PM assures citizens of currency stability

I am amazed at the rather blase attitude of the Serbian government to the developing worldwide recession. I am equally amazed at the fairly low-key coverage of this crisis on B92. Here in Ireland and throughout Europe and the US the approaching economic tsunami is receiving massive attention on all forms of media.

Over the next year or two there will be huge increases in unemployment throughout the Western economies and just about everywhere else. Many, many people will lose their homes and businesses will close down all over the place. Overall living standards will drop dramatically.

Yet, to listen to Serbian government representatives it is almost as if Serbia is immune to all this. B92 doesn't seem too bothered either. Well take it from me that this economic meltdown will have major consequences for Serbia and its people. The fall in the value of the dinar is only the beginning of it. This is going to be a worldwide recession and no country will be unaffected. Time for the Serbian authorities to get real.

TS.... taxpayers? Serbs have little concept of what taxes are. My mother-in-law says the roads need to be fixed. When I ask who will pay she says "the government". When I ask her where the government will get the money she just shrugs and says "the government will pay for it". Ever walk down a street in Belgrade and see the face of the building falling away? The state used to take care of that. Now the state does not and the people living in these expensive apartments simply say "Don't worry, the state will take care of it." In comparison to other countries, the citizens of Serbia have no concept of taxes.

Is Cvetkovic willing to bet his salary and all his savings on that???

One reason why the US dollar and the Japanese Yen are appreciating in value at a time when their economies and stock markets are falling is because of the unwinding of speculative currency trades.

For the past few years American and Japanese money managers could earn only 1% or 2% interest in their own currencies, so they sold their currencies and bought foreign currencies that earned more interest (e.g. the Serbian Dinar). Foreign investors bought Serbian Dinars and earned 10%+ interest on their money. Each year they would take the 10% interest earned and buy dollars or Yen. This trade is easy money if the Dinar exchange rate with the US dollar and Japanese Yen is stable, but if the Dinar is falling in value then the rationale for the trade disappears. Investors may earn 10% in Serbia, but if the Dinar falls by more than 10%, then they risk losing part of most of their investment when they convert their profits back into their home currencies.

American and Japanese investors are now selling their Dinar holdings and buying their own currencies in a desperate hunt for safety.

Cvetkovic's words may influence some Serbian citizens, but they will have no effect on American and Japanese money managers. The Dinar will fall unless the Serbian government can find the funds to hold it at these levels. Quite why the Serbian government believes it needs to maintain the Dinar at these levels is beyond me.

For what its worth, I agree with "TS"; the Dinar will fall very soon and very significantly.

I agree with Tom. This government is insane if they think that everythign will be OK. Russi ahas (or had) $600 billion in reserves but they are going at $20 Billion a week, with no end in sight. Ukraine, Hungary, Iceland just got bailed out by IMF and god knows who is next. On a best case scenario: expect many investments to be delayed as money is very tight.

To increase the savings guarantee to €50.000 is obviously a good idea, and secures savers. However, who is then going to pay for the losses when they come? Well, that is, ultimately, taxpayers. So, Mr. Cvetkovic, how will you assure that banks, who must be bailed out with taxpayers money, pay those money back when they can?

Further, the idea that the Dinar will be stable around 85 RSD/€ is nonsense. While the first stage of the crisis is now fading in developed markets, emerging markets are next - Serbia being one of them. I see no reason for believing that the Dinar will be stable. Expect a rollercoaster ride the next year or so, and expect to see 100-120 RSD pr Euro!

No government can guarantee thestability of the currency. Governments (better said central banks) can only guarantee that they will do everything in their power and use their entire ability to balance the impact of the crisis and speculative actions on the exchange rate.
The paradox nowadays is that the more centralised and close an economy is, the more chances are that it will get out of the crisis with lesser damage.
But let's not blame only the intl crisis, let's also have a look at the speculators who are just out there feeding.
Look at the forint or the zlot lately, I'm sure the govt.s would have done anything to avoid the situation.
Like the whole credit crunch thing was not enough, the big initiators (and some beneficiaries) are trying to remake their loss by speculating and throwing stuff on the backs of smaller economies.
Last week in my country we have seen a veritable attack on ROL, with rumors on the market and an entire staged drama. This time JP Morgan and Barclays got fried (some say 200 million euro loss in just 2 days for Barclays), but who can guarantee that they won't be successful next time. how is it possible that actually the lifetime savings and perspectives of many are subject to such a purely distructive attitude of some banks that bought for peanuts lehman and WaMu?!
In our region here, local currencies will follow generally the same trend, of course with some differences, but don't think that some will be up and others down.

Funny I remember this government saying it was made up of parties that cared for the economy and living standards and that this PM is himself some supposed expert in economics. Well judging by this statement his credibility doesn't look to bright now does it?

