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.
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.
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.”