FREE: Lithuania Talonas 0.20

The listing, Lithuania Talonas 0.20 has ended.

In early August 1991, as a response to public complaints about inflation, the Lithuanian government introduced the talonas (Lithuanian plural form is “talonai”; sometimes translated as “coupon”). It was a quick and unforeseen reform pushed by the Prime Minister Gediminas Vagnorius. At first, it was very similar to ration coupons: every person received 20% of his/her salary in talonas up to a maximum of 200 talonas. In order to buy goods other than food, a person must have paid the same price in rubles and in talonas (for example, if a pair of shoes cost 50 rubles, a person must pay 50 rubles and 50 talonas to buy them).

This system was widely criticized. First of all, in no way it addressed the reasons why there were shortages of goods, i.e. it did not promote the supply; it just limited the demand. Also, the demand for expensive goods (like home appliances) dropped sharply because people needed a lot of time to accumulate the necessary amount of talonas to buy them. It caused bottlenecks in the supply chain and further damaged already troubled production. In addition, this scheme could not prevent the hyperinflation of the ruble because the talonas was not an independent currency; it is a supplementary currency with a fixed exchange rate to the ruble. The system tried to encourage Lithuanians to save 80% of their salaries. But people accumulated their rubles and had nowhere to spend them. It led to the inflation of goods that did not require the talonas (like food or goods on the black market).