An Artistic Experiment

The policy related to the dinar as the national currency of pre-war Yugoslavia, then of wartime Yugoslavia, and, finally, of Yugoslavia with gravitating regions is bursting with the policy-makers' unrestrained creativity. The joke, whose punch line is that "it's a pity the horse didn't survive, because I had so many other great ideas to cure him" is perfectly applicable to the wretched, worn out dinar. The 1989/90 attempt (Prime Minister Ante Markovic's plan), which we still remember, now resembles more a death rattle.

An artistic approach to the dinar gave our monetary policy an utterly undesired, nonchalant flare. It is highly questionable whether the dinar will ever be able to get off the "something in between" road and start behaving like a currency that is operated in that revoltingly boring way that many economics textbooks advocate and such dull institutions as the IMF and the World Bank impose.

The dinar is vanishing. All by itself - carrying the burden of all artists who had practiced on it.

The punishment for incautiousness, dishonesty, ignorance or clumsiness, no matter which, is the same and usually equally distributed to all those using the dinar. And punishment is expressed synthetically through inflation and exchange rates to stable foreign currencies (30,869,574.8% - that's the dinar's "inflation rate" from 1980 to date). It's the current world record.

Yugoslavia started disintegrating, as its constitutive parts abandoned the single currency one by one. All the tricks played by the republics' various political oligarchies in order to depreciate the dinar, and thus divide a part of their expenses incurred with the others, were finally invoiced to the one which the last to use the dinar. The Serbian authorities, which were also very actively engaged in the dinar's depreciation, did not have enough courage, wisdom or acumen to abandon it before the others.

The price of that becomes evident from the dinar's exchange rate to the currencies of the other ex-Yugoslav republics (see table down). True, only in case of Slovenia are there signs of emerging from the crisis, and the reasons why the dinar lagged behind the tolar so much can be clearly spotted. The Croatian dinar had been ingeniously governed, until the change in the Croatian monetary leadership revealed that the Croatian authorities were incapable of giving up the "creative" approach to the currency, which they had liked so much during their previous socialist life. The accelerating inflation and depreciation of the Croatian dinar to the German mark over the past few weeks puts the Croatian economy in its rightful place. The denar is worth more than the dinar because the dinar is racing down the road of destruction twice as fast, not because Macedonia has a stable currency.

For how long can the dinar keep on disappearing? How many times do the zeros have to be dropped in order to make the dinar an operable means of exchange? Transactions are not only being calculated, but also effected in marks - those who engage in such practice are interested in the dinar's exchange rate to the mark only inasmuch as they can rejoice in the reduced expenses for minor bribes (major bribe are also calculated in marks). The rest of the isolated population will try to save whatever they can by running away from the dinar. The more clever ones will be buying and then selling certain commodities - yesterday TV sets, today flour, tomorrow cans, melba toast and candles, and probably finish off with brandy. The less clever or courageous will hope that they will survive the forthcoming bleak days if they manage to save some German marks in a secret compartment in their wallets. And the exchange rate (on the black market, of course) will continue to rise, sometimes faster, sometimes slower than the inflation rate.

Exchange rates between (ex-)Yugoslav currencies

dinar denar Cr. dinar tolar

dinar 1.000 0.375 0.112 0.055

denar 1.800 1.000 0.313 0.153

Cr. dinar 8.936 3.191 1.000 0.489

tolar 18.260 6.522 2.043 1.000

Source: EP Index ("Ekonomska Politika", 2099, June 22, 1992)