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After the First World War Germany suffered from inflation. In January, 1921, there were 64 marks to the dollar. By November, 1923 this had changed to 4,200,000,000,000 marks to the dollar.
Some politicians in the United States and Britain began to realize that the terms of the Versailles Treaty had been too harsh and in April 1924 Charles Dawes presented a report on German economic problems to the Allied Reparations Committee. The report proposed a plan for regulating annual payments of reparations and the reorganizing the German State Bank so as to stabilize the currency. Promises were also made to provide Germany with foreign loans.
These policies were successful and by the end of 1924 inflation had been brought under control and the economy began to improve. By 1928 unemployment had fallen to 8.4 per cent of the workforce. The German people gradually gained a new faith in their democratic system and began to find the extremist solutions proposed by people such as Adolf Hitler unattractive.
As soon as I received my salary I rushed out to buy the daily necessities. My daily salary, as editor of the periodical Soziale Praxis, was just enough to buy one loaf of bread and a small piece of cheese or some oatmeal. An acquaintance of mine, a clergyman, came to Berlin from a suburb with his monthly salary to buy a pair of shoes for his baby; he could only buy a cup of coffee.
Germany is in terrible condition this year. This is particularly true of the working masses, who are so undernourished that tuberculosis is having a rich harvest, particularly of adolescent children. Gambling in the mark has been the great indoor sport of the capitalists for months, and consequently food has increased by 25 to 100 per cent. I have lived in the homes of workers; they live on boiled potatoes, black bread with lard spread on it instead of butter, and rotten beer. In one hotel, the maid who built the fire fainted in our room. Exhaustion was the cause. We talked with her later and learned that she worked 17 hours a day and makes 95 marks a month - about 50 cents. She lives in the hotel, sleeping in one room with all the other maids - a tiny, dirty little place. They receive their food also - clothing they buy themselves - out of the 95 marks a month! This means they all become prostitutes and haunt the streets whenever they have time. Or they pick up "clients" in the hotel.
A Berlin couple who were about to celebrate their golden wedding received an official letter advising them that the mayor, in accordance with Prussian custom, would call and present them with a donation of money. Next morning the mayor, accompanied by several aldermen in picturesque robes, arrived at the aged couple's house, and solemnly handed over in the name of the Prussian State, 1,000,000,000,000 marks or one halfpenny.
Before the War
After a certain stabilization of the economy from the hyperinflation of the Weimar Republic, foreign capital markets started to grant large loans in Germany. The high interest rates made it attractive, the discount rate of the Reichsbank was set down to 5% in 1927, but was raised again to 7% in 1928 and 7.5% in 1929. Long-term credits of over 1 billion Reichsmark streamed into the country per year the Reichsbank estimated that at the end of 1930 there was a total of 18.5 billion Reichsmark of long-term foreign loans and 14.5-15 billion of short-term loans. The unemployment rose nonetheless, from a low of 1.012 million in July, 1928, in December it was 2.385 and in December, 1929 2.850 million. The attempts of the Reichsbank to stem this flood of loans with lower discount rates failed, so it limited them directly, leading to the "Black Friday". The Great Depression and the end of prosperity in the USA hit hard its major exporters, England and Germany - and the American investors withdrew many of the loans in Germany, leading to even more unemployment.
The crisis entered its critical phase, when the Austrian Kreditanstalt, the most important bank in Vienna, and one of the major international banks, suspended its payments in May 1932. In Germany, the collapse of the Nordwolle group led to a run of foreign investors on the Darmstädter und Nationalbank, which was strongly associated with the group. The bank fell after Reichsbank stopped extending further credit to it, and practically the whole German banking industry collapsed, with consequences felt around the whole world.
In January, 1933, has unemployment exceeded 6 millions, helping the NSDAP to victory. Adolf Hitler became the Chancellor. Hjalmar Schacht returned to the positions of the president of the Reichsbank and the minister of finances.
To finance the public works projects of the Reichsautobahn (Imperial Highway), Reichspost and Reichsbahn, a number of new loan instruments (the 'Wechsel') was created. Accepted by several institutions, the Reich should redeem them out of future incomes, that should increase, when the economy would improve. The unemployment has in fact decreased:
The official money supply did not increase (from June, 1934 to June, 1935, it remained at 3.7 billion). However, the Arbeitsbeschaffungswechseln also circulated to some degree, many corporations passed them to their suppliers etc. before they ended up in the banks. By the end of 1933 was about 1.5 billion of the Wechseln in circulation, 3 billion by the end of 1934.
