With so much attention being given to the economic problems of Portugal, Ireland, Greece and Spain, the media has overlooked one of the most important economic stories of the past month. The greatly overlooked story comes out of Belarus. Belarus is a former Soviet Nation which borders on Russia, Ukraine, Poland, Lithuania and Latvia. Recently, the economy of Belarus has completely imploded. On May 24th, The National Bank of Belarus devalued the Belarusian Ruble by 56%. Overnight, Belarusians who held the national currency saw prices for everything from food to diapers soar higher. The average monthly wage in Belarus was 1.6 million Rubles in April. In dollar terms, Belarusians saw their real wage fall from $507 to $325 in one day. The situation is so dire that the government had to step in and freeze prices for fish, tea, coffee, cheese and a number of fruits and vegetables, some of which already had doubled over the past two months. The situation could quickly descend into chaos as citizens sweep store shelves for toasters, canned goods or even Dollars or Euros- basically anything that will not lose value as quickly against the national currency. In the capital of Minsk, people have been hoarding basic staples such as sugar and salt.
To most Americans, the situation in Belarus seems like a distant event that is happening in a third world country. The message we have been trying to convey on this blog over the past two years is that not only is a Belarus-type hyperinflationary crisis possible in the United States, but it is becoming more and more likely with every passing day unless we stop pretending and face up to our financial realities.
