What Hyperinflation Looks Like → Washingtons Blog
What Hyperinflation Looks Like - Washingtons Blog

Thursday, May 5, 2011

What Hyperinflation Looks Like

File:Inflació utan 1946.jpg
Sweeping up pengő banknotes. Hungary, 1946

100 Billion Dollars buys eggs in Zimbabwe.

500 Billion Dinar note from Yugoslavia.

Burning marks as fuel to keep warm. Germany, 1913.

As I've previously noted, hyperinflationists are too focused on Weimar Germany:
You've heard how bad things were in the Weimar Republic, when people would rush straight to stores to buy food after receiving a pay check because their money would buy much less the next day.

But it turns out that Germany's hyperinflation in 1923 was nothing compared to that experienced by Hungary, Zimbabwe and Yugoslavia.

In a new paper published by the Cato Institute, economics professor Steve Hanke lists the all-time worst episodes of hyperinflation:

(click for full image).

Note that Hungary's daily inflation rate was ten times greater than that in Weimar Germany, and prices doubled almost six times faster in Hungary than in the Weimar Republic.

Life in Weimar Germany was extremely difficult. But Hungary in 1946 was a lot worse.

Note: While the commonly accepted explanation for hyperinflation is government printing too much money, Ellen Brown argues that the real explanation is a concerted attack on a country's currency by foreign speculators and/or foreign governments.

Postscript: This post is not implying that I think we'll necessarily get hyperinflation. It is only trying to put historical cases of hyperinflation in context.


  1. The difference with the approach taken by modern central banks is that instead of physically printing paper, they are issuing massive amounts of debt and electronically issuing currency to purchase that debt (70% of the debt issued by the US government for example, not to mention what's happening in Europe).

    So the end-game will be different, although likely as bad - we just don't know in what ways. The limiting factor will be that as long as interest rates are non-negative, the debt service costs will eventually overwhelm the entire amount of debt rolled over. It should be easy enough to forecast the point at which the interest payments become 100% of GDP as a function of interest rate, deficit and time, given publicly available data.

  2. Ellen is right. Hjalmar Schacht (if I remember the name correctly) was the comptroller of the currency in Weimar and he put the blame on speculation and (it may have been in Ellen's book) it was the reichsbank that caused the problem and it wasn't until they were reeled in that the hyperinflation stopped.

    As for the rest, MMT is an attempt to describe the reality of our monetary system and has a very different take on all this austerity nonsense. People would do right for their country by looking it up and trying to understand the reality of a sovereign country that pays its bills in its own currency. (Hint: we can never go broke)


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