We hear more and more each day about the pending collapse of the US dollar in the coming years, brought about by overspending, large and growing debt, excessive and regressive taxation to the point that business slows down, unemployment increases, and inflation creeps up, little by little at first, and then soars irretrievably; this last happened in the US in the late 1970s when inflation (measured in the old fashioned way whereby things we actually buy, like food and gasoline, were included in the measure) reached 14-15%.
With a GDP at the time of about $1 trillion, this meant that $150 billion in assets disappeared in one year. The disappearance occurred in cash and cash equivalents, most visibly in savings accounts. The money went into the account, for example, with a buying power of $100 at the start of 1980, and came out a year later with buying power of $85. We were lucky.
Ukrainian friends of ours lived in East Germany at the end of the Cold War in 1991, and remained there until 1993. In late 1992, they purchased a used Mercedes in Germany for about $3,000 and drove it to Ukraine where they sold it and put the money, a $3,000 value in Ukraine’s currency (with the unlikely name, Karbovanets), in a bank account in Ukraine.
They then returned to Germany for the next year…. 1993 …. during which period Ukraine established a world record for the most inflationary year of any country in history. Retail prices increased by a factor of 102 .. i.e., an item costing one Karbovanets on January 1, 1993, cost 102 karbovanets by December 31 of that year.
Our friends knew that the purchasing power of the money in their bank account had depreciated considerably, but even they were surprised when one of their daughters finally got back to Ukraine to claim the funds, withdrew the deposit from the sale of the car and used the entire amount ….. to buy a pair of silk stockings.
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