Washing The Money

Although the National Bank governor Dusan Vlatkovic stated with pride that the decision concerning the "colouring" of dinar bank notes surprised everyone including the ones "who were hoping for a monetary chaos in Yugoslavia", one could add that chaos is alive and well in Yugoslavia and that the grand "money washing" operation which was announced on December 24 by the Central Bank could not make good dinars out of the bad ones.

Vlatkovic was probably hinting at the very essence of the game between the National Bank of Yugoslavia and the Croatian government which on December 23 launched "the Croatian dinar" which would serve as a transitional currency of the republic Ministry of Finance until the Croatian crown is established. He was hinting at the tactical maneuvering and secret moves which were kept hidden even from Ante Markovic who gave a verbal resignation. The Central Bank of Yugoslavia was from June 6 craftily hiding its operation of "separating" its own cash from the money launched by the Croatians, although only an economics illiterate could have understood the "exclusion" of Slovenia and Croatia from the country's monetary system differently.

Although the Croatians were open about their intention to separate from dinar, the game of poker between the federal governors and dr Ante Cicin-Sain, the Croatian governor, and dr Marjan Hanzekovic, the Minister of Finance and the president of Tudjman's committee for creating a Croatian currency, still held a thrill. It is difficult to have something more definite on this matter with the disruption of telephone lines with Zagreb and only a limited insight into the Croatian press, but it is symptomatic that dr Vlado Veselica, shortly after cracking up the story of the two stages of the Croatian "escape from dinar", had to resign from Greguric's cabinet. By doing so he pressed hard the Croatian governor Cicin-Sain to say something more concerning the deadline marking their separation from the official Yugoslav currency, so he openly said two months ago that Croatia could be using dinar for a while longer, passing independent and unauthorized decisions concerning its additional issuing (thus around 6 billion more dinars were issued than this republic was entitled to receive for the last quarter of this year). If we then start off with an assumption that it is possible that the Croatian "money creators" were counting on the fact that the National Bank of Yugoslavia will not opt for a grand operation of changing the old dinars, so that they were possibly working on the ways to go on a shopping spree for "the abolished dinars" (Vlatkovic says that there are 57 thousand of those) where their companies can still do business (in Bosnia and Herzegovina and Macedonia), then Vlatkovic can say that "in Croatia they still do not believe that he did what he did".

The satisfaction of the governor of Yugoslavia should be attributed to the political aspect, not the economic. "Even if they have not totally agreed on their final formal legal and political framework", as Vlatkovic would put it - parts of Yugoslavia which want to remain in it should separate their money from Croatia and consent to the common note issuing. That means that the majority Serbian lobby at the Governors' Council should give certain concessions to their colleagues in Bosnia and Herzegovina and in Macedonia. This would mean that "Yugoslavia" would be the name of the firm behind it, or rather that the money which it would be handling could as early as tomorrow go to the federation, or the new asymmetric federation, or even the new confederation. Bosnia and Herzegovina would be most severely affected with the influx of "unusable dinars" from Croatia. The Serbian Minister of Finance Momcilo Pejic says: "Croatian dinars can successfully be shaken off by balancing of the financial exchange with other republics, where most deals could be arranged through barter or by compensation. Many businessmen do not agree with him. Thus, dr Zarko Primorac, the vice-president of "Energoinvest-holding", thinks that the politics of financial defence of the Republic of Serbia is "not well thought out and is practically non-existent". Primorac did not associate his fear of the monetary collapse only with Croatia, he struck a cord by stating that the rate of inflation in December was over 2000% a year, and according to his estimation "the discussion on budget in the organs of federation will bring about a new influx of false money into the republic, so it would not surprise me if other republics were soon to print their own currencies".

Even the Macedonian hasty acceptance of the "monetary union" with Serbia, Montenegro and Bosnia and Herzegovina is not certain now, but it is probably welcome in the situation where the leadership of this republic is torn between its own ambition and the internal pressures for constituting the totally sovereign state and the economic failure to "pay" for its own currency. The second day of the change of dinar, reports the republic police, "a great quantity of obsolete dinars were in circulation in Macedonia". It was thus confirmed that decisions of the Central Bank of Yugoslavia will be strictly enforced. The governor of the National Bank of Macedonia Borko Stanoevski was more precise on the subject of "the surplus of invalid Yugoslav dinars", so he sees the present decision only to be a "temporary solution". The government president Nikola Kljusev recommends foreign currency for inter-republic trade.

The fact that the Central Bank experts made minor changes of the 100, 500 and 1000 dinar notes which are now green, yellow and blue respectively is joined by a new 5000 note, which represents an elegant solution.

It is a small consolation that the federal governor is appealing to the patience of foreign currency savers since in the "remainder of Yugoslavia" the foreign exchange debt accruing to the civilian population has been halved (5.7 billion dollars) so the issuing institution can at least pay it off in dinars. We should ponder over the fact that the foreign exchange savers are offered the "reparation costs" for Yugoslavia, much like after the First World War when Germany printed the money to pay out the reparations to the victors.

If the dinar placements of the National Bank of Yugoslavia are to exceed 180 billion dinars the very fact that the issuing of 581.5 billion dinars is planned for next year indicates that the new dinars can not stop the inflation, although they are easily distinguished from the Slovenian and Croatian money. Even that is not certain if we are to see this year out with the inflation of 700% compared to last year. In the view of this it is somewhat foolish that the National Bank assumes that next year's inflation will be less than 600%. The planners of the Serbian budget have shown even more misplaced optimism by estimating an increase of only 153%. The ones who made a forecast of the federal budget were a trifle more realistic - they estimated the current price increase to 380%. Should we add that the very fact that three supposedly respectable institutions are using three entirely different forecasts of the rate of inflation suggests that nothing is under control - that anything is allowed.

From the beginning of this year until December 11 the unofficial budget of the state of Yugoslavia has allegedly spent 102.8 billion dinars and it had collected 47.8 billion dinars from the real income. The National Bank has thus lent 54.9 billion dinars. The projected budget for next year is 305.1 billion dinars and it is estimated that 229.5 billion dinars should be provided from the primary issuing for the financing of federal expenses.

Starting with a simple assumption that budget spending, owing to the existence of a single currency was responsible for 24 million people and that next year it will cover 15 million people, we can calculate that 2287 dinars were printed per capita without cover, and next year another 15.300 dinars are supposed to be printed "per capita". In the view of this, is it appropriate to talk of the rate of inflation of 10,20% or 25% per month, or should it openly be admitted that the real monetary chaos is ahead of us unless the brakes are pressed hard.

The salary planned for the president of Yugoslavia amounts to 38.380,000 dinars. If we begin with the calculation of income for the eight members of the Presidency for the next 12 months, then each member of the collective presidency would be receiving 400.000 dinars per month. If we exclude Slovenia and Croatia and if we add one Krajina, every president would be receiving around 460.000 dinars a month. If we should exclude Macedonia and Bosnia and Herzegovina, the individual monthly income would rise to 640.000 dinars. A federation of three republics would present the most favourable choice for the leadership so these three would be receiving more than a million dinars a month. Dispelling with the more humorous moments of his resignation, the explanation given by Ante Markovic for leaving the Federal Executive Council does carry a lot of weight. Next year's draft of the federal budget for the Army and army pensioners is estimated to 245 billion dinars, which is 81% of the entire projected amount. In this respect the main issue of today's and any future Yugoslav dinars lies in the problem of how to "separate" them.