In Opium We Trust? Pondering the Falling Dollar

Dollar Bill Origami
Dollar bill oragami. A good use for the falling dollar?

In late September, we headed into the mountains of eastern Kyrgyzstan with a stash of US dollars tucked away in our money belts for emergencies. When we emerged a week later, that same stash was worth about 5% less. No surprise that the dollar was trading lower. This has been the pattern for some time now, particularly since we began our travels one year ago.

This time, however, the dollar appeared to lose value in a way that imitated a countdown clock marching towards a momentous event. “Which event?” we wondered. At what level will the US dollar bottom out? Economists like Berkeley’s J. Bradford DeLong continue to ask the same relevant questions about the US dollar.

Whether it’s stoked by economists and international media or kicked up by people in countries whose salaries and profits are personally affected by the US dollar’s fluctuations, discussion of its precipitous fall is not in short supply. Purchasing power dwindles, prices go up, anxiety starts to loom and the topic makes a frequent appearance in everyday conversation. No difference on the travel trail or in our discussions with locals.

Currency and Inflation: Some Things Change…Some Things Stay the Same

Fluctuating currencies and inflation are nothing new. We stayed with a friend in Bishkek who gave us a crash history lesson in the post-Bolshevik revolution formation of the Soviet Union and the fall of the individual hold-out states of Transcaucasia (now the Caucasus and Central Asia) in the late 1910s and early 1920s.

A Billion Rubles, Transcaucasian Currency
A one billion rubles note?

He pulled out his pre-Soviet currency collection and showed us a series of notes from the struggling Georgian independence movement in the early to mid-1920s. Notes ranging from 1000 to 1,000,000,000 were printed within the course of a year as inflation zoomed out of control. The decline of the currency eventually overtook the speed of the printing presses. Amounts were stamped by hand on blank bills, evoking scenes of hand-cranked printing presses with paper flying out in all directions.

In some cases, the pre-Soviet bank notes indicated that they were backed by a standard such as gold. Most of it was pretty boring small print that doesn’t grab much attention. However, one note issued after the Bolshevik Revolution in 1919 by what is now Tajikistan was backed not by gold, but by the opium stored in the national reserves.

Central Asian Note from 1919
Currenty backed by opium reserves. In opium we trust?

We tried to imagine a pile of opium locked away in some Fort Knox style Tajik complex, ready to be paid to note bearers on demand.

Why not? Though gold is pretty strong these days, we suppose a few might favor a return to the opium standard. If neither gold nor opium are your thing, there’s always the American standard, “In God We Trust.”

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  1. says

    Have a nice, lazy time in Beijing, guys. Is it snowing there? We have tropical atmosphere here, not without christmas tree on every corner, from at least two weeks already:)
    take care

  2. says

    It seems odd to read a discussion of the falling dollar that fails to mention two of the main causes of the debt explosion that is causing the greenback to sink.

    1) The hugely expensive war in Iraq.

    2) Bush’s massive tax cuts for the rich.

  3. says

    Luiza and Chriss: Nice to hear from you. As we look out our window in Beijing, it is indeed snowing. Enjoy the warmth.

    libhomo: The topic of the falling US dollar is rather broad. The intent of our post is not to re-focus a political and economic discussion of its causes. There are plenty of sites and blogs out there that do that already. Our intent is to discuss the falling US dollar as it relates to our experiences and observations while traveling through places like Central Asia.

  4. says

    While I really, really miss traveling as we did when we lived in Prague, I definitely don’t miss the vagaries of the exchange rates. Except for the all-too-brief halcyon days of Kc40 to $1 that we had for the first few months we lived in Prague, we spent the entire duration of our overseas life watching the dollar–and our salaries–fall. All I can think when I see reports about the crazy-strong euro, pound, and even crown is how much various staples in European life would cost now. Bakeshop Praha would be right out. Hell, even a Bohemia Bagel klubovy krocan is approaching $10.

    Oh, for a salary paid in euros right about now!

  5. says

    Nicole: We remember those days. Well, maybe not Kc40 to $1, but about Kc 37 to $1. Then, we remember 30, then 25, then 23. At that point, I suggested to a Czech friend – to his surprise – that the dollar would easily go below 20 Kc. I’m not sure I expected it to go so quickly. At the moment, it’s at Kc 17.7 to $1. The next question…an exchange rate of 15 Kc to $1?

    I have also argued in passing conversation that the days of cheap Czech _______have long been over. Finally, the Fleet Sheet Final Word, a source that I respect calls it like it is.

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