The world’s poorest billionaires

By Frederic Friedel

8 min readDec 17, 2018

About twenty years ago a very good friend of mine from Serbia told me about a kid he knew back home—22 years old, very talented, never been abroad. He asked if I could somehow look after him, which I gladly agreed to do (we had an open house). I invited him to come and stay with us for a month, and very soon Vlada turned up. He had hitched a ride in a truck on the last leg of an adventurous journey from Niš in Serbia. I picked him up at a highway stop.

Vlada was a pleasant lad. He was smart, cultured, kind and humorous. We were glad he was there. As a gift he brought us a litre of Serbian slivovitz, a plum brandy very popular in that region. It was the most potent alcoholic drink I had ever tasted — delicious, but only in homeopathic quantities. It took me two years to finish what Vlada had given us.

So we got on very well with the lad, who soon was integrated into the family. A week after his arrival, however, he suddenly handed me a bank note:

It said 100 Dinara. “What’s going on, Vlada?” I said. “You are our guest, you will have no expenses while you are here.” But he insisted: “I want you to keep this, Frederic.”

An hour later he came to me again and handed this over:

“Listen,” I said, “we don’t want any money from you. We are glad you are here, you are our guest.” But he wouldn’t take it back. “No, I want you to keep it.”

I discussed this with my wife, and we speculated it might be “a Serbian thing”: Vlada was very thankful or something for our hospitality to a stranger and needed to show it? “But he is not affluent, he hitch-hiked all the way from home. What’s going on?”

In the course of the day Vlada continued in the same vein. He gave me 5,000, then 50,000 and then 100,000 dinars. Slowly I began to understand what he was doing: showing me how hyperinflation that had struck his country — actually Yugoslavia, which had broken up a few years earlier into Serbia, Croatia, Slovenia, Macedonia, Bosnia and Herzegovina. Serbia was the only republic that kept the dinar, which crumbled like the country that had originally created it. He had brought me the now valueless banknotes as a gift, which I treasure till today. In fact all these images are scans of the banknotes Vlada brought.

How far could it go? Every hour or so he came with a new banknote: 5,000,000, 50,000,000, 100,000,000. We could hardly believe it: one hundred million as a single banknote! We went to sleep impressed and shocked.

The next day, at breakfast, Vlada gave me another banknote: one billion dinars! While we were discussing and marvelling he pulled out the next bill: five billion. And before breakfast was over he had handed over fifty billion dinars to me. At some stage of his life this young lad had been a multi-billionaire! “That’s it, right?” I said to Vlada, who nodded. People had to spend fifty billion dinars for a nice suit of clothes.

Then at lunch came the final stroke: “Hey, sorry, I forgot this one,” he said.

Five hundred billion dinars! How could that happen, what could it mean? After years of catastrophic economic policies, and international sanctions for Serbia’s role in the Balkan Wars, the country had, in the late 80s and early 90s, experienced one of the worst hyperinflations in history. At its peak, in early 1994, monthly inflation in Yugoslavia had reached 313 million percent, and the Central Bank in Yugoslavia was printing paper money in ever higher denominations on a weekly basis, adding more and more zeros to the newest banknotes. It was only when strict economic reforms were introduced that the zeros were stripped and dinar banknotes regained their value.

If you are thinking that the Yugoslav hyperinflation set the absolute record, think again. In 2008 Zimbabwe had a monthly inflation rate of 80×10⁹ percent, which translates to eighty billion percent. That means that instead of paying 100 Zimbabwe dollars for some item a month before you now suddenly had to pay eighty billion Z$. And shortly after WWII Hungary broke all records: in 1946 they had a monthly inflation of 4.19×10¹⁶. That’s forty quadrillion, or forty thousand billion percent — and we worry about 3% per year. The price of goods doubled every sixteen hours, and the largest banknote printed was 100 Quintillion (10²⁰) Hungarian pengő. Today you can buy a 100 billion pengő banknote from 1946 on Ebay for around US $10. I wonder what Vlada’s half a trillion dinars (which I would never sell) is worth.

There is a little tale to tell about Vlada. One day we were standing in our kitchen, together with our 18-year-old son Tommy, and had a long conversation about micro payment. We discussed how it would be really cool if you could pay for things on the Internet with a single click, even if they cost just a cent or two (e.g. for permission to read a page or an article). We worked everything out: the triangle bank verification, the accumulation of many small payments in the bank for monthly billings or remittance to vendors. The system could also be used for larger amounts, with a limit set for automatic payments, to avoid serious theft and misuse.

In the end we said “Great idea, we should do something about it” — but of course we didn’t. Two years later Max Levchin, Peter Thiel, Luke Nosek and Ken Howery did, and called their service PayPal. I should add this to my article on how I did not become a billionaire. Incidentally Vlada, who is now 43, works for an investment and technology development firm in New York, where he develops software for trading and investing on stock exchanges. I must contact him and share this story.

Before I let you go, a couple of things. Hyperinflation was not something I ever lived through, but there was the following encounter: in the late 1960s I was in Turkey, on the Galata Bridge that connects Europe and Asia. Yes, that’s an original picture from the time. Along the pathway there were little fishing boats, and I bought a fish sandwich. The man killed the fish before my eyes, filleted it, roasted it on a little oven, sliced open a Turkish pita and put it in there, together with some onions and spices. It was one of best things I have ever eaten, and it cost me one lira. That was less than five US cents at the time — the dollar was worth around sixty lira.

When I was in Turkey in the late the early 2000s the lira had inflated and become the world’s least valuable currency. You could get over a million and a half for a single dollar. I asked my Turkish friends: do little children go to their parents and say “Mommy, I want to buy an ice cream. Please give me a million lira!” Yes, they said, that is normal. In 2003 the government issued a new currency which stripped six zeros from the previous one. A new Turkish lira was worth one million old ones. So it became “Mommy, please give me a lira.”

The following is not directly related: in 2002 we switched in Germany from the venerable Deutsche Mark to Euros. We collected our old currency and exchanged it at the bank for the shiny new coins and bills (we still have a couple of five DM coins, for memory sake). Everyone exchanged all the currency they had — you would think. Today, 17 years later, the Deutsche Bundesbank tells us that 12.55 billion DM were never converted. Specifically: 5.88 billion in banknotes, 6.67 billion in coinage. The latter means 23 billion DM in coins are lying around somewhere, together with 166 billion banknotes. We must search our cellar to find any we missed.

And finally: In late November 2016 I was invited to do a series of lectures in Mumbai and New Delhi. Just before my trip my contact people in Indian informed me that the 500 and 1000 Rupee notes were no longer valid — in case I had any left over from my previous trip. I had, and handed them over to my friends when I arrived. The lines of people trading in their old currencies were too long. They gave me new currency—500 and 2000 Rupee notes — in return and traded my banknotes later.

What was this all about? Well, it was an effort by the government to flush out illicit and counterfeit cash that was stashed away in secret locations and often used to fund illegal activities and terrorism. It was not a great success: of the 15.3 trillion in banknotes the Central Bank had issued, only 107.2 billion, i.e. just 0.7%, was retrieved. But the idea is sound. If you want to know why some experts are recommending we do away with all higher denomination banknotes, read my article: Ken Rogoff and the Curse of Cash.

Addendum

Recently my car mechanic, Mr Goran from Serbia, gave me a few additional tidbits about hyperinflation in his country. He recalled how people who had access to foreign currencies would buy a government flat, with the payment due in six weeks. This allowed them to get it for half the asking rate or less.

Also: what would one trillion dollars look like? If you were to store it in 100 dollar bills this is what you would get: