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By the end of 1992, Russia stood at the brink of hyperinflation. This article identifies the main cause as an uncontrolled increase in the money supply related to the budget deficit, and central bank credits to enterprises, and to the rouble zone. These create a vicious inflationary cycle, which will be difficult to break since the political forces representing old Soviet economic structures have undermined stabilization policies. The article concludes that though macro-economic stabilization is not a sufficient condition for the market-oriented transformation of the Russian economy, it remains a necessary one, without which the reform will fail. [ABSTRACT FROM AUTHOR]