In the comments section tonight, someone asked, "What happened to the price of gold in Russia when they defaulted? If anyone knows or can send a link, that would be helpful."

An answer was proffered that I thought was worth posting. At the bottom of this post I have included a link to Alf Field's latest, about Zimbabwe. Here is the anonymous reply that came in about two hours ago...

Regarding of price of gold after Russian default:

I was quite young then, and didn't know anything at all. I just reached 18, when the hyperinflation broke out. Honestly, I can't tell you much about gold, because it didn't exist in my experience. I can only tell you what I was smart enough to notice.

First, when you talk USSR, you have to understand that we were living inside a propaganda aquarium that was inside of the propaganda aquarium that exists from our common point of view today. Meaning, that for us then, to know the truth as average American knows it, was a huge progress already, unthinkable, and you could find may-be one in a hundred (may-be) who even knew enough to understand that USSR is just a big bold lie. I am not aware of any single soul who knew more than that, no-one who could participate in this current discussion.

Gold. All we knew about it is that urinals supposed to be made of it when we reach the communist prosperity. And, a lie that USD is backed by gold. Nothing else about it. We knew that Stalin mined gold, and that gold mines are still in operation, but we thought it was all for the jewelry. I did not know that Stalin purchased every bit of "landlease" from US for pure gold, until I was here. They told us that "landlease" was a completely free, selfless gift from the United States, and that without that gift, we would have fell under Germany. As far as I know, every honest person loved US for that magic help in the worst time.

At any time before and during hyperinflation, one could go to the swap meet and sell his jewelry to gypsies. This was a better deal that Soviet "ALMAZ", a government run jewelry store that was the only other purchaser of gold. ALMAZ was giving us a penny on a dollar and Gypsies were giving us two, but were much more riskier to deal with, as they used all kinds of tricks.

Most everyone I know sold their family gold, what small amounts they had, to survive the hyperinflation. Sold for nothing, due to widespread lack of knowledge and consequently lack of marked, also helped by import controls and price controls.

Personally, I had no gold. My father was an important communist, and my mom was a typist. Our family heirlooms were taken back during the revolution, in 1917.

My mom paid for 18 years into my "maturity fund", which sat in the Savings Bank and accumulated tiny interest. As I reached 18, then a withdrawal could be made. This was a thousand rubles, big enough to buy several boxes (not cartons) of imported cigarettes. Through her cries I did just that and hide it all. About a week later, the news anchor said that the rumors of devaluation were completely off base. The next day, Saturday, the finance minister personally assured everyone on TV, that everything is honky dory and no devaluation is even in the plans.

The devaluation announcement was made on Sunday, yes, the next day after that. Suddenly, all money were not good for anything. You had to stand in a huge line to get in to the bank and then to exchange only a small amount of old money into the new banknotes 1 to 1. Everything above that, burned.

After that, the price increases really started in earnest. I couldn't decide what to do with my smokes, because the prices were going up so fast.

So, we were surviving like most everyone, by stealing from factory plants. Somehow, all of that industrial high quality stuff ended up abroad. I saw it all on swap meets in Turkey, few years later. Wherever one had been working, this is were he took the stuff from. Again, I can't trace it for you who was providing the other side of transactions, as I wasn't asking myself those questions.

When prices finally began to stabilize, the country was swept clean, of most of the industrial base. This is how we paid for it.

Those who just purchased homes, found themselves to be able to pay them off awesomely quick, because prices were increasing faster than any interest owed, and the salaries were increasing too, although at a magnitude slower pace, but still much faster than the rate of interest. Some folks made last bulk payments equating years of normal payments with just their last paychecks.

But this was happening only to relatively high income ones. Those on the bottom, saw real estate prices running away forever.

I sold my smokes pack by pack, basically where there were no stores, along with smuggled moonshine. Smokes turned out to be the ultimate store of value par excellence even showing some ROI. I can't think of any other commodity that did so good and wasn't perishable as sugar, tires and flour that other folks hoarded.

I have found out that this is the single item that is always in demand, and easily traded and sold. Smokes were also easy to buy in bulk even as the whole thing already started to slowly unfold.

I say that this is the item to spend the last paper that you know will burn, but it is too late to buy food or better stuff. Some people had literally warehouses of tobacco products.

So, that is it. I am sorry I can't tell you anything useful about gold.

End.

FOFOA

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