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Waspsnest’s Contributors

The Wasp
Mr Raccoon

A modern example of hyperinflation.

An excerpt from a piece at ZeroHedge on the currency buggerations that happened in the early 1990’s in Yugoslavia really brings home what must be a very difficult and also seemingly absurd time to live through. Pay attention to the exchange rates and dates given and have a good think about how your wages would wither to bugger all in a matter of days under those circumstances :

On November 12, 1993 the exchange rate was 1 DM = 1 million new dinars.  Thirteen days later the exchange rate was 1 DM = 6.5 million new dinars and by the end of November it was 1 DM = 37 million new dinars.

At the beginning of December the bus workers went on strike because their pay for two weeks was equivalent to only 4 DM when it cost a family of four 230 DM per month to live.  By December 11th the exchange rate was 1 DM = 800 million and on December 15th it was 1 DM = 3.7 billion new dinars.  The average daily rate of inflation was nearly 100 percent. When farmers selling in the free markets refused to sell food for Yugoslavian dinars the government closed down the free markets.  On December 29 the exchange rate was 1 DM = 950 billion new dinars.

About this time there occurred a tragic incident.  As usual, pensioners were waiting in line. Someone passed by the line carrying bags of groceries from the free market.  Two pensioners got so upset at their situation and the sight of someone else with groceries that they had heart attacks and died right there.

At the end of December the exchange rate was 1 DM = 3 trillion dinars and on January 4, 1994 it was 1 DM = 6 trillion dinars.  On January 6th the government declared that the German Deutsche was an official currency of Yugoslavia.  About this time the government announced a NEW “new” Dinar which was equal to 1 billion of the old “new” dinars.  This meant that the exchange rate was 1 DM = 6,000 new new Dinars. By January 11 the exchange rate had reached a level of 1 DM = 80,000 new new Dinars.  On January 13th the rate was 1 DM = 700,000 new new Dinars and six days later it was 1 DM = 10 million new new Dinars.

The telephone bills for the government operated phone system were collected by the postmen.  People postponed paying these bills as much as possible and inflation reduced their real value to next to nothing.  One postman found that after trying to collect on 780 phone bills he got nothing so the next day he stayed home and paid all of the phone bills himself for the equivalent of a few American pennies.

Here is another illustration of the irrationality of the government’s policies:  James Lyon, a journalist, made twenty hours of international telephone calls from Belgrade in December of 1993.  The bill for these calls was 1000 new new dinars and it arrived on January 11th.  At the exchange rate for January 11th of 1 DM = 150,000 dinars it would have cost less than one German pfennig to pay the bill.  But the bill was not due until January 17th and by that time the exchange rate reached 1 DM = 30 million dinars.  Yet the free market value of those twenty hours of international telephone calls was about $5,000.  So despite being strapped for hard currency, the government gave James Lyon $5,000 worth of phone calls essentially for nothing.

How any society can function when the money supply behaves in that way is amazing but I suppose some people will muddle along with all sorts if it really comes down to it, expecially if they are used to living under a centrally planned communist state with all it’s beaurocracy and officialdom.

Just how the UK population would cope is another matter all together in my view. As everything here is always somebody else’s fault and instant gratification is the order of the day I doubt it would end well.

The whole article is an interesting historical guide as to why the hyperinflation came about in the first place and for all that is said in the MSM, we are not in too different a position right now with a budget deficit of around 9% of GDP and calls for more money printing being made to keep the show on the road just a little while longer.

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