The Bodacious Belgrade Blog

March 4, 2009

That’s Not An Economic Croysis, THIS Is An Economic Croysis

Filed under: Uncategorized — bunitingi @ 9:38 pm

It’s fairly self evident that there is a great deal of anxiety and wringing of the hand over our current economic meltdown. (Them damn Jews! Who will they screw next to please their Dark Lord of the Netherworld?) In case anyone is sitting, wondering just how bad it can get, i thought i’d share some fireside tales from these parts of the Yugoslavian financial crisis of the late 80s/ early 90s.

See, almost 20 years ago, just following the collapse of the soviet Union, Yugoslavia had a real, REAL nasty little financial crisis. I’m not going to go into lots of detail of the causes, but it started in the 70s, when Yugoslavia borrowed huge amounts of western money. The West however, went into recession, and blocked Yugoslavian exports (which was how Yugoslavia was supposed to pay back the borrowed money).

The country sputtered along until the late 80s when the IMF/World Bank proposed a “Shock Therapy” solution, which Yugoslavia adopted with disastorous consequences.  Within the next 2 years over 1,000 firms from industrial to financial to business declared bankruptcy and a quarter of the population was almost instantly thrown out of work.

From here things snowballed.

The currency collapsed. People who actually still had a job were payed a paycheck. You would cash your paycheck and the resulting cash would fill 2 garbage bags. I am not making this up. You would take home two garbage bags full of money as your paycheck. Within a week however, those 2 garbage bags full of money would barely buy a load of bread and a roll of toilet paper.

Eventually, in 1990, everyone who worked for any government or state owned business was not payed for almost the first half of the year so the government could get itself together.

Stories from these 2 years abound. People really, literally, wiped their butts with money because it really, literally, was cheaper quantity-wise than toilet paper. A guy we know wallpapered his apartment with money, since it was VASTLY cheaper than wallpaper. Maja’s father would come home from his business with the money from that day in garbage bags he would then dump all over the living room floor and spend the rest of the night counting.  It would buy a meal for the family.

Currency devalued so fast that there are bills from that period for 50,000,000,000. Seriously, you can now buy them from venders in the tourist areas of Belgrade. If anybody wants any i’d be happy to get them some. You want the 100 million bill or the 100 billion bill?

So, how did anybody survive? This lasted 2 years and when i ask how folks survived everybody shrugs and says they’re not sure. there are however 2 ways:

1. Barter. Obviously, when money fails you simply revert to the barter system. I have a bag of coffee, you have a fish. Let’s talk.

2. Personal checks. I don’t fully understand this one, so bare with me. People got paid in these huge ass amounts of worthless money. So before the money would devalue further, they would transfer  it to German marks. They would then write a personal check for these marks which they would use to buy something. This check would then be used by its new owner and signed over again to someone else to buy some other thing. These personal checks would circulate for WEEKS, simply signed over and over and over again to different people.

This brings up many obvious questions which i cannot answer. How do you even know that the check is really good for anything? You don’t. But then again, you’re not trying to be the guy who actually attempts to cash it, you get it, you go down the street and use it  to buy something signing it over and keeping it going.

After all, worth is faith. Money is not real, we all know this. It is pure belief in action. Pieces of paper only have value if we collectively agree to psychologically bestow it with some. When one type of paper breaks down, you can just use another.

Of course, ideally, there was supposed to be some german marks backing it up, but no one often saw it. What’s to stop you from writing a hundred worthless check of your own? I don’t know. I’m not sure exactly how this worked.

The IMF eventually took control over Yugoslavian central banking, but this only made things worse, as the IMF wasn’t actually inteesting in helping the country, it made sure whatever money it could get ahold of went to pay debts of its members, particularly Paris and London financiers. This isn’t left wing anti-IMF global capitalist banking spouting, this is all a matter of public record.

Then, after 2 years, a new tender was introduced, state institutions were privatized to certain degrees and other whatnot happened. I don’t know, but the new Dinar worked and the crisis ended bit by bit.

Of course by this time Croatia decided it had had enough of Yugoslavia and began its attempts to succeed and replace all police in Croatia with only Croatians and marginalize its Serb population. Slovenia followed suit. Bosnia got similar ideas, only couldn’t decide whether the controlling power should rest with Bosnian christians, Bosnian muslims, or of course the Bosnian serbs (who might themselves be either christian or muslim) who wanted to remain tied to Serbia, which held central power in Yugoslavia.

We all know how that went.

So, in case you’re worried about how bad things can REALLY get, don’t. Trust me, they can get SO bad, your worst worries now are just silly in comparison. Also, keep a checkbook handy.

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