December 31, 2017 Sunday
Bedtime Story
The Russian Hyperinflation of 1992
In economic parlance this kind of sudden
release of price and currency control that took place in the Russian Federation
of 1992 goes by the very apt name of “shock therapy”.
The prime architect of this ruthless plan
was the deputy prime minister Yegor Gaidar under the guidance of American
Economist Jeffrey Sachs.
What is certain from my own experience was
the shock or the jolt part that the recently liberated Russians got when this
policy was unleashed upon them.
As far as any therapeutic gains to the
masses that was intended to achieve I cannot vouch for.
Radical slashing of government spending,
heavy new taxes, soaring prices and deep credit crunch – all these factors
ensured the GDP of the country continued to fall till 1998.
Such kind of nation-wide treatment to
economy was first handed out in 1985 to the people of Bolivia when Bolivia was
facing a mind-boggling hyperinflation of 25,000%.
It was handed out to people of Poland a bit
earlier in 1989.
What is certain is that this so called
“shock therapy” converted the mighty disciplined Russia into a large lamentable
Bolivia.
Never ever before in the history of mankind
has living standards of so many fallen so rapidly in such a short span of time
without any war or foreign invasion or epidemic.
The fragility of economic systems,
political boundaries and life in general was in full display and we lived
through it.
It is hard to imagine that any ape would be
able to come of out of this trauma unscarred.
In the very first year of so called
liberalization and reforms, retail prices increased by 2520%, which amounts to a
monthly inflation of around 200%.
Now just to give you a proper perspective,
doubling of price would occur in a month in a hypothetical case of 100% monthly
inflation.
So a loaf of bread that amounted to 20
ruble would become 40 ruble at the end of month in a case of 100% monthly
inflation.
In the scenario of 200% monthly inflation
that same loaf of bread would end up costing 60 rubles.
So if you see the increase per day, a
person buying that same bread would be paying on an average 1.33 rubles more
each day.
So any student like us who was depending on
fixed stipend thanks to the courtesy of Soviet Government or most Russians who
depended on fixed wages were rapidly being deprived of purchasing power.
In an economy undergoing hyper inflation all
savings and investments become worthless unless they have been traded in for a
more stable foreign currency.
Hyper inflation is not something that is
very commonplace and to have gone through it is also a kind of rare experience.
Stay tuned to the voice of an average story storytelling chimpanzee
or login at http://panarrans.blogspot.com
Good night mon ami and my fellow cousin ape.
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Another great educator and a teacher that I am aware of is
Professor Subhashish Chattopadhyay in Bangalore, India.
While I narrate stories, Professor Subhashish an electronic
engineer and a former professor at BARC, does and teaches real mathematics and
physics.
He started the participation of Indian students at the International
Physics Olympiad.
Do visit him here:
All his books can be downloaded for free through this link:
For edutainment and English education of your children, I
recommend this large collection of Halloween Songs for Kids:
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