Why Is The Inflation Rate In Serbia Twice Higher Than In Montenegro?

The geographic area in which the Yugoslav dinar is still being used consists of the entire territory of Serbia, Montenegro and Macedonia, most of the territory of Bosnia and Herzegovina, and parts of Croatia.

Although the German mark is squeezing out the Dinar as a means of payment, even in these areas, some kind of a very covert economic policy is being pursued concerning the very same Dinar, whose quantity is much larger than allowed even by the first chapters of economics textbooks and much smaller than needed for covering the already issued invoices which can only be covered with freshly printed money. The creators of the policy affecting the Dinar are either the Serbo-Montenegrin government of Serbia or the Serbo-Montenegrin federal government, and the principal beneficiary is the army, of course, the Yugoslav Army.

The amorphousness of the territories where the dinar is still being used as the only currency unit, does not enable any kind of efficient protection of the dinar, and the absence of Macedonians and Bosnians from the administrative bodies governing the fate of money clearly illustrates their determination to abandon the "Dinaric" Yugoslavia.

Many objections could be made against the political detachment of Macedonia and B&H from Yugoslavia if there was no pragmatic motivation contained in the slogan: "Without the dinar into the future". On the other hand, the transferring of one's own costs on all the republics, and even those which one is warring with, is boomeranging in the form of an unrestrainable inflation to those who remain faithful to the YU dinar. Serbia would also be glad to join the escapade from the dinar if it were not troubled by the problem of financing the Army. If it attempts to salvage the dinar, Serbia will have to completely dissociate itself from the Serbs living outside Serbia and from the Army as well. If it persists in its current inflationary financing of all of its needs and desires, the Serbian politics will inevitably be confronted with an unprecedented social rebellion.

The 45% inflation rate in February, or as much as 85% - if calculated from the beginning of the year, predicts not only an annual inflation of some 10,000%, but also a tendency towards a rapid extinction of the dinar as a means of payment. In such a situation, the German mark will remain the only possible solution, to the heart's content of the German financial elite.

The different prices and cost of living tendencies in Serbia on one hand, and Macedonia and B&H on the other, are quite illogical, having in mind that they are related to a single monetary system, in which some sort of free market exists. The established protective mechanisms and the de facto imposed duties on trade between Serbia and the other two republics/states provide a considerably adequate explanation for this phenomenon. Actually, the differences are so big that one could go as far as calculating the par exchange rate between the dinar from Serbia and the dinar from Macedonia, for example.

What is surprising is that there are some differences (as a matter of fact, the biggest) in price increase in the only two remaining federal units of SFR Yugoslavia. Measured by the change in the consumer price level, the inflation rate in Serbia has reached 46.9% (47.1% in Serbia proper), and "only" 23.1% in Montenegro. The ratio between the relative increases in the costs of living is similar: 56.4% vs. 30.4%. The common sense discards the explanation that an economic boom is under way in Montenegro, which has not yet spread to Serbia (with which Montenegro comprises the Federation) and that the inflation rate of some 20% represents the so called transferred inflation from the preceding month. The remaining possibility is to speculate about divisions in the remainder of the remains of Yugoslavia, and effects of barriers between Serbia and Montenegro, separating the two independent economic systems. This means that independent market forces are in action and that the "equalizing" effect of an integral market is absent. What is puzzling, though, is the fact that the leaders of the two republics still speak of untroubled mutual relations and everlasting historical unity.