The collapse of the Russian ruble has become the straw that broke the camel’s back on Wall Street – forcing many U.S. investors to worry for the first time that Asia’s economic woes could lead to a worldwide economic crunch.

Following its worst week ever, the key Dow Jones industrial average has lost more than 13 percent of its value since it hit an all-time high of nearly 9338 points on Jul. 17, and investment firms are not sure when – or whether – it will stop sliding downwards. After closing Friday afternoon at 8051 points, the Dow is at its lowest level since the beginning of the year, and few feel it has hit bottom.

With a drop of 357 points on Thursday and 114 points Friday, the Dow – like stock markets around the world – is showing signs not simply of a response to Russia’s recent ruble devaluation but of a general fear of a worsening global economy.

“The big guys are going to get hurt, too,” argued Doug Hellinger, executive director of the Development Gap, a Washington- based economic group. “Mexico (where the peso collapsed in 1994) was the wake-up call. This may not be the big one, but it’s going to be pretty close … It’s being spread around the world.”

“The news just keeps getting worse and worse,” said Doug Henwood, a U.S.-based economist and author of ‘Wall Street’. “There’s hardly been a portion of the world that hasn’t been hit yet.”

“The drops are so large, it’s not just fundamentals driving this,” warned Robert Allan Feldman, chief economist at Morgan Stanley’s Japan branch, in a recent CNN interview. “People are scared.”

Some banks already are reporting dramatic losses from the Russian crisis. BankAmerica reported Friday that it had lost 200 million dollars over the past quarter, largely through Russian losses, while financier George Soros claimed that his Russian investments dropped nearly two billion dollars in value.

For Wall Street, the new feeling of fear is a dramatic change from investors’ response to the beginning of East Asia’s economic crises last summer. Last year, the Dow and other key U.S. indices continued to rise even though Asian stock markets and currencies – particularly in Malaysia, Thailand, South Korea and Indonesia – were buffeted by speculative attacks and the massive departure of investors. By this mid-July, the Dow Jones had peaked to historic levels.

Last week, however, investors were considerably more pessimistic following ailing Russian President Boris Yeltsin’s dismissal of his prime minister, Sergey Kiriyenko, after just five months in office and the naming of his predecessor, Viktor Chernomyrdin, as acting premier.

Rumours that Russia may abandon some liberal economic measures, nationalise banks and invite Communists into a coalition government have fed fears that, as Chernomyrdin put it during his previous stint in office, that “the whole era of market romanticism is over”.

“There was a large political component to the bull market,” argued Henwood. “There’s been an enthusiasm over the apparent political triumph of capitalism, especially in the last few years.” Now, he contended, the optimism that the U.S.-backed model of global trade would last is subsiding, taking with it investors’ confidence in the global economy.

Those worries persist even though, as Lawrence Goodman, chief economist for Santander Investments, noted, the actual size and impact of Russia within the global economy is quite small.

“Russia accounts for a mere 1.8 percent of the total gross domestic product growth in the world,” he said, while its sector of tradeable goods is relatively small, comprising about 10 to 12 percent of output. Yet Russia’s “knock-on” effect on Germany, and to a lesser extent the United States, has been considerable, Goodman added.

One reason that the ripples from Russia loom larger than those from Asia’s woes last year, Goodman argued, is that there is “increasing concern regarding a vacuum of international economic leadership”. With German and U.S. politicians concerned about upcoming elections this autumn, he said, domestic political factors could interfere with a response to the economic problems.

“I think people are nervous. I think they know they can be hit in a number of ways,” Hellinger said. He added that the U.S. economy could suffer, for example, if the devaluation of Asian currencies leads to a rising tide of cheaper Asian imports which drown out U.S.-made goods; if the spread of economic concerns dampens demand for products in Latin America; or if speculative fears bring Wall Street down further.

U.S. President Bill Clinton tried to allay such worries by asserting that he will travel to Russia this week for a long- planned summit with Yeltsin. But neither the ill and increasingly absent Yeltsin nor the scandal-hit Clinton has commanded enough authority in recent months to assure their respective publics about the future.

Similarly, German Chancellor Helmut Kohl has looked like a lame- duck politician as Socialist leader Gerhard Schroder has trounced him in pre-election polls. Japan’s ruling elite, meanwhile, seem “politically paralysed”, Henwood argued.

In the past, the International Monetary Fund (IMF) and World Bank would be relied upon by world leaders to step into the breach; but in the recent crisis, even their nostrums – particularly the IMF’s reliance on ‘structural adjustment’ policies to depress local economies – are being criticised.

“The IMF is going around the world destroying local economies,” Hellinger contended. What is needed now, he said, was for the financial institutions not to insist only on liberalisation but on more flexible policies that could help nations steer a “middle way” between chaotic capitalism and state regulation.

Henwood said that recent days have in fact seen more criticism of IMF and World Bank policies, with many more economic analysts seeking state-centred programmes rather than traditional IMF policies calling for a limited state role. Following some recent mishaps, such as Indonesia’s economic collapse, the international financial institutions may have to consider some alternative policies, he said.

However, IMF Executive Director Michel Camdessus insisted Friday to Chernomyrdin that he follow “strict monetary discipline” and avoid having any “misconception” that he would find support for pursuing less monetary control in handling Russia’s crisis.

Goodman warned that Russia’s problems were largely home-grown and could not be blamed on the IMF. “Russia has no tax base,” he said. “It would be difficult to point the finger at the IMF and the World Bank in this case.”

More importantly, he cautioned, IMF liquid reserves are down to 17 billion dollars – which means that it cannot be relied upon to bail Russia out at this stage.

That could be a problem this week, when trading in the ruble, which Russia suspended for three days on Wednesday, resumes. When trading was suspended, the ruble had fallen in value to 7.86 per dollar. Now, with rubles trading at more than 10 to the dollar on the street, this week could see an even deeper currency collapse.