Lawry, I, too, enjoyed Ed's post.
I think that your suggestions might have worked. Harry ----------------------------------------- Lawrence wrote: >Thanks for the exceptional comments on Russia in the mid-nineties, Ed. > >ED: > >I'm not sure of what else might have been done. > >LAWRY: >What might have been done was: >1. Recognize that the threat of hyper-inflation was the number one issue in >transforming the Soviet/Russian economy >2. recognize that the hyperinflation threat arose from the 'ruble >overhang' - a huge excess of ruble currency far surpassing the value of >goods and services. This overhang was being hidden on a day-to-day basis >through the artificial control of prices and currency exchange, but even so >there were pretty good estimates of the magnitude of the overhang readily >available. >3. 'Absorb' the ruble overhang by selling off state properties - buildings, >equipment and coops, especially. There were plenty of rubles floating around >Russia at the time. Without anything else to do with them, people would >gladly have bought tangible items. The state would then collect vast ruble >sums, thus getting the overhang rubles back (having printed a vast excess of >them to begin with. The sale of state properties would continue until it >was estimated that the rubles still in circulation roughly equaled the value >of goods and services being produced. (All this requires honest sales, >priced at the value of the property being sold, and this would have required >careful management by honest administrators. This was quite do-able, if >attended to properly.) Now comes the tricky part: >4. Destroy 85-95% of the rubles that have been retrieved. Of course, it is >tempting to pretend that these rubles have value, and to put them into some >account that will be used for something, but in reality, they are >hyperinflationary excess and the government could have destroyed them >without the sense of loss that an individual might have. >5. Use the remaining 5-15% of the overhang rubles to create a social >services 'net' for anyone so dislocated or harmed by the coming transition >to a free market economy that they simply cannot maintain a minimum standard >of living. Yes, the use of these rubles will be inflationary, but if the >program is managed carefully and the rubles only dispersed on a real >need-basis, the inflationary impact would be minimal and perhaps not even >perceptible. Meanwhile, the people are given one more reason to have >confidence in the way the economic transition is being handled. >6, Let the dynamics of the free market prevail. >7. Seek and punish individuals who launch scams or defraud investors and >consumers. > >I do believe this approach would have worked. It was proposed in 1990-91, >but internal political turmoil was already such that clear thinking and >implementation was difficult. Under Yeltsin, the intellectual discipline was >quite poor, and initiatives requiring this kind of thoughtful and dedicated >management were probably impossible, not to mention that Jeffrey Sachs had >got their ear by then and, ignorant of how to handle the overhang, he was >endorsing economic policies that were to lead to Russia's ruin. >A variant on this was proposed to the Georgians and successfully implemented >by them. >Lawry ****************************** Harry Pollard Henry George School of LA Box 655 Tujunga CA 91042 [EMAIL PROTECTED] Tel: (818) 352-4141 Fax: (818) 353-2242 *******************************
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