The Day After

The only good thing about hyperinflation is that it must stop some day. All other information is bad news, including the fact that for a certain period we will be practically without money or prices. Then we will all become aware of the fact that things cannot continue this way, and that it is better to pay the price for curbing hyperinflation, then continuing life with it.

Our present situation does not differ in any way from the other hyperinflations which happened in this century. That is why the solutions cannot differ. It must be underlined that there are only two ways out of this monetary chaos: we will definitely adopt bartering as the only system of exchanging goods, or we will introduce new, valid money. A third solution does not exist. The gradual curbing of hyperinflation - and this is being talked about as a new package of measures to be prepared by the future government - is just another illusion.

Let us start with bartering, since this is the more likely choice of those who are responsible for the current hyperinflation. Firms will continue to exchange goods, calling the process compensation transactions, and when this becomes impossible then payments will be made in cash - in Deutsche marks. This form of payment will continue to be illegal, but firms will continue to operate in this fashion for as long as the authorities are willing to tolerate such a situation. This however, won't be possible for the citizens, for the simple reason that there are not enough small DM bills to cover the demand. That is why the authorities will try to issue food packages instead of salaries. In order to fill up such packages, it will be necessary to find the food somewhere. The peasants will not sell food for dinars, and the state will not give them Deutsche marks. This however, isn't a burning issue right now, since the state has already completed this year's buy up. The peasants "sold" their corn, sugar beet, sunflower, maize... but they never got their money.

A barter economy has no prices, no inflation and no goods. If we continue with the barter system next year, we won't have any food. Some may think that all this is a long way off, on the contrary, it is just round the corner. There is another problem linked to bartering. The state prints money in order to cover expenses incurred by the army, police and state services. With the disappearance of money and taxes, the budget's coffers will remain empty. Food packages are not enough for them.

There is another possibility. Food packages should be distributed to those without anything to eat, while the others must be allowed to earn healthy money. Today it is both difficult and easy to arrive at valid money, money which will not be devalued weekly. The task is a difficult one because there are no hard currency reserves, but made easier, unfortunately, because the real mass of money has been drastically decreased. The entire money mass of the dinar at the start of 1992 was equal to 1.2 billion dollars (black market rate). Today it is the equivalent of 200 million dollars. The classic method of curbing hyperinflation is by cutting down on public expenditures and the introduction of valid money - money which would be based on goods and not on foreign currency reserves. From the political angle, this is the more difficult move. People must be told that over the next six months they must tighten their belts, and not spend a penny more than they should. This attitude must be adopted by the citizens, army, refugees, political parties and trade unions. It is necessary to set up a government which will have the confidence of all.

This is not an easy thing to achieve here. It must be understood however, that the alternative solution - bartering, with which we can survive today, will not be enough to feed us tomorrow.