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A Zimbabwean banknote worth ten trillion dollars

'Just print more money': History's worst cases of hyperinflation

After Zimbabwe's period of hyperinflation, the treasury printed bills with denominations as high as one hundred trillion dollars | Image: Shutterstock

Hyperinflation is a period of very high and accelerating inflation as the price of goods and services increases. The action quickly erodes the value of local currencies as investors and banks move their funds into more valuable currencies and assets. A number of countries have been cursed by hyperinflation across history, typically as a result of war. In this article, we’re going to dive into some of the worst cases and examine the causes.

Weimar Germany: 1922-1923

In November 1922, Germany had defaulted on its reparation payments. In response, Allied Forces invaded the Ruhr Valley, one of the country’s main industrial areas, confiscating production goods. The Weimar government ordered a policy of ‘passive resistance’, where workers refused to work or co-operate with the foreign troops in return for the government continuing to pay them. And this payment came through the printing of more money.

Initially meant to be a temporary measure, as the occupation continued so did the circulation of more cash, with central banks using more than 30 paper factories, almost 1,800 printing presses, and 133 companies to print banknotes. As a result, prices soared. A loaf of bread, which cost 250 Reichsmarks in Jan 1923, had risen to 200,000 million by November 1923.

The speed of the price increases also meant workers were often being paid twice a day to keep up. And if these numbers somehow haven’t shocked you, in 1918 you could have bought 500 billion eggs for the same cash required to buy just a single egg in 1923.

Kingdom of Hungary: 1945-1946

Despite Weimar Germany being the go-to case of hyperinflation, it’s Hungary (the then Kingdom of Hungary) that saw the highest recorded levels in history. In 1944, the country became a battleground between German and Russian forces, which damaged 90% of its industrial capacity. Much was also taken by Nazis back to Germany or seized as reparations by Russians. With production collapsing, prices rose. In an attempt to curb this the government ramped up circulation of the Pengő.

Like Weimar, prices propelled as a result, doubling every 15 hours. Something that cost 379 pengos in Sep 1945, ended up costing 1 trillion trillion pengős by Jul 1946 (that was not a typo). To deal with the countless number of zeros needed for the simplest of items, the pengo was replaced by the denominations Mpengo and Bpengo. However, even these notes became obsolete.

The government had to actually stop collecting taxes as a single day’s delay in collection wiped out the value of revenues. This led to another denomination, the Adópengő (keeping up?). Although it was indexed to inflation, it also succumbed to the ridiculous prices.

The Federal Republic of Yugoslavia: 1992-1994

Following years of economic and political crisis, Yugoslavia disintegrated in 1992. Wars led to a breakdown in inter-regional trade, causing production in the newly formed Federal Republic of Yugoslavia to decline. A UN-imposed trade embargo was a further blow to the import-dependent economy.

On top of this, though the country comprised a smaller territory, its bureaucracy remained the same size which meant extortionate expenditure was required. As its fiscal deficit worsened, history repeated itself, and the government resorted to boosting the money supply. I wonder what happened next?

The monthly inflation rate rose to a whopping 313 million percent, with prices doubling every day and a half. The prices soared so rapidly that to protect their inventories, some regular stores wouldn’t even accept the dinar currency. Instead, the black market became the place to get a loaf of bread or a bottle of milk.

Zimbabwe: 2007-2008

Zimbabwe had suffered from high inflation since the 1960s but saw a massive spike in 2007 and 2008, resulting in the second-highest incidence on record. An increased money supply was again the main culprit for the price spike. This in turn stemmed from several factors, such as institutional corruption and financing for the Second Congo War. Land reforms also shrank the nation’s industry, including its prized tobacco farming.

As with the other cases, citizens became poverty billionaires, holding extreme amounts of cash that were worth very little. The treasury printed bills with denominations as high as one hundred trillion dollars. And bartering was not uncommon, with some using food payments to get a haircut.

At its peak, the daily inflation rate hit 98%, with the highest monthly inflation being 7.96 x 1010%. I’ll let you figure out how many zeros that is.

Key inflation facts

  • An economy is officially considered hyperinflationary when prices increase 50% per month
  • The two primary causes of hyperinflation are an increase in money supply and demand-pull inflation (where demand outstrips supply)
  • There have been over 55 hyperinflation events since 1900
  • For all the cases mentioned here, the introduction of a new currency was required to end hyper-inflation