Friday, January 13, 2017

Surviving the fall of the Soviet Union

Those interested in how people cope in a crisis situation should go read a long, detailed, and very interesting thread on about the experiences of a Russian man during and after the collapse of communism in that country.  Here's just one excerpt from his recollections.

There were multiple money "reforms" after the collapse. Ruble was artificially tied to a dollar before the collapse. I believe the artificial exchange rate was a around 0.90 rubles per one dollar but ruble was technically considered as a non-convertable currency. I could't go to a bank and exchange rubles for dollars. Actually it was highly illegal to own any foreign currency. Only the special people who did travel abroad could exchange money and it was very limited too.

Also, before the 1991 collapse, prices on many goods, especially food, were much lower than what it actually cost. I remember reading that meat products actually cost around 8 rubles per one kilo, production cost but were sold at around 3 rubles per kilo. ALL prices were set by the government and were often printed on a box. This means, I could buy a kilogram ( about 2 lbs) of sugar for the same price anywhere in the country, Same for everything else.

I remember one money reform where they printed new 25 and 100 rubles banknotes. I think it was before the USSR collapse. This was done in an attempt to catch or to hurt all illegal businesses. People could exchange their old 25 and 100 ruble banknotes but up to a certain amount. Anything over that amount required an letter explaining where the money came from.

Something similar may happen here in the US, in the name of national security or the war on drugs. I keep my money in the bank but I try to keep a few hundred dollars on hand. for emergencies. If you do the same, it's best to have it in $20 bills or less . I know several hardcore preppers who keep most of their savings in cash. If you are one of them, don't keep it all in $100 bills.

What happened to the economy after the USSR collapse was called - "Shock Therapy". It was an attempt to fuse russian economy with the rest of the world. A rudimentary form of Market Economy was also being developed. This meant that everything was tied to a real market price, tied to the real currency exchange rate. Prices skyrocketed. People were walking around in shock and disbelief after they saw new prices on food and everything else. It was like 10, 100 or 1000 times more than a month earlier. Yes, food was readily available but people could not afford much because they were still getting paid very little.

I remember one day, one of my university professors walked in the class, all upset. He just got his monthly wages (everyone was paid in cash only) that equaled to 360 rubles. That day a dollar was selling at it's new high of 350 rubles per dollar, at Moscow currency exchange market. So he just got paid ONE DOLLAR for a month of teaching at a prestigious university. Now, keep in mind that teachers in Russia were like doctors and lawyers here in the US. Being a teacher was prestigious back then, before the USSR collapse.

Inflation was also getting out of control. Prices were getting higher and higher, almost daily. It was best to spend money as soon as you get paid. Most family incomes were spent on food.

I'm not talking about buying frozen pizzas or eating out. Heck, I never ate out or visited a restaurant until I was about 18 years old. Money was spent on things like sugar, rice, potatoes, tea, salt and maybe some meat products.

We had a small summer shack (Dacha) with a small garden out in the country. This helped a lot before and after the collapse. Everything the garden produced was eaten or canned for the winter. It was nearly impossible to buy fresh fruits or vegetables during winter months, especially during the soviet times. Most apartment buildings had basements that were partitioned to have small storage cells, about 10x15 ft, where temperature never got below freezing. We had one too and stored all of our canned goods and potatoes for the winter. Many people would not have survived without it. We canned tomatoes, pickles, fruits like apples and strawberries. We also stored about 500 lbs of potatoes in the cellar. every September we made a trip to a country side and bought the potatoes from small (often illegal) farms. Potatoes store very well in dry, cool and dark place.

Food was number one priority back then. Like I said previously, people were not really starving but they were not eating as good as what's considered normal here in the US. I often laugh when I hear on the news about people who "starve" here in the US. How is this possible when food is so cheap and available everywhere? Perhaps they call it starving when they can't afford to eat out everyday? Obviously they have no clue about basic things like cooking. Yes, it's nice to have pork chops or a steak every day but it costs a lot too. Why not make soup? It's relatively cheap and will feed a family for several days. A 50 lbs. bag of rice can be purchased at Costco for around $15 and will last for a long time. You can make a lot of mouth watering dishes from potatoes only. How can you go hungry in this country???

