Hyperinflation in Bolivia
I am from Bolivia, a country that has a very turbulent economic and political history. In 1985, when I was 5 years old, Bolivia underwent one of the worst inflations in the economic history of the world. At that time, I wasnít aware of the magnitude of such an economic event but I have some memories that today make realize the effects of inflation on the banking system of my country.
I remember we used to buy bread with lots of bills because they were almost worthless. During hyperinflation, almost nobody had money in any financial institution because the central bank converted dollar saving accounts into pesos (Obviously, I was not aware of that in 1985). I remember we stored lots of sugar, rice and some other non-perishable products in my house. It was better to buy those before prices double or triple the next day. In 1985 Bolivian inflation was 60000 % 1
Before prices started to increase, everybody was expecting the de-dollarization of bank accounts the devaluation of the peso. These expectations increased inflationary pressures even further. Nobody trusted the banks anymore. I remember that year my father bought the house where my family lives currently. He also bought some land outside the city, which he sold after 1987. Now, I understand that buying land was a good strategy. It was safer to have houses and land because pesos were worthless and US dollars were one of the hardest things to find.
Luckily, inflation got under control after one year. However, the measures taken by the government affected thousands of workers who were laid off. After 15 years, people are recovering confidence in financial institutions to a certain extent. However, most of the people, including myself, never recovered enough confidence in the national currency. Today, most checking accounts, time deposits, some employment contracts, leases and even prices in the market are posted in US dollars.
1. Cardoso Eliana. Latin American Economy, Inflation in Latin America.