A while back
Bolivia went through one of those periods of
hyperinflation that are not all too uncommon in
South America. The total lack of confidence in the
domestic currency led to most people using
US dollars instead. Using a foreign currency is not altogether uncomplicated. It means that the
government cannot use its
central bank to regulate the
money supply. Instead the money supply is earned by
exports.
As it happens the major export of Bolivia is
cocaine. For reasons that I will not discuss in greater detail here individuals exporting cocaine seem to prefer
cash transactions in
hundred dollar bills when making business. Because of this there was a large number of hundred dollar bills circulating in the Bolivian
economy. Unfortunately hundred dollar bills are not very well suited for the everyday shopping needs of the average Bolivian
consumer. The result of the combination of large demand for
one dollar bills and large supply of hundred dollar bills was that the price of a hundred dollar bill was about 97 one dollar bills.