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The Worst Episode of Hyperinflation in History -- Page two curbing inflation this policy actually increased inflation because the stores tended to increase prices by larger increments so they would not have file forms for another price increase so soon.
In October of 1993 they created a new currency unit. One new dinar was worth one million of the "old" dinars. In effect, the government simply removed six zeroes from the paper money. This, of course, did not stop the inflation.
In November of 1993 the government postponed turning on the heat in the state apartment buildings in which most of the population lived. The residents reacted to this by using electrical space heaters which were inefficient and overloaded the electrical system. The government power company then had to order blackouts to conserve electricity.
In a large psychiatric hospital 87 patients died in November of 1994. The hospital had no heat, there was no food or medicine and the patients were wandering around naked. Between October 1, 1993 and January 24, 1995 prices increased by 5 quadrillion percent. This number is a 5 with 15 zeroes after it. The social structure began to collapse. Thieves robbed hospitals and clinics of scarce pharmaceuticals and then sold them in front of the same places they robbed. The railway workers went on strike and closed down Yugoslavia's rail system.
The government set the level of pensions. The pensions were to be paid at the post office but the government did not give the post offices enough funds to pay these pensions. The pensioners lined up in long lines outside the post office. When the post office ran out of state funds to pay the pensions the employees would pay the next pensioner in line whatever money they received when someone came in to mail a letter or package. With inflation being what it was, the value of the pension would decrease drastically if the pensioners went home and came back the next day. So they waited in line knowing that the value of their pension payment was decreasing with each minute they had to wait.
Many Yugoslavian businesses refused to take the Yugoslavian currency, and the German Deutsche Mark effectively became the currency of Yugoslavia. But government organizations, government employees and pensioners still got paid in Yugoslavian dinars so there was still an active exchange in dinars. 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.
How to Profit from the Coming Hyperinflation
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