There's much more at the link.  Very interesting to all 'professional preppers', as well as to those of us who aren't fanatical about it, but believe in being prepared for life's less palatable moments.



drjim said...

Most people in the Unitedt States don't know what it's like to be hungry. I don't mean "Where do you want to go for lunch?" hungry, I mean "Haven't eaten in three or four days" hungry.

My parents were teenagers during the great Depression, and they knew hungry. My Mom grew up in a rural area where everybody had gardens or farmers in the family, so they were relatively well off. My Dad had a large family, and everybody had gardens, raised chickens, and some even had a goat or two, so they did OK, too.

But I still remember whenever we had steak or pork chops for dinner, and my Mom and Dad ate every last scrap. They'd pick up the bones and gnaw them clean after they used their knife and fork to get as much off the bones as they could.

They learned some real lessons the hard way, and my Mom was an excellent cook who could "stretch" things like you wouldn't believe. NOTHING went to waste, and bones and such were used for soup, and she could whip up a good, nutritious meal from "whatever" was left in the fridge.

Same with money. She shopped very carefully, and while we had money in the bank, they still believed in "The Bank of Sealy", and kept quite a bit of cash on hand because "You never know when you might need it".

Anonymous said...

Yeah, current first-world economy of abundance really produces situations where doing things the old-fashioned "right" way ends up being counterproductive.

As in, if you count the energy costs and such... let alone value your own time at all...

Just the other time we calculated that certain traditional foods, we could buy ready to eat (well, microwave or whatever way to warm it up) from the supermarket at just about the energy price for cooking them at home on the electric stove, or less. As in, much less than half the price of the raw, unwashed vegetables...

Still have to do it every now and then so that the kids know how, just in case they ever end up not having a working first-world industrialized economy around.

harp1034 said...

Talk to people came here from other countries especially the third world. They say we have it made here and don't know it. We complain but they would gladly swap places with us.

CoastConFan said...

Paper money can go Tango Uniform very quickly. I was a kid in the very early 60s and we were stationed in West Germany. Our landlord had a trunk of busted currency that he got towards the end of WWII and even a couple of years afterward, before the new Mark was printed (June 1948). Knowing that I was interested in coin collecting, he gave me a double fistful of old banknotes to enjoy. He did welding as a sideline just after the war and was often paid in barter as well as boxes of paper money on the hope that some of it might be worth something.

I still have most of those old bills and along with the later WWII Reich Marks, which went kablooey in1945. There were a large number of bills from the earlier inflation period of 1923 to 1924, when a billion Marks bought you a loaf of bread, maybe. A few decades later in Athens, I bought a small suitcase of Rubles at a junk shop. It was czarist currency, beautifully printed, still banded in sequential bundles. I paid about $20 for the whole wad, suitcase included. A couple of years after that I was back in Germany and bought a two inch thick stack of RM treasury bonds, issue date 1938 with most of the coupons still attached. The first remaining coupon date was spring of 1945 (go figure) and the maturation date for the 5,000 RM bond was summer of 1948. The owner of a couple million in RMs lost all his money when that regime went bust.

I lived in a certain mideast country a couple of decades ago, that had a 40 percent inflation rate on their local currency, compared to the US dollar. I saw what it did to the average person there – they kept their money in gold bullion and gold jewelry as well as invested in real estate. Mind you for me it was no problem as I got paid in USDs.

Being exposed early on to bad banknotes and busted bonds was a cautionary tale not to take things as set in stone. For example, you don’t see any U.S. $500 or $1,000 dollar notes anymore as they have been recalled; yet they were easy to get as a trip to a large bank in the 1970s.

Closer to home, for anybody who was earning a wage in the 1970s here in the US will remember double-digit inflation and then stagflation. That was mild compared to what went on elsewhere then and now. I still have a stack of old paper with pretty pictures printed on them … they used to be money. I don’t want to add my USDs to my collection of busted bank notes and curious, worthless currency.

drjim said...

