by Thayer Watkins

The Worst Episode of Hyperinflation in History: Just fifteen years ago

Between October 1, 1993 and January 24, 1995 prices in Yugoslavia increased by 5 quadrillion percent. That’s a 5 with 15 zeroes after it.

Under Tito, Yugoslavia ran a budget deficit that was financed by printing money. This led to a rate of inflation of 15 to 25 percent per year. After Tito, the Communist Party pursued progressively more irrational economic policies. These policies and the breakup of Yugoslavia (Yugoslavia now consists of only Serbia and Montenegro) led to heavier reliance upon printing or otherwise creating money to finance the operation of the government and the socialist economy. This created the hyperinflation.

By the early 1990s the government used up all of its own hard currency reserves and proceded to loot the hard currency savings of private citizens. It did this by imposing more and more difficult restrictions on private citizens’ access to their hard currency savings in government banks.

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