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The Three M's: Milosevic, Mugabe, and Maduro

May 13, 2019 in Economics

By Steve H. Hanke

Steve H. Hanke

What do Slobodan Milosevic, Robert Mugabe, and Nicolás
Maduro have in common? Other than being leaders who kept the
Communist Manifesto at their bedside, all three ushered in
devastating hyperinflations.

Other than being leaders
who kept the Communist Manifesto at their bedside, all three
ushered in devastating hyperinflations.

Hyperinflations are rare. They have only occurred when the
supply of money has been governed by discretionary paper money
standards. No hyperinflation has ever been recorded when money has
been commodity-based or when paper money has been convertible into
a commodity.

The first hyperinflation occurred during the French Revolution
(1789-96) when the mandat collapsed and the monthly inflation rate
peaked at 143% in December of 1795. More than a century elapsed
before another episode of hyperinflation occurred. Not
coincidentally, this period of currency tranquility occurred during
the heyday of the gold standard. With the emergence and adoption of
fiat currencies, the 20th century ushered in currency instability
and inflation. Indeed, since 1900 there have been 57 episodes of
hyperinflation. And, five of those episodes can be claimed by
Yugoslavia, Zimbabwe, and Venezuela. All are featured in the
Hanke-Krus World Hyperinflation Table below, which first
appeared in
The Routledge Handbook of Major Events in Economic History

(2013).

Milosevic and Yugoslavia:

Slobodan Milosevic was in the saddle when inflation last gutted
the rump Yugoslavia. The first of his many monetary shenanigans was
uncovered on January 7, 1991, when I served as an adviser in the
Ante Marković reform government. It was then that we
discovered on December 28, 1990, the Milosevic-controlled Serbian
Parliament had secretly ordered the Serbian National Bank (a
regional central bank) to issue some $1.4 billion in credits to
friends of Milosevic. That illegal plunder equaled more than half
of all the new money the National Bank of Yugoslavia had planned to
emit in 1991. The heist sabotaged the Markovic government’s
teetering plans for economic reform and hardened the resolve of
leaders in Croatia and Slovenia to break away from Belgrade.

Without the Croats and Slovenes to fleece, Milosevic turned on
his own people with a vengeance. Starting in January 1992, what was
left of Yugoslavia endured what was at the time the second-highest
hyperinflation in world history. It peaked in January 1994,
when
I measured
the monthly inflation rate at 313,000,000%. The
Yugoslav hyperinflation episode lasted 24 long months. Nonetheless,
Milosevic retained his grip on what was left of Yugoslavia for
another six years.

During the 24-month episode, per capita income plunged by more
than 50%. Ordinary people were forced to deplete their
hard-currency savings. People couldn’t afford to buy food in the
free market; …read more

Source: OP-EDS

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