all you could have fucking hoped on. By Brad Fuchs. Should not have blown that stimulus on Dodge Coin. He's a socialist. Put in oral weed, baby. Fucking General Mills.

That's the shit that's going to last. Okay. Good night, everyone. Bye. Huddled in rubble. Dying like crazy. Yeah, basically. Anyways, cut all this, Chris.

Cut all our great Battle of Stalingrad material. Let's get this done so I can smoke some weed.