On March 16th, 1935, the German government announced its intention to rebuild the army, in contradiction to the Treaty of Versailles. This required new ways of financing. The "Mefo-Wechsel" were accepted by the "Metallurgische Forschungsgesellschaft A.G." (Metallurgic Research Stock Company), covered by the empire. These financial instruments did not enter public circulation, to cover up the magnitude of military spending. The increased possibilities of banks to grant loans led to a greater liquidity on the money market. Until 31.3.1938 were 12 billion of of the Mefo-Wechsel in circulation, then was their issue stopped. Other types of "Wechsel" were introduced and accepted by the banks. In this way, much of the liquid money could flow to the state.
Long- and short-term loans were issued to cover the growing demand of the state. To avoid competition, other emissions were forbidden, affecting not only industrial companies, but also the states, districts and mortgage banks, and in turn housing construction and agricultural investment. Savings banks and insurance companies also came under pressure to accept loans and give up their savings and reserves.
The unemployment sank further, in 1938 to 180.000 and in April, 1939 to only 34 000 (the number of employed was 21.3 million), however, tensions in the economy were visible by 1936, leading to an abdication of Schacht.
In March 1938 was Austria occupied and later that year also the Sudetenland. New expenses and growing political tensions led to an enormous increase in state expenses. Since these could not be covered from loans and taxes, Schatzanweisungen (treasury notes) were issued in value of 4.2 billion Reichsmark.
In spring 1939 was created the "N.F.-Steuergutschein" (a tax credit), they could be used to pay taxes after some time. Until the outbreak of war in August, 3 billion were put into circulation, the highest amount was 4.8 billion in November of that year. The Reich paid 40% of payments for supplies and services in these tax credits they had to be accepted in the same amount from other companies as well. And so, to a degree, they became legal tender. Also in 1939, the Reich began to pay its suppliers with 6-month Lieferungsschatzanweisungen ('supply treasury notes'). In these ways has the state, with more or less force, extended its credit.
Finally, as a measure to prepare for the war, in July, 1939 were all the provisions for the independence of the Reichsbank were removed, and the requirement to back banknotes with gold and foreign currency was removed as well. The treasury notes were allowed as backing instead and the war could be financed directly, without need for roundabout methods. Ώ]
Budget of the Reich
|(in billions of Reichsmark) Ώ]||1933/34||1934/35||1935/36||1936/37||1937/38||1938/39|
|- military expenses||1.9||1.9||4.0||5.8||8.2||18.4|
|- treasury notes||1.5||2.0||2.4||2.0||1.9||6.1|
Export and Import
The foreign trade was heavily regulated since the outbreak of the Great Depression in 1931. The first emergency regulations should block the repayment of foreign loans and capital flight. The English pound has devalued by 40% in 1931, followed by many currencies that were bound to it, the U.S. dollar devalued as well by 40% in 1933. The German mark could not be devalued (especially because of the recent hyperinflation), but lost many export markets. The export would be revived by subsidies.
The imports were overseen through a number of offices ("Überwachungsstellen"), that would expertly decide, whether a particular import was necessary. The trade balance was so under control and the exports could rise - in this way, the exchange rate of the mark could be kept stable as well and was considered a success. Ώ]
An office for the oversight of prices was opened at the end of 1931, during the worst of Depression. It forced a decrease of wages, interest rates and related prices. When in 1936 the general level of prices started to rise as a consequence of the military spending, it was replaced with a 'comissar for the creation of prices'. In November of that year was issued a price stop, that forbade any price or wage increases very few exceptions were granted. Finally, in June, 1938, were the cartels given the right to set maximum wages, and the Dienstverpflichtung ('service duty') was introduced, ending the free choice of a workplace.
The natural interplay of supply and demand has ceased completely and the price mechanism lost its regulating effect on the market. The foundations of the market economy were destroyed and turned into a system of rationing, a pure command economy. The purchasing power of money seemed to be preserved, but the economy was still doomed. A new wave of inflation was initiated, while the prices were kept low. Ώ]
The Century of Inflation
The Twentieth century may be remembered as the century of excess. In every area, more things were done in the Twentieth century than in any other century in history, and in many cases, more than in all previous centuries combined. The Twentieth century saw some of the most destructive wars in history, the development of the Atomic Bomb, the beginning of air and space travel, the colonization and decolonization of the Third World, the rise and fall of Communism, dramatic improvements in the standard of living, the population explosion, the rise of the computer, incredible advances in science and medicine, and hundreds of historically unprecedented changes.
