There's Still A Chance

A month has passed since the implementation of the program aimed at reconstructing the monetary system, and we have managed to prove to ourselves and the world, two well-known truths. First, it is much easier and much nicer to live without inflation, or for that matter, hyperinflation. Secondly, there is no inflation even when there is a deficit in public expenditures, if these expenditures are financed from foreign currency reserves.

Naturally, we are all happy with the program's first results. It is also understandable that we should be concerned over how long they will last. Foreign currency reserves are limited. We know from experience that there have been other anti-inflationary programs here which started off well, but never lasted more than six months. Some will say that even that would be enough compared to what we have been through. Agreed, and on condition that this summer isn't worse than it would have been if the program hadn't been introduced.

However, such a danger does exist. The battle for healthy money and a strong dinar have yet to come.

The first thing which must be attended to, concerns the dinar. The new dinar is based on foreign currency, and the rate of the old dinar is stable. In this way, the old dinar also has a foreign currency base.

It is believed that the entire money mass of the old dinar is not more than 40 million German marks. This is why it is necessary to abandon the system of a dual domestic currency, and return to having only one dinar the new dinar. The overall money mass will not increase much, and a need will be created for setting up a monetary system based on new dinars.

So far, only mechanisms for the printing of the new dinar have been set up, but no mechanism for the withdrawal and abolishing of these same dinars has yet been introduced.

The first attempts at printing money based on goods--tractors and combine harvesters--do not promise much good. This is the same old system of supplying credit for production from the primary issue, in which money from the primary issue replaces working capital. The tractors have already been sold and the money collected. When they are delivered to the buyers, this money will not be withdrawn, and this issue of money will not have a base in goods.

The issuing of money based on foreign currency reserves was the first positive step towards getting the people to have some faith in the new dinar. The National Bank of Yugoslavia council has adopted a decision on determining the money mass for the first quarter of this year. It is obvious that this decision has been abandoned, and that one billion of the money mass of new dinars will not be covered by the country's foreign currency reserves. This is why it is necessary to install a new mechanism for the issuing of money as soon as possible, and not allow pressures from badly-run state-owned firms to endanger a healthy dinar.

A healthy dinar does have a chance. The population's faith in the new dinar is satisfactory, but it is not sufficient. It is necessary to win over the trust of the business world.