Thank god I didn't vote for them...

To increase the savings guarantee to €50.000 is obviously a good idea, and secures savers. However, who is then going to pay for the losses when they come? Well, that is, ultimately, taxpayers. So, Mr. Cvetkovic, how will you assure that banks, who must be bailed out with taxpayers money, pay those money back when they can?

Further, the idea that the Dinar will be stable around 85 RSD/€ is nonsense. While the first stage of the crisis is now fading in developed markets, emerging markets are next - Serbia being one of them. I see no reason for believing that the Dinar will be stable. Expect a rollercoaster ride the next year or so, and expect to see 100-120 RSD pr Euro!

One reason why the US dollar and the Japanese Yen are appreciating in value at a time when their economies and stock markets are falling is because of the unwinding of speculative currency trades.

For the past few years American and Japanese money managers could earn only 1% or 2% interest in their own currencies, so they sold their currencies and bought foreign currencies that earned more interest (e.g. the Serbian Dinar). Foreign investors bought Serbian Dinars and earned 10%+ interest on their money. Each year they would take the 10% interest earned and buy dollars or Yen. This trade is easy money if the Dinar exchange rate with the US dollar and Japanese Yen is stable, but if the Dinar is falling in value then the rationale for the trade disappears. Investors may earn 10% in Serbia, but if the Dinar falls by more than 10%, then they risk losing part of most of their investment when they convert their profits back into their home currencies.

American and Japanese investors are now selling their Dinar holdings and buying their own currencies in a desperate hunt for safety.

Cvetkovic's words may influence some Serbian citizens, but they will have no effect on American and Japanese money managers. The Dinar will fall unless the Serbian government can find the funds to hold it at these levels. Quite why the Serbian government believes it needs to maintain the Dinar at these levels is beyond me.

For what its worth, I agree with "TS"; the Dinar will fall very soon and very significantly.

I am amazed at the rather blase attitude of the Serbian government to the developing worldwide recession. I am equally amazed at the fairly low-key coverage of this crisis on B92. Here in Ireland and throughout Europe and the US the approaching economic tsunami is receiving massive attention on all forms of media.

Over the next year or two there will be huge increases in unemployment throughout the Western economies and just about everywhere else. Many, many people will lose their homes and businesses will close down all over the place. Overall living standards will drop dramatically.

Yet, to listen to Serbian government representatives it is almost as if Serbia is immune to all this. B92 doesn't seem too bothered either. Well take it from me that this economic meltdown will have major consequences for Serbia and its people. The fall in the value of the dinar is only the beginning of it. This is going to be a worldwide recession and no country will be unaffected. Time for the Serbian authorities to get real.

I agree with Tom. This government is insane if they think that everythign will be OK. Russi ahas (or had) $600 billion in reserves but they are going at $20 Billion a week, with no end in sight. Ukraine, Hungary, Iceland just got bailed out by IMF and god knows who is next. On a best case scenario: expect many investments to be delayed as money is very tight.

Is Cvetkovic willing to bet his salary and all his savings on that???

TS.... taxpayers? Serbs have little concept of what taxes are. My mother-in-law says the roads need to be fixed. When I ask who will pay she says "the government". When I ask her where the government will get the money she just shrugs and says "the government will pay for it". Ever walk down a street in Belgrade and see the face of the building falling away? The state used to take care of that. Now the state does not and the people living in these expensive apartments simply say "Don't worry, the state will take care of it." In comparison to other countries, the citizens of Serbia have no concept of taxes.

No government can guarantee thestability of the currency. Governments (better said central banks) can only guarantee that they will do everything in their power and use their entire ability to balance the impact of the crisis and speculative actions on the exchange rate.
The paradox nowadays is that the more centralised and close an economy is, the more chances are that it will get out of the crisis with lesser damage.
But let's not blame only the intl crisis, let's also have a look at the speculators who are just out there feeding.
Look at the forint or the zlot lately, I'm sure the govt.s would have done anything to avoid the situation.
Like the whole credit crunch thing was not enough, the big initiators (and some beneficiaries) are trying to remake their loss by speculating and throwing stuff on the backs of smaller economies.
Last week in my country we have seen a veritable attack on ROL, with rumors on the market and an entire staged drama. This time JP Morgan and Barclays got fried (some say 200 million euro loss in just 2 days for Barclays), but who can guarantee that they won't be successful next time. how is it possible that actually the lifetime savings and perspectives of many are subject to such a purely distructive attitude of some banks that bought for peanuts lehman and WaMu?!
In our region here, local currencies will follow generally the same trend, of course with some differences, but don't think that some will be up and others down.

Funny I remember this government saying it was made up of parties that cared for the economy and living standards and that this PM is himself some supposed expert in economics. Well judging by this statement his credibility doesn't look to bright now does it?

Thank god I didn't vote for them...