The Twentieth century also produced more inflation than any other century in history. Inflation is nothing new. Roman rulers produced inflation in Third Century Rome by debasing their coins, China suffered inflation in the fourteenth century when the Emperors replaced coins with paper money, Europe and the rest of the world suffered inflation when gold and silver started flowing into the Old World from the New World in the sixteenth century, and the French and American Revolutions destroyed currencies in each of those countries.
Nevertheless, as we shall see, the Twentieth century produced the worst inflation in human history. Every single country in the world suffered worse inflation in the Twentieth century than in any century in history. So what caused this inflation to occur, and is further inflation in the Twenty-first century inevitable?
The Nineteenth Century
Amazingly enough, the Nineteenth century was a period of deflation, rather than inflation. From the end of the Napoleonic Wars in 1815 until the start of World War II in 1914, there was no inflation in most countries, and in many cases, prices were lower in 1914 than they had been in 1815. Prices fluctuated up and down from one decade to the next, but overall, prices remained stable.
There were exceptions to this rule. The United States suffered inflation during the Civil War, though the United States also went through deflation after the war in order to bring the economy back onto a gold standard. The Confederate States suffered high inflation since they printed money to pay for the war. The eventual collapse of the Confederate States made their currency worthless.
Countries were able to minimize the amount of inflation they suffered during the Nineteenth century because currencies were tied to commodities (gold and silver) whose supply increased at rates similar to the increase in output. Price stability in gold and silver produced price stability for the world.
The Nineteenth century was a period of bimetallism. Countries chose to back their currency with either gold or silver. The United Kingdom was on the gold standard from the end of the Napoleonic Wars until 1914. Because the British economy grew faster than the supply of gold, prices fell in Britain during that hundred-year period.
Other countries such as France, Russia, Austria, most of Asia, and other countries tied their currency to silver. Since the supply of silver was growing faster than economic growth, countries on a silver standard had higher inflation rates than countries on the gold standard. Nevertheless, their inflation was modest by Twentieth century Standards.
Still, other countries such as the United States, primarily for political reasons, tried to balance themselves between gold and silver by tying their currency to both metals, but in the end, gold triumphed. By the beginning of the Twentieth century, every major country in the world had tied its currency to gold.
The result was a century of price and currency stability. The value of the US Dollar relative to the British Pound Sterling was the same in 1914 as it had been in 1830. Because currencies were tied to gold, fluctuations in exchange rates were minimal, rarely moving more than one percent above or below par.
Given this situation, nothing could have prepared the world for the hyperinflations and persistent inflation of the Twentieth century. The purpose of this paper is to both document inflation in the Twentieth century, and to analyze what went wrong.
Why will the Twentieth century be remembered as the century of the worst inflation in human history? How did the Twentieth century differ from the Nineteenth century? Which countries suffered the worst inflation, and why? Which countries suffered the least inflation, and why? And most importantly, will the Twenty-first century be another century of inflation? Or will the world enjoy a century of price and financial stability similar to what occurred during the Nineteenth century?
Exchange Rates and Inflation
It would have been easy to write this paper if every country had kept data on inflation throughout the Twentieth century. Unfortunately, this isn’t the case. Most countries only began keeping data on inflation after World War I, and for smaller countries, data often does not exist before World War II. Inflation data before these dates are often estimates based upon historical price data.
Moreover, the worst inflationary periods often lack any inflationary data at all. It is easy to keep track of inflation when prices are rising at 2% per annum, but more difficult when prices are doubling on a daily basis. In order to compare inflation throughout the world, we have had to rely upon a proxy for inflation: exchange rates.
The theory of Purchasing Power Parity says that in the long run, differences in inflation rates between countries are transmitted through changes in relative exchange rates. If prices double in one country but remain unchanged in another country, the currency of the inflating country will lose half of its value relative to the currency of the stable country. Otherwise, exports from the inflating country would become so expensive that foreigners could not afford to purchase their exports. For this reason, all inflation comparisons will be based upon exchange rate changes over time.
