Devaluation

When a father has no money to buy his kid a new pair of shoes, he often justifies it by saying that his kid’s feet are going to get bigger. The justification of those responsible for postponing devaluation sounds much the same. Ministers were the first to admit what we all see, that is that the dinar has already devalued on the street and through financial transactions between companies. And then these days they began claiming something which nobody sees, nor can even imagine: by implementing economic policy measures, they will lower the value of the mark below four dinars. This is not the first time that ministers believe that citizens are fools, but, if truth be told, they have little left other than to claim that "our feet are going to get bigger". That is to say, they would have backed the dinar long ago had they had available financial resources.

Every successful devaluation follows a simple recipe: either a part of the total domestic currency is withdrawn from circulation, or a certain amount of foreign currency is pumped into the economy. A combination is also possible. The Government is afraid to do the former, while it cannot do the latter. Were they to withdraw money from circulation, all those who receive salaries from the budget will be the first to cry. These days, even the police is late with paying out salaries, so that it’s more realistic to expect that the Government will print money before it does anything else. Foreign currency inflows are literally nonexistent, just like foreign currency reserves. More serious economists calculate that without reducing the total amount of dinars to eight billion dinars, and without pumping in another 300 million dollars, there is no question of maintaining a currency exchange rate of 4.6 dinars to a German mark. It’s only in stories that fowl fall from the sky. There is no evidence of money. Thus all that’s left to the ministers is to beat their breasts and claim that they will not go ahead with devaluation, supposedly on principle, and that they will find some other measures for balancing the value of domestic currency. In much the same way they promised to release flour, sugar and cooking oil into circulation from state reserves. O.K., it’s clear even to them that the cause of the sickness is not treated by dealing with the symptoms. That is to say, the currency imbalance did not occur because there was no cooking oil, flour and sugar in stores, but because panic arose with people fearing that prices would go up because of that imbalance. Then, they are promising strict controls, strict discipline, a strict state and strictness in general. Earlier they exercised this on the citizenry, but it does not happen that economic principles change when our ministers cast an evil eye their way. Thus, when everything is added up, and here the issue literally concerns addition and subtraction, it becomes as clear as daylight that the absence of devaluation is the main reason for state bankruptcy. Our feet will be wet because there’s not money for new shoes. Here, everything is getting smaller, and without a possibility of correction. Hence, when our ministers speak about balancing the currency exchange rate, they hardly appear as adamant supporters of a clear policy, but as confused people who did not get a vote of confidence in order to admit that all is lost.

Recently Robert Gelbard gave Slobodan Milosevic an analysis by the American Finance Department of the situation in the Yugoslav economy. We can just imagine the scene: Milosevic taking the file, pretending to be looking through it seriously, while mumbling in an undertone, "I really found the right guy to tell me about this". I don’t think that Milosevic is ignorant and that he believes in the levels of increases which statisticians, under order from his government, manufacture for propaganda purposes. There isn’t a ministry, not even in America, which knows better than Milosevic that the meat and potatoes have long been eaten and digested. Here the issue is completely different: do the Americans believe that Milosevic fears those circumstances. Hardly. If he feared poverty among his people, we would hardly be where we are now.