Regarding local currency, when I was in the Mideast several times in the late 1970's, the "official" exchange rate was a joke, compared to what you could get on the street in exchange for greenbacks. It was usually almost double, and in some cases even triple.

-OR- you could just buy stuff directly with it at the local markets. Ignore the posted price, and just show some US currency, and you could get some incredible "bargains".

shugyosha said...


"Being exposed early on to bad banknotes and busted bonds was a cautionary tale not to take things as set in stone. For example, you don’t see any U.S. $500 or $1,000 dollar notes anymore as they have been recalled; yet they were easy to get as a trip to a large bank in the 1970s."

How did that work? What was the background? There's some weird thing around the 500€ note (and if they recalled the 1000$ note that explains why I thought there was something higher while they kept saying it was the highest general issue note worldwide).

Take care.

Ferran, BCN

Anonymous said...

RE: cash on hand: the mantra of "pay yourself first" holds true. We all have bills - electricity, water, groceries, mortgage, gasoline, etc. - that we pay monthly. Do not forget to add "self" to that list in the form of cash.

A couple thousand dollars on hand, in small bills (Peter suggests nothing larger than a $20, but don't forget an assortment of $10s, $5s, and even a small number of $1s, because no one will be making change at that point, and rounding to the nearest $5 or $10 will be common) is one heck of a good idea. Once the $2500 - $3000 point in cash is reached it's time to start splitting it between greenbacks and lower denomination precious metals, such as silver coins (of known pedigree - a silver dollar from the Republic of Gafroonia may have the same silver content as a U.S. silver eagle, but if I think I may have trouble converting it to my needs I'm not going to accept it) and hard goods suitable for trading.

RE: hard goods - we tend to think of food and ammunition in that category, but things like toothpaste, shampoo, bar soap, drinking alcohol, motor oil, etc., and especially toilet paper, have good trade value (a GI could get a pretty good weekend in Europe right after WWII with a pair of nylon stockings - small luxuries mean a lot when they're extremely difficult to come by).

Timbo said...

People never learn. The exact same thing is happening today in Venezuela. The recall of the Bs100 banknote, the prices of everything set by the government mostly belove replacement price, the whole nine yards.
We lived in Caracas during the two coup attempts and the curfews. My mother in law had lived through the Spanish civil war and always kept a full larder which was a boon in those times.

CoastConFan said...

@ shugyosha,

The U.S. stopped printing the $500 and $1,000 bills as well other larger (and rarer) denominations of American currency by 1946, although the series notes of 1928 and 1934 continued to circulate for decades. These bills continued to be used freely until the Federal Reserve decided to recall them starting 1969. The idea was that the easy portability of these large denomination bills made money laundering and drug trafficking easier, at least that was the rationale for their phase out from circulation.

They weren’t demonetized, but once they went to the treasury, they were removed from circulation. Certainly $500 and $1,000 bills were around, but by the late 70s the collecting value was above the face value of these bills. I know that by the late 70s even a dogged out $1,000 bill was worth $1,100 to a collector and a crisp bill was worth more. I have no idea the value of superior grade high denomination bills might bring these days. As far as I know they are still technically legal tender, if you can find one. I suppose you could still turn in a thousand dollar bill into a bank and get a big sack of wonderful Susan B Anthony or Sasquach Dollars to lug around. Mind you to turn one of these notes in to a bank to get a cash in other notes requires you to fill out a form asking for personal information.

Back to your question about higher notes, the US had $5,000 notes and even $10,000 and upwards, but those generally weren’t in circulation and stayed in banks as inventory. The famous $100,000 notes were only exchanged between banks. I never saw any note higher than the $1,000 anywhere anytime in circulation.

Slightly on the subject, my Mother (a Depression kid) told about her and her friends playing “store” and other games with the boxes of Confederate currency that nearly every household had in the 30s. Sorry to say those notes are long gone and I didn’t even get any.