Then married to a native of Bolivia I visited her home country twice: 08/1979 and 12/1984.
On my first visit in 1979 the $b100 note cost $20 as the Bolivian Peso/USD was 5:1.
When I got off the plane just before Christmas, 1984 the $100,000 note cost $5 as the $b/USD rate had become 20,000:1. I found the $b100 note below, only five years before worth $20
, blowing in the streets of Cochabamba!
As I boarded the plane for home just after New Years 1985, the 'value' of the $b100,000 note had fallen to $2 as the exchange rate skied to from 20,000 to 50,000:1 in only two weeks
Several months later my father-in-law sent me a few $b10,000,000 notes. The envelope he sent them in had two $b1,000,000 stamps on it!
Actually living through a hyperinflation was a 'lifetime experience' for me as an economist. Of course I knew the 'why' and the 'how', but the really instructive part was to see how the natives coped with this catastrophe.
For them it was simple: don't hold the domestic currency for any longer than you had to; consequently, the mershants and the wise would convert their Pesos into U.S. Dollars twice a day - once before the afternooon siesta and again at close of business. As they said at the time: "Never sleep with the Peso
Fortunately for them the United States Dollar was available to become an emergency substitute medium of exchange that made specialization and commerce still possible despite the egregious profligacy and miscreance of their government which has become addicted to 'quantitative easing'
Which begs a question - what happens to us if our Dollar should ever fail?
The present market rate of exchange (with the Dollar acting as a medium of that exchange
) is five minutes of economics lecture for a one pound rib-eye.
Should the dollar fail I guess I would be left to find a butcher who wants a five minute chat about economics. Anyone care to wish me luck in that endeavor?
post edited by MetroplexJim - 2014/02/01 12:04:38