From: malenovi@plains.NoDak.edu (Nikola V. Malenovic )
Newsgroups: soc.culture.yugoslavia
Subject: Hyperinflation (VREME NDA 6.Apr 1992)
Date: 6 Apr 92 15:02:31 GMT
Organization: North Dakota State University, Fargo


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     "Vreme" News Digest Agency                       No. 28, April 6 1992.
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    Hyperinflation
    --------------


                               THE RULE OF ZEROS


           None of the economists or  businessmen to whom VREME has
           talked expects  that price trends  will be moderated  in
           April.  Almost  everyone  is  expecting  the boosting of
                                    prices

    It  was a  coincidence that  the  first  100 days  of Radoman  Bozovic's
    government  matched  the  statistics  report  on  March  inflation.  The
    connection is  simple and evident: when  you add two zeros  to the above
    mentioned figure, you  get the annual trend of  price level increase. So
    the  Serbian  government  has  completed  its  adaptation  period with a
    10,000%  inflation, but  that need  not worry  the devotees of Bozovic's
    policy.  The  ruling  party's  majority  in  the Parliament has smoothly
    rejected a  motion by two  MPs to discuss  the government's achievements
    during these 100  days, and if the situation remains  the same, a change
    in the  behavior of Socialist MP's  is not to be  expected. Therefore it
    still remains to be seen how many zeros are needed until a turning point
    appears, at least on the horizon.

    According  to the  behavior of  officials, major  changes are  not to be
    expected in  the near future. It  seems that the economic  and political
    authorities in Serbia are preoccupied  with anything other than the fact
    that  the inflation  rate here  in  4  - 5  days matches  the cumulative
    inflation rate  in Germany and Japan  for the past six  years. For those
    who prefer a comparison with the WW II Allies, here are these figures as
    well: for  the past six years,  inflation has risen 26.1%  in the United
    States, 19.4% in France, and amongst  the big ones, the highest rise was
    registered  in Great  Britain -  41.2% (The  Brits have  just managed to
    undercut the 43.9% March price level increase in Serbia).

    A supposedly  trifling detail  from Washington  probably gives  the best
    picture of what is happening here. The only thing to do with Belgrade to
    be  presented  to  the  viewers  of  a  prime  time  TV  news program in
    Washington at  the beginning of the  last week, was a  statement made by
    the Serbian  National Bank's Vice-Governor that  a stabilization program
    cannot  be  expected  within  the  next  three  months.  Of  course, the
    Americans are  familiar with inflation,  but not with  governments which
    publicly announce that they will be  doing nothing about it for the next
    100 days,  despite the fact  that hyperinflation is  already raging. The
    stoicism  of the  citizens of  such  a  state, where  such a  government
    manages to exist and survive, must also seem strange to them.

    For the  purpose of getting a  better picture of the  whole situation in
    Serbia,  it is  helpful to  repeat the  explanation given  for the  last
    electricity  price increase.  Fellow citizens,  said the  democratically
    elected government, your family budgets  will remain intact although the
    summer season  price of electricity will  be equal to its  winter season
    level increased by  slightly over 26%. For a  careful monitoring of your
    behavior, dear  consumers, has revealed that  you spend less electricity
    in the summer months, so you will be paying the same amount as usual!

    If it  were not tragic,  as the  saying  goes, one would  have to laugh.
    Following this  logic, maybe consumers  would pay less  if they consumed
    more  electricity? Maybe  they would  not pay  at all  if they increased
    their consumption to an adequately high  level? Or, turning it the other
    way round, maybe they  would have to to give up ating  bread in order to
    pay  for  the  electricity  they  do  not  use.  Naturally,  we  are not
    discussing whether and to what  extent the electricity price increase is
    justified.  The main  point is  that some  wires are  crossed here; i.e.
    firms  are forced  to think  about social  policy, instead  of their own
    efficiency.  In  normal  countries,   social  policy  is  primarily  the
    government's task.

    Mr. Bozovic's recent  photographs show him in the  company of members of
    the  government's Economic  Council, from  where the  introduction of  a
    basic  anti-inflation policy  is being  announced within  the next three
    weeks.  Meanwhile,  the   government  is  doing  its  best   to  make  a
    stabilization program  less feasible. The  Economic Council has  already
    drawn   the  government's   attention   to   this  fact,   warning  that
    nationalization is not a good way  out of the deepening crisis. The fact
    that  the current  government does  not have  a scape-goat  for its  own
    faults  is  meager  consolation,  because  it  will  have  to  bear full
    responsibility for  the total disintegration of  the economy and poverty
    of the majority of population.

    Bozovic's  time  will  probably  be  remembered  by police oppression or
    rampaging  crime. The  daily chronicles  are already  full of reports on
    robberies and  banditry. Apart from  the usual criminal  offenses, there
    are  some new  ones: goods  such as  food, soap  and the  like are being
    stolen. And  it is clear that  the illegal possession of  these goods is
    not to  enrich the humiliated culprits,  but enable them to  live within
    the norms of civilized customs such as washing, bathing, eating... It is
    not an  overstatement to say that  people are humiliated. This  is clear
    from official reports on supermarket  thefts which relate more precisely
    that the most numerous amongst  those caught with unpaid merchandise are
    elderly people. One must reflect upon  the number of people spending the
    last  decades of  their lives  in the  joy of  hiding milk cartons under
    their coats. Provided they have a coat.

    Officially, the March inflation in Serbia is on the mark of 43.9%. There
    is no irony, nor doubt, in the word "officially". However, one is struck
    by the  fact that Tomislav  Milisavljevic (Market Research  Institute in
    Belgrade),  contrary  to  the  official  figures,  claims that the March
    inflation  rate  was  some  60%,  from  which  follows  that  the annual
    inflation will  be 28,000%. This  estimate was based  upon a poll  among
    businessmen. But, unless Mr. Milisavljevic has some information which he
    is not publicly disclosing, we had better stick to official statistics.

    The  Statistics Bureau  Director, Milovan  Zivkovic, does  not doubt the
    official March inflation figure, but emphasizes two facts. Firstly, that
    only price  increases prior to the  21st day of a  month are included in
    the  calculation of  the said   figure, and  that inflation  has largely
    accelerated  during the  last ten  days of  March. Secondly, for several
    reasons, the prices  in March tended to increase  more slowly than those
    in  January and  February (an  exception was  the year  of the  "damned"
    Markovic's  stabilization program,  when monthly  inflation was  reduced
    from month to month, eventually going  below zero in June). Therefore, a
    real picture of  the price level increase trend will  be provided by the
    April figures.

    However, none of the economists or  businessmen to whom VREME has talked
    expects that price trends will be moderated in April. Almost everyone is
    expecting the boosting of prices. And let us remember that a 70% monthly
    inflation generates an  annual inflation of around 38,000%,  and once we
    have the 38,000, we can easily have 380 thousand, million, billion...

                                                               Zoran Jelicic


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     "Vreme" News Digest Agency                       No. 28, April 6 1992.
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