Ruble overhang and ruble shortage : were they the same thing?

Economists and policymakers in the Soviet Union before its dissolution were concerned about the growth of the"ruble overhang."The concern was that the rationing of consumer goods evident in prior years had led to an excess of purchasing power in households. Price liberalization was expected to lead to a jump in consumer prices as households tried to exercise their purchasing power. But after the Soviet Union dissolved, a new concern emerged: a ruble shortage. Throughout the ruble currency area, governments and state enterprises could not get enough rubles to pay wages and pensions. As a result, households were unable to make the purchases they wanted to make. Ruble shortages contributed greatly to the progressive deterioration of the ruble area, from its beginning with fifteen members to its present membership of two. The names given to these two episodes - the"ruble overhang"and the"ruble shortage"- are misleading, because they are both manifestations of the same phenomenon. In both cases, forced savings led to a reduction in purchasing power and downward pressure on inflation. The difference was in the mechanism that induced forced saving. For the ruble overhang, the government maintained price rigidity; there was nonprice rationing of output that was insufficient to satisfy demand at those rigid prices. For the ruble shortage, the government - through the de facto inconvertibility of deposits to currency. The result was the same: a rationed household sector unable to trade financial assets for commodities.