The End Of Dinar

For the fourth time this year the Federal and the Republican Governments have introduced new measures to curb hyperinflation: in March, June, August, and now in November. The monthly inflation rate stood at 125 per cent in March, it rose to 366 per cent in June, reaching an astronomic level of 1,880 per cent in August while the figure was 10 per cent higher in October. According to forecasts it will rise by 15 per cent each day in November, which amounts to 7,000 per cent for the whole month. That will certainly be our record.

Every time our governments intervened, the life of our citizens became more difficult, and prices rose more easily. One would think that the inflation rate would be lower if they had not done anything. However, at the moment the governments can do nothing else but watch Dinar disappear. In January some new government will either truly solve the problem of hyperinflation or run the barter economy.

The same reasons are accountable for the current monetary chaos as before, only the way it took place was slightly different. Like in previous cases, at one point there was more money on bank accounts than could be placed at low interest rates. Previously the banks used cash to buy hard currency at the black market exchange rate through street dealers. This time they skipped the dealers and bought Marks and Dollars directly from the citizens paying for them directly to their bank accounts. That is why they had to offer a higher exchange rate than the streets. The dealers responded by raising their rate, to which the banks retaliated by an even higher price of the foreign currency used in the economy. The entire inflatory charge had to explode in several days' time. What was the result?

The country's monetary system was destroyed once again. Beobanka bought 840,000 DM, and private savings banks had to close until the end of the year. Those citizens who sold hard currency to state banks could keep Dinars on their account current. The others who went to private savings banks will have to return Dinars and receive hard currency they had sold if they weren't fortunate enough to do it before November 9.

The fact that the director of Beobanka, the Belgrade bank which largely contributed to devaluation of Dinar, is still on the Governors' Council of the National Bank of Yugoslavia (NBJ) is certainly an oddity. Beobanka had triggered the race of exchange rates and ended it at midnight of November 9, when new economic measures were announced.

Dinar, as a national currency, no longer exists. It is very much like a coupon with which you can buy papers or some food in shops or on the market. Any other shopping has to be done with DM. All production expenses along with prices of goods are figured out in Marks. The points function on the same principle, as their value changes against the price of a Mark.

It still pays to buy with checks, where it is possible, since the nominal price in Dinars is devalued by the time a check is cashed. A daily delay saves 15 per cent. Naturally, salesmen take this into account when establishing prices. Both buyers and salesmen are trying to outwit each other, while everybody is being ruined by inflation.

How long can this chaos last? The monthly inflation rate higher than 1,000 per cent was recorded only in three countries a long time ago. In Germany in 1923 it took three months for inflation to exceed the limit of 10,000 per cent from the initial 1,000, it took two months in Greece in 1944 and three months in Hungary in 1946. Common to all these cases was that the next month proved to be most critical. And that's when the explosion of prices took place. It was only afterwards that the stabilization followed. In our case it seems that we will have to drop zeroes from bank notes in January and elect new governments which will have to find a definite solution to inflation.

If we don't do it, there will be no market economy or dinars. The economy will be based on barter trade (which is called compensation today) and goods will be exchanged for DMs on the black market. The state will collect taxes in wheat, cabbage or potatoes, and financial police will impose a ``racket.'' That's how we'll do away with mafia and hyperinflation in one blow.