Worst. Inflation. Evar.

San Jose State’s Thayer Watkins has a fascinating account of hyperinflation during the early years of the breakup of Yugoslavia (no, really!)

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.

That was bad enough, but of course like other regimes before it, Yugoslavia tried to counter this hyperinflation with a series of price controls. But the result, not surprisingly, was simply to make the situation much worse since the hyperinflation was occurring far faster than the government could update prices even on government-owned goods, so it was essentially giving many goods and services away free,

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.

And so on. But, of course as Watkins notes, the Yugoslavian government’s position was that all of its economic problems were due solely to Western sanctions.

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