Comment by anovikov | Hacker News Reader

Comment by anovikov | Hacker News Reader

In Russia, a period of high inflation in 1990s and early to mid 2000s made people simply think in dollars. Whatever price or income you get, you just convert into dollars in your head and now you know what it's worth. Saving were only USD cash. Although inflation is long gone, people over 35-40 still think this way to this day

In Belarus, where there is no high inflation, but just periodic (once in 3-7 years) sudden devaluations of the local currency, people always think in dollars, and many employers set salaries in dollars too. Even government sets rent on government property and some taxes in dollars or euros just to avoid the hassle of recalculating it too often. After a while, people got used to it and it's not a problem at all - no one but government employees who get salaries in local currency, is even worried about the exchange rate (and those employees can't survive on salaries anyway - they are dependent on bribes as salaries are laughable - and bribes are in USD).

In ex-Yugoslavia, due to large numbers of people guest-working in Germany, we ended up de-facto pinned to Deutschmarks.

One of my favorite memories is watching the news where Ante Marković announced the denomination of the dinar, where they basically ran out of room on the bills for all the zeros and so just declared that henceforth they would print "new dinars" which are same as "old dinars" but without the trailing 4 zeros. Marković waved one of those bills in front of the parliament, started laughing with joy, and there was applause. [1]

[1] https://youtu.be/G3dSOfoQiaY

Of course what I didn't understand at the time is that they also officially pegged the exchange rate to the German Mark, which made the currency convertible and stabilized the inflation rate. Now I see that deleting the zeros was mostly showmanship (though it helped lessen the confusion).

Bosnia still has the mark. It’s an interesting link to the past.

Initially the mark was pegged to the German mark at par. Since the replacement of the German mark by the euro in 2002, the Bosnian convertible mark uses the same fixed exchange rate to euro that the German mark had (that is, 1 EUR = 1.95583 BAM).

https://en.m.wikipedia.org/wiki/Bosnia_and_Herzegovina_conve...

That is amazing. Straight out of an episode of Top Lista Nadrealista.

Don't think I ever expected to see that reference here!!

Oh it's all about Hrkljuš :)

Well, that clears things up.

This is known as currency substitution or dollarization and can be done officially or unofficially. But what happens when the world's currency also inflates?

https://en.m.wikipedia.org/wiki/Currency_substitution

> But what happens when the world's currency also inflates?

It's a relative premise of course. The USD Index [1][2] (currently over 97 and rising) indicates the USD isn't being debased at a faster rate than the other major currencies. The EU, China and Japan have debt & spending problems every bit as bad as the US (with the EU and Japan having far worse growth problems), choking at their economic and political systems persistently and requiring forever interest rate games. So if, this decade, Argentina's currency debases at 20% per year and the USD debases at 5% per year, and there are no superior alternatives in the currency realm (eg the other major currencies are doing something similar), you'll largely mentally disregard the USD inflation, as all the major boats are getting the same tide, and your USD choice is still the right one vs the local currency. And if you can, you may properly choose to diversify whenever possible into inflation hedging assets with surplus cash, trying to balance holding enough transactional USD vs inflation hedges to limit some of the USD damage.

[1] https://finviz.com/futures_charts.ashx?p=d1&t=DX

[2] https://www.investopedia.com/terms/u/usdx.asp

We had what we called "hiper-inflação" (hyper-inflation) in Brazil during the late 80's and early 90's. My father calculated the prices in gasoline liters.

> Although inflation is long gone

Well, you say this, but then there was that time in 2014 when the ruble went from about 40 RUB/USD to 60-70RUB/USD...

That's true, but there wasn't any super major inflation spike. Everything just became cheaper in dollars.

Venezuela sounds exactly like Belarus, bribes are expected for common state procedures, even with those that the government already set in dollars like getting a passport.

Venezuala ranks 177th out of 180 in the latest Corruption Perceptions Index (CPI) : https://www.transparency.org/en/cpi/2021

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