SOVIET MODEL

No this isn’t a Russian Dating post.

It’s an economics rant.

It’s interesting to me that despite all the talk of impending U.S. Dollar inflation, nobody in the mainstream media is talking about hyperinflation (pah rooskie, ‘geepereenflatzeeya’).
I was ranting about that last year and I’m surprised that nobody in mainstream media ever talks about this.

People seem confused about what inflation is.

It’s not rising prices.

In a natural, healthy, free market, prices rise and fall, depending on natural market forces, namely supply & demand!

Hyperinflation is not a situation where there are a just a few too many paper notes chasing the supply of goods and services. That’s just your garden-variety inflation.

Make no mistake, hyperinflation comes when there is NO FAITH IN A CURRENCY.

Hyperinflation is when you’d prefer to own a roll of toilet paper than a fistful of currency that nobody thinks is worth anything more than, arguably, and only in certain unstocked shops, a kind of state-issued foodstamp.

When I was in Russia in 1992, nobody wanted rubles. With rubles, you could only buy whatever basic (lousy, wilted, generally yucky) food actually did make it to market (most food got misappropriated somewhere along the supply chain by hungry workers).

Most of the food available for sale in Moscow in 1992 was on the street outside the subway stations, not in the grocery store. It was generally for sale in rubles but LOTS of rubles… hyperinflated rubles.

Street rubles, not state-run-shop rubles.

With rubles, the main thing you could safely expect to be able to buy was bread at the bread store, where the state had maintained control even throughout the shift from communism to capitalism.

You could even buy black or white bread.

It was a ruble-oasis.

I had a laugh when i saw a loaf of Russian black bread (“chyorniy klyeb” / черный хлеб) for sale for $50/loaf in the posh grocery store here in Yaletown, flown-in fresh on Aeroflots from Russia to Vancouver, Canada. I remember buying that stuff for kopeks (0.01 of a ruble, like a penny to a dollar), in Moscow in 1992, and damn, it IS GOOD STUFF.

But back to hyperinflation….

If you wanted to buy anything valuable or anything imported, people would demand KKKHHARD KOORANSEEE (‘hard currency’), and by this, they meant U.S. Dollars or British Pounds.

Demanding foreign currency for domestic sales was actually illegal, but honestly we had all grown weary with the daily laundry list of completely insane monetary/tax laws – clearly everyone at the top was suffering from nervous breakdowns and insane edicts were being mused over in every radio- or TV-possessing home in Moscow. I remember drinking tea after tea (there wasn’t much to eat) with my Russian friends, asking them over and over again, questions like: “Is it really true that the tax on commerce is now 90%? That’s what it said on the news this morning, right? Is that really true? Can that be true? Are they serious? Holy shit!”

Seriously, I remember some crazy edicts coming from the top in those days in Moscow. The next day, the rules would be changed or the proposed law would not be enacted. Maybe they were thinking out loud and kind of panicking. I guess nobody knew what to do!

I learned the Russian word for panic – it’s “panika” (паника).

None of this really surprised me (OK, OK maybe the 90% tax threats surprised me – but not the general chaos), because I had a basic university course in economics under my belt and I had been taught in no uncertain terms how silly & unnatural the Soviet economic model was.

I remember distinctly in university, taking Economics 101, and how we used to snigger about the Soviet “Command & Control” economic system. Like – HELLO – the only way you can have a healthy market/currency/economy is by letting the market take care of itself.

We, in the West, like to interfere with the market where it seems too harsh, just as we interfere with “cruel” nature.

In some ways this is a good thing, in my opinion. We can have a good effect (ie: a certain level of social welfare), and anyway AS LONG AS WE LIMIT OUR INTERFERENCE, the market, like any healthy, natural ecosystem, can absorb our impact, clean itself, and carry on normally.

Sadly, it seems that the U.S. government and the Federal Reserve in the U.S. has created a command & control economy just like the Soviet model we used to mock back in the 80s. The Fed is busy churning out valueless dollars like sweaty, desperate ponzi-schemers, and the U.S. government has apparently largely taken over the banking business and auto industry…. or vice versa…?

In my 1980s uni class, we KNEW that the childish (Soviet) belief that mere humans could actually print up as much money as they want and attempt to completely control / micromanage the market could only result in disaster.

When did we forget that?

I never took Economics in 2nd year.

I never really think about any of this stuff unless I have to – it’s kind of boring.

Has ANYONE been thinking about this stuff?

Scary.