Inflation in the Twentieth Century
The United Kingdom is the only country for which a complete Consumer Price inflation record is available for the entire Nineteenth century. Prices in the United Kingdom rose during the Napoleonic Wars, and started to decline after 1813, returning to stable pre-war levels by 1822. From 1822 until 1912, consumer prices showed no overall increase. There were periods of moderate inflation and deflation, but no overall inflationary trend. This general pattern holds true for other countries for which inflation data are available.
The Twentieth century is quite another matter. Whereas the Nineteenth century went through periods of moderate inflation and deflation, the Twentieth century was a period of general continual inflation, with some periods worse than others. The only times in which prices fell were the periods right after World War I and the Depression of the 1930s. During all other periods, prices generally rose.
The table below compares the inflation experiences of the United Kingdom and the United States between 1820 and 2000, providing both the index for each country and the annual inflation rates during the 20-year and 10-year periods that are covered. Several facts are immediately obvious.
First, the lack of inflation in the Nineteenth century is clearly visible. Even in the United States during the 1860 to 1880 period when the Civil War occurred, the overall level of inflation was lower than in most of the post-World War II era. Second, both the United States and the United Kingdom had similar inflation experiences throughout the Nineteenth century. By contrast, not only was inflation higher in the Twentieth century in the United States and the United Kingdom, but it was also more variable, both within and between countries. Greater inflation in the United Kingdom in the 1910s led to greater deflation in the 1920s than in the United States. The same was not true after the war. The United Kingdom had greater inflation than in the United States in every decade after 1960.
The table can also show the merits of using Purchasing Power Parity to analyzing inflationary differences between countries. Whereas wholesale prices in the United States increased 14-fold in the Twentieth century, wholesale prices increased 53-fold in the United Kingdom. Prices rose 3.75 times faster in the United Kingdom than in the United States during the Twentieth century. This would predict that the British Pound should have depreciated from 4.85 Dollars to the Pound in 1900 to 1.30 Dollars to the Pound in 2000, which is not far from the current rate of about 1.45 Pounds to the Dollar.
A Brief History of Inflation in the Twentieth Century
The review of inflation in the United Kingdom and the United States showed that inflation varied from one decade to the next. Inflation in the Twentieth century can be divided into a number of periods of deflation and inflation. Economic and political events were the primary factors that set the tone for each of these periods. We divide the inflationary experience of the Twentieth century into seven periods:
The first period lasted from 1900 until August 1914. This was a period of relative price stability. All major European countries and many non-European countries were on the gold standard. Weaker economies tied their currency to silver. This period showed modest rates of inflation throughout the world and a large degree of stability on foreign exchange markets between currencies.
The next period, from 1914 until 1924, was a period of instability, inflation, and hyperinflation. Within days of the outbreak of World War I, all countries had left the Gold Standard. Unable to finance the war through taxes alone, countries resorted to printing excessive amounts of money to pay for the war. The result was the highest inflation the world had experienced since the Napoleonic Wars. The overall price level more than doubled in every country involved in the war.
The period immediately after World War I produced even worse inflation than during the war for many countries. Countries that were victorious in World War I, such as the United Kingdom and the United States, deflated after 1920, but countries that had been defeated faced political instability after the war underwent some the worst hyperinflations in human history.
New countries that were created after the war, such as Poland and Hungary, lacked the ability to collect sufficient taxes and paid their bills by printing money. Revolutions rocked Russia and other countries, war indemnities had to be paid by Germany, governments faced new demands for government services, and were burdened with debt from the war. These and other problems made inflation an attractive alternative to cutting services or raising taxes in many of the European countries that had been directly involved in World War II. This solution only created more economic problems. The result was hyperinflation in Germany and other countries that had been fighting on the side of the Axis Powers, or had been occupied by the Axis powers. The table below compares exchange rates to the United States Dollar in 1914 and 1924 for some of these countries.
The period from 1924 until 1939 was one of financial instability and deflation. By 1924, most countries, including Germany, had stabilized. The driving force behind the financial system during the interwar period was the attempt to return to the stability of the pre-war Gold Standard. Germany exchanged 1,000,000,000,000 Marks for 1 Rentenmark, and set the exchange rate for the Rentenmark equal to the pre-World War I rate for the Mark. Britain put the Pound Sterling back on its pre-war Gold parity, and other countries tried to do the same. Instead of returning to economic growth and stability, each country sank into economic depression, accompanied by deflation.
