I read William Shirer’s book The Rise and Fall of The Third Reich about 20 years ago. And in it there’s a photo of a man with a wheelbarrow full of money entering a bakery to buy a loaf of bread.
“Hyperinflation”, right?
I have never been able to get that picture off my mind, and recently in Ken Follett’s novel, The Fall of Giants it came up again when he mentions a loaf of bread costing several million Reichmarks.
This made me wonder if there’s been any other nation which had such a ridiculous rate of inflation?
Zimbabwe is definitely the most famous recent example. At its peak, they were issuing notes worth 10 trillion Zimbabwean dollars (effectively nothing, in the rest of the world).
They’ve revalued their currency, and it’s effectively been replaced by the U.S. Dollar, the UK Pound, and the Euro, as I understand it.
The old $100 billion and $1 trillion notes are now sold as souvenirs. It might be fun to get a bunch of these notes and play poker with them.
Hungary in the 1940s was even worse than Germany in the 1920s, I believe.
The currency then was the pengo. and at the end they had to come out with a bill with a face value of 100 quintillion pengo. Which still wasn’t worth much.
I’ve wondered about the practical aspects of making change, etc. Since people tend to be innumerate, with even “million” almost meaningless, how could the average person possibly deal with a 100-quintillion pengo banknote?
“Look, you need twenty zeros on your banknote for a pack of ciagrettes, not two ten-zero banknotes! These are just 10-billion pengo notes printed months ago; come back when you have real money!”
The inflation in Hungary in May 1946 is mind-boggling. According to the wiki page prices were doubling every 15 hours (on average) for the whole month. Doubling!
They go up to 100 trillion. I bought two for $4 (including shipping) on ebay.
They’ve mostly gone to using the US dollar and the South African rand. The latter makes sense as they border South Africa and there is already a currency union pegged to the rand:
What happened was as inflation spiraled, the pengő was issued as milpengő (million pengő) and eventually b-pengő (billion pengő, but that’s a “long-form” billion which corresponds to “trillion” or 10^12 in the US.) So, the 100 quintillion note (10^20) was issued with the words százmillió b-pengő (“one hundred milliion b-pengő”) written on it, so it’s not like there was a note with a 1 followed by twenty zeroes on it.
The largest actual numeral on a Hungarian pegnő I can find from a quick Google search is 100,000.
Back in the 80s I used Ecuadorian 100 Sucre notes as bookmarks. The corners looked a lot like US 100s of the time so they looked cool sticking out of books. File:00100+Sucres+Bill+Ecuador+1994.jpg - Wikipedia
They were worth around a US quarter at the time; cheap for a bookmark. Just a few years previously the 100 sucre note would’ve been worth $5-10. Not hyperinflation by any stretch, but fun / funny to use what had been real currency a few years ago as a toy. Especially when it closely resembled a real bill of real value.
Shame our hundreds aren’t worth much any more either.
I just finished “When Money Dies” by Adam Fergusson, an exploration of the causes of hyperinflation in the Weimar Republic and how if effected ordinary people. The amazing thing to me is how ignorant the bankers were. They actually were dismissive of the idea that the printing of banknotes was causing inflation. Many people viewed the problem as the dollar and other currencies being unreasonably strong, not the Mark being weak. Fascinating read.
This is quite bizarre-bankers knew about the cause of inflation, from the time of ancient Rome. The German Hyperinflation was engineered (on purpose)-it was done to achieve two objectives:
-to wipe out the debts of the big industrial firms (e.g. Krupps, I.G. Farben) This made it possible for these firms to expand their operations at no cost
-to transfer wealth from the people who had savings accounts, to the rich (Hugo Stinnes became the wealtiest man in the world-for a few years-because of this
Germany (both under the Kaiser and in the Weimar Republic) lacked a taxation system that could fund the government. That is why they resorted to the printing press…and inflation.
And a 3rd objective: devaluing the huge reparations Germany had to pay under the Versailles treaty. These were in German marks. So the hyper-inflation engineered by Hjalmar Schacht effectively greatly reduced the cost to Germany of paying these reparations. (At quite a high cost to the poor & middle class of Germany, but that didn’t bother the government much.)
There’s a very interesting story about hyperinflation in Brazil and how they finally got rid of it by creating a fake currency.
Brazil built a new capital Brasilia in the 1950s and financed it with government debt. That started an inflationary spiral that resulted in hyper inflation. In the supermarkets, people use to race the guy who was raising the prices.
One of the problems Brazil faced was the fact that people assumed that inflation was the natural state of things, and that prices would simply keep increasing. Several things were tried to stop the hyper inflation, but they all failed.
In 1994, Brazil made a fake currency called the URV. All prices were in URVs. All bank accounts were in URVs. All taxes were in URV. And, everyone got paid in URVs…
There were no URVs in circulation though. Instead, Brazilians continued to use their old currency, the reis. When you made a payment or got paid, there would be a table that told you how many reis were equal to one URV for that day, and then you got paid in reis. The reis would still drop in value, but people got use to price stability in URVs.
Then, Brazil switched its currency from the reis to the real, and defined one URV as equal to one real. Since Brazilians were use to URVs and were use to price stability, inflation was no longer an issue.
They weren’t. The reparations had to be paid in gold. Trying to pay the reparations (and trying to get hold of that much gold) did end up increasing inflation, but Germany didn’t cause hyperinflation in order to reduce their reparations payments.
There are several inaccurate statements here. First, Hjalmar Schacht did not “engineer” hyperinflation - he was president of the Reichsbank from December 1923 until 1930, and then again under the Nazi regime. While the end of the hyperinflation was in 1924, the inflation itself was well on its way when Schacht took over; you can’t blame it on him. In fact, Schacht was president of the Reichsbank when the currency reform that replaced the paper mark with the stable Rentenmark took place. So Schacht successfully fought hyperinflation rather than “engineering” it.
Second, German war reparations were not denominated in paper marks. They were, depending on which payment plan you look at (the Versailles treaty did not fix the amount and instalments to be paid but left this for the future), denominated either in gold marks corresponding to the pre-war parity of the German currency to gold, or in foreign currency such as the Swiss franc. The Allied powers were smart enough to realise that it would not be a good idea to denominate war reparations in a currency the value of which Germany could manipulate.
Of course, part of the German debt were paper mark-denominated war bonds, and hyperinflation did indeed devalue them. But these debts were mostly owed to domestic bondholders, not to the Allied powers as war reparations.
One of my teachers was brought in a mark from the hyper inflation of the Weimar Republic. I forget what demonination it was but it was printed on only one side.
What amazes me about inflation: people seem to think it is something that “happens” to countries, like an “act of God”.
Quite the contrary-it results from the conscious efforts of governments and central banks to steal wealth from those who save-and transfer it to speculators and crooks. In the case of Weimar Germany, the big industrialists saw the (engineered inflation) as a nifty way to build up their physical plant-at no real cost to themselves. Indeed, the inflation made them tremendously wealthy, as it reduced the German middle class to poverty.
