Monday, August 18, 2008

Gas Money

Hyperinflation in Zimbabwe reached 12.5 million percent in May and is probably higher now. There is a shortage of money and the government has made use of the US dollar illegal to avoid currency substitution. As a result, according to this article, Zimbabweans are using gas coupons -- claims on liters of gasoline.

This is not barter. It is the development of an alternative money, what is being used for transactions are the claims to gasoline, the gasoline itself is not used as money (that would really be explosive!).

This brings to mind the use of brick money in Russia in 1992. During the high inflation brought on by excessive money growth and price liberalization, a shortage of cash arose (why? because prices grow even faster than money in such periods). Enterprises in the Urals resorted to trading claims on bricks. Why bricks? They are easy to count, uniform in quality, easy to store, and useful. But as with the gasoline coupons, it was the claims, not the goods that were actually traded.

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