World War II determined the behavior of exchange rates between 1939 and 1949. Most countries avoided the inflation of World War I by introducing price controls. Governments also used exchange rate controls to limit access to foreign exchange, effectively freezing exchange rates during the war. After the war, inflation set in, and the countries that had been devastated by World War II suffered inflation or hyperinflation. As is shown in the table below, China, Hungary, Greece, Romania, and other countries went through hyperinflation that were worse than the ones that followed World War I.
The period from 1949 until 1973 was the Bretton Woods era. A realignment of currencies in September 1949, which allowed most currencies to initially depreciate against the dollar, created the basis for 25 years of stability among currencies. Though exchange rates were stable, prices were not. The Dollar played the role of the world’s Reserve Currency during the Third Quarter of the Twentieth century, just as gold had played this role in the Nineteenth century. However, the United States preferred moderate inflation to the possibility of returning to the high unemployment and deflation of the 1930s.
The Nineteenth Century avoided inflation by tying the financial system to gold. The increase in the supply of gold was less than the increase in the supply of goods in general, so inflation was avoided. By tying all the world’s currencies to the US Dollar, the United States had responsibility for maintaining a stable currency, and in this, the United States failed. Between 1949 and 1974, consumer prices in the United States doubled, and consequently, the prices of goods in all countries doubled.
During the late 1960s and early 1970s there were strains on the Bretton Woods system. The scarcity of Dollars in the 1950s had turned into a surfeit by 1970. Since currencies were tied to the dollar, but each country had a separate currency and Central Bank, countries suffered different rates of inflation. The exchange rates that had been established in 1949 lost their validity as countries began suffering different rates of inflation, trade patterns changed, and international capital flows increased. In August 1971, the United States devalued the Dollar, and by 1973, most of the world’s major currencies were floating against one another. The table below follows the evolution of exchange rates between the world’s major currencies during the period from 1939 and 1979.
After countries began floating their currencies in 1973, the OPEC Oil Crisis hit, producing an inflation-inducing supply shock that lasted for the rest of the decade. Most countries suffered their worst peacetime inflation in their history. Governments thought they would avoid unemployment through monetary accommodation during the 1970s, but when the second oil shock hit in 1979, Central Banks saw that during the 1970s, unemployment had risen and growth had declined while inflation got worse. Inflation in developed countries hit double-digits, and inflation in developing countries often hit triple digits. There were few hyperinflations in the 1970s, but countries suffered continuous high rates of inflation resulting from monetary accommodation. Former European colonies that had anchored their currency to European currencies after independence gradually broke the link, eliminating their inflationary discipline. Countries in Africa and Latin America suffered unprecedented rates of inflation.
When Paul Volcker became Chairman of the Federal Reserve in 1979, he decided to fight inflation even if the cost was higher unemployment. This determination, along with the weakening of OPEC after 1981, led to a decade of disinflation in the 1980s, and low and moderate inflation in the 1990s. The collapse of Communism produced hyperinflationary bouts in Eastern Europe, but the rest of the world saw decreasing inflation. Even the African and Latin American countries that had suffered high rates of inflation throughout the post-World War II period learned to tame inflation. Argentina, for example, did this by introducing a currency board, linking their currency to the dollar.
At this point, one would expect that the Twenty-first century should be a century of low inflation similar to what occurred during the Bretton Woods period between 1949 and 1969. But this isn’t certain. Several countries, such as Japan and Singapore, have actually gone through deflation in the 1990s, and there is always the risk that economic and political instability in the Twenty-first century will cause inflations similar to what happened in the Napoleonic Wars, World War I and World War II. No one knows what will happen in the century to come, but we can learn lessons from the last century.
Countries that Appreciated Against the Dollar in the Twentieth Century
Despite the fact that prices in the United States increased 23-fold in the Twentieth century, most countries suffered even worse inflation than the United States. Since inflation data are incomplete, we make our comparisons by looking at exchange rate changes during the Twentieth century.
You can literally count on your hand the number of countries whose currencies appreciated against the Dollar in the Twentieth century, and only one currency, the Swiss Franc, appreciated significantly. This means that with a few exceptions, the United States had the best inflation record of any country in the world during the Twentieth century. This occurred despite the United States’ poor record in fighting inflation in the past 100 years.
