State-Directed Chaos

The exchange of bank notes, which should have taken place in Serbia and Montenegro from July 1 to 3, has raised dust which has still not settled, and nobody knows when it will. The newest dinar ruined its own reputation and ambition to become a more valuable currency - already during the exchange of bank notes. A farce was made out of what should have been the state's most delicate operation. The changing of bank notes should be an act of "re-established trust". In Yugoslavia, however, it demonstrated that the bell is making its last toll for the regime.

The trouble began when the three days set for the exchange flew by - those who had managed to get new (mostly large denomination) notes could not get change anywhere. The change was given in kind, so a grocer in Novi Sad warned his employee: "Quit giving out chewing gum, insist on apricots" (as change). Those who got chewing gum instead change, wanted to pay for newspapers with them last week. The Belgrade Bus Station toilets would not take the old dinar on the very first day of the "new dinar", so those who could not evade nature's call had to indulge in "majestic defecation" worth 100 dinars (1000 old dinars). The private shop-owners who kept accepting old notes, because they had no small change, were not able to turn in their daily receipts to their local Public Auditing Office (SDK) branches, because of a bunch of people with various certificates were waiting to change old bank notes after the official deadline. In Novi Sad and Krusevac they managed to do so through their connections, and over ladders dropped down from the windows of the local SDK offices. Most pensioners in Vojvodina did not receive their pensions even by July 7. The Post Office explained that it has mostly 5,000 dinar notes, and 90% of the pensioners have lower pensions. Only black marketeers had enough bills to buy out the available German marks, practically at the official exchange rate, and even to exchange the old bills for a 20% commission. It is typical for every socialist economy with centrally allocated resources that the black market alone never fails.

Naturally, the Serbian Government hurriedly "assessed that the exchange of bank notes was not carried out either efficiently and responsibly, or in accordance with the regulations and adopted measures, which allowed misuse and speculation, caused great damage and justified the people's discontent". Of course, on July 6, a Government Committee was set up to determine "who was responsible for such irresponsibility" in the exchange of bank notes. It is strange that a Government Committee for "irresponsibility" in distributing gas coupons has not been formed yet. The need for government committees will probably arise when something else is rationed.

If the Treasury Department of the National Bank of Yugoslavia is to be believed, it supplied the National Bank (NB) of Serbia with 19.7 million coins, the NB of Vojvodina with 6.1 million, the NB of Kosovo with 1.7 million, and the NB of Montenegro with 1.5 million. The Payment Operations Service of Serbia received only 2 million coins. According to this, it appears that a big truckload of coins got stuck somewhere, for example in the NB of Serbia. It turns out that either 17 million coins have to found or someone is lying (or stealing).

This exchange mess alone will induce an increase in the inflation of at least 50%, because the denomination practically increased the value of the so-called "basic bank note" (before it was the 500 dinar note, because it could pay for a coffee, or a bus fare, or a pack of cheaper cigarettes, or a kilogram of cheaper fruit or vegetables).

Is one just "burying one's head in the sand" with a reported cash injection of 200, that is 20, billion dinars before the real needs, the pre-paid wages, pensions and privileges? This obvious question would make sense only if Mr. Bozovic's "anti-blockade" policy showed any sign of sense. This is not the case, but don't let that worry you! It's only the dinar that's down today, we're still standing.

Wages - 50, 100, 200 dollars

Mr. Dimitrije Boarov apologizes to the readers of NDA bulletin for a mistake he made in his last week's article ("The Internal Blockade of Economic Reasoning"). Namely, the author maintained that the new package of measures "officially" raises average wages to US$ 200, and promises US$ 100 pensions. In fact, the average wage in May was US$ 200 according to the official exchange rate, i.e. US$ 70 according to the black market rate. The package should have brought it to US$ 100 (official rate), but economists assess that the Government should limit it now to US$ 55.