Inflationary Tsunami

Inflation in November measured by retail prices reached a record 20,190% in Yugoslavia, according to data issued by the Federal Statistical Office. For purposes of comparison, we must say that last year's annual inflation stood at 19,810.2% which was enough to put Yugoslavia at the top of the list of countries worldwide with the fastest growth of inflation.

In the event that November's inflationary tsunami continues to grow, a loaf of bread could cost 29,000 billion dinars on March 1, 1994. This sum was sufficient to buy 580,000 DM from street dealers on December 1. Under the same circumstances, in three months' time, a liter of longlasting milk could reach the price of one million billion dinars, the December 1st equivalent of 20 million DM. The tempo at which the domestic currency is being devalued is illustrated by the fact that it was planned to release a fresh 205,000 billion dinars from the primary issue in the last three months of the year; this sum will be sufficient for six and half loaves on March 1.

If November's rate of growth continues, in only three months' time, prices will go up by a fantastic 836,542,600%, while it is practically impossible to write out the annual inflation in figures which would be understood by the man in the street. An inflation of 20,190% is the highest in modern economic history, and it is becoming clear from day to day, that the Weimar Republic's alltime record 32,000% per month will soon be surpassed, probably in December. There are many who might regard these forecasts as being too pessimistic. Unfortunately, there are not many reasons for believing otherwise.

It is a public secret that for months now, domestic prices have been calculated and expressed in indexes based on the Deutsche mark. Trends on the black market have a crucial effect on the growth of domestic prices. This trend is accelerating, and there are no signs of stabilization in the near future. This tendency can best be seen in tables showing the growth of the black market rate in the past two months:

Date Street price of DM in dinars 1 October 2,500 11 October 6,500 21 October 22,000 1 November 80,000 11 November 800,000 21 November 7,000,000 1 December 50,000,000

At first glance it is obvious that the black market rate is growing with geometric progression. The value of the DM from October 1 to November 1 had increased by only 3,100%, from October 11 to November 11 by 12,200%, and from October 21 to November 21 by 31,700%. The culmination was reached from November 1 to December 1 when the street rate of the DM reached an astronomical 62,400%! This tendency will probably continue and affect inflation in December. There is a chance that it might reach 40,000%, with all the negative consequences which such a devastating rise in prices entails.

Producers are trying to find a way out by bartering goods, the oldest mode of doing business. The number of those selling their goods for the parallel domestic currency, the Deutsche mark, is dropping, since there is a hard currency inflation in Yugoslavia. The prices of many goods grow even when calculated in hard currency. This has the effect of diminishing the increasingly modest offer, and further influencing the growth of prices, even though salaries and pensions and other income show a realistically negative drop. Simply put, those still producing something hold monopolies, and can dictate prices as they wish.

Compared to producers, shopkeepers and retail tradesmen are trying to guard against losses by hiking prices often. Many shops are closed more often than they are open, because they are sticking new prices on the goods. August's price freeze destroyed the working capital of many firms in only a few days, so that they are now endeavoring to salvage what they can. This kind of behavior, even though it results in aggravating consumers, is absolutely justified if it is borne in mind that the daily rate of inflation in November stood at 18.7%. Under such circumstances, in the span of a few days, the price of an article goes down so much, that it is as good as free.

Shopkeepers and producers are trying to pass the costs of the inflationary chaos onto buyers, i.e. the citizens. So far they have managed, but they will not be able to do so much longer. Pensions have been reduced to a few Deutsche marks, while salaries will soon be expressed in single figure hard currency values. This will be the start of the country's total economic disintegration. Producers will guard their remaining reserves jealously in order that they might ensure minimal wages for their employees, shopkeepers will hike prices by the hour, while the citizens will run around with their dinars trying to get rid of them as fast as possible, buying foreign currency or goods.

There is a very thin dividing line between today's queues in front of banks, post offices, shops and tomorrow's stampede on warehouses with food. The state and its organs are still regarding the whole situation with disinterest. The authorities aren't even aware of the fact that it is a miracle that the domestic economy is functioning at all amid November's inflation of 20,190%. With a doubled inflation in December, this won't be possible any longer. But, perhaps this isn't all that important to the authorities. Elections have been scheduled for December 19. Official data on the rate of inflation in December will be available a few days later. Those who survive will live to talk about it.