The table below shows the only countries whose currencies appreciated against the United States Dollar during the Twentieth century. Two other currencies should also be mentioned. The Aruba Florin, which was created in 1986 when Aruba separated from the Netherlands Antilles, had a similar exchange rate history to the Netherlands Antilles, and Brunei Darussalem, which has pegged its currency to the Straits Settlement/Singapore Dollar giving it a similar history to that of Singapore.
Switzerland had the least inflation of any country in the past century. Prices increased tenfold between 1900 and 2000. At any point in time, Switzerland’s inflationary history was similar to that of the rest of the world, but its actual inflation rates were lower. Switzerland suffered inflation between 1915 and 1920, deflation between 1920 and 1936, and gradual inflation thereafter.
Switzerland has followed an explicit policy of minimizing inflation. The Swiss National Bank is independent of government influence, and because of Switzerland’s role as an important international finance center, maintaining a strong currency has been important. Had Switzerland allowed its currency to depreciate, it would have lost its role as a safe haven for funds. Moreover, Switzerland is a federation that lacks a strong central government, and it avoided participation in either of the European World Wars. Switzerland avoided the economic and political chaos that usually accompanies inflation, avoided high government deficits, avoided large increases in government spending, and provided the Swiss National Bank with independence. Because Switzerland has been a small, open country, it has had to focus on maintaining a strong, liquid currency. For this reason, the Swiss Franc was the strongest currency in the Twentieth century.
The Netherlands is also a small, open economy with a long, commercial history. It was neutral in World War I, but was invaded during World War II. Although it is more centralized, and has a larger role for government and social spending than Switzerland, it has avoided the economic and political problems that often plunge countries into inflation. Consumer prices rose 24-fold in the Netherlands during the Twentieth century, almost exactly the same as in the United States, which is why the currencies were almost unchanged against each other during the Twentieth century. Of course, the Netherlands has forsaken the Guilder, introducing the Euro in 1999. The European Central Bank will run the Netherlands’ monetary policy in the Twenty-first century.
The Netherlands Antilles benefited from linking its currency to the Netherlands from 1900 until 1940 and to the United States from 1940 until 2000. Aruba became a separate country in 1986 and introduced the Florin at par with the Netherlands Antilles Guilder. The Netherlands Antilles is still part of the Netherlands, and it has never pursued an independent monetary policy. There can be no other explanations for its inflationary record.
By contrast, Suriname, which was a Dutch dependency until it gained its independence in 1976, has capitulated to the temptations of inflation. The Suriname and Antillean Guilders were at par to one another until the 1960s, but by 2000, it took 550 Suriname Guilders to get one Antillean Guilder. Sometimes, a lack of independence can be a blessing in disguise.
The final currency that appreciated against the US Dollar was the Singapore Dollar. The Singapore Dollar is a successor to the Straits Settlements Dollar, Malayan Dollar and Malaysian Ringgit. Brunei linked its currency to the Singapore Dollar throughout the Twentieth century, and its currency has mirrored the behavior of the Singapore Dollar.
Singapore is in situation similar to Switzerland. It is a small, open economy, dependent on trade, and has maintained a steady currency as a result. The Singapore Dollar was linked to the British Pound between 1905 and 1970. Since 1970, the Singapore Monetary Authority has maintained control over inflation, causing the Singapore Dollar to appreciate by 55% against the US Dollar. Throughout most of its history, the Straits Settlements/Singapore used a currency board to maintain its stable currency. Prices in Singapore rose only fourfold after World War II, which is why the currency remained so strong. Brunei maintained a strong currency, in part, because of its oil wealth.
This leaves us with the question, why did these countries–Switzerland, Netherlands Antilles/Aruba, the Netherlands and Singapore/Brunei–succeed in controlling inflation during the Twentieth century when other countries failed? We believe the most important factors were:
- All the countries had small, open economies dependent on trade.
- They all had independent monetary authorities or currency boards that avoided an overissue of currency.
- None of them suffered periods of economic or political chaos that might have led to high rates of inflation, even though both the Netherlands and Singapore were occupied during World War II.
- None of the governments have used large government deficits to fund social and defense programs that could have produced inflation. Although the Netherlands suffered from the “Dutch Disease” in the 1970s, when it used its oil revenues to fund generous social programs, it has since reformed itself and reduced social benefits.
The paradox of fighting inflation is that the best way to control inflation is to minimize control over monetary policy. Large countries should rely upon an independent central bank, dedicated to fighting inflation, and small countries should use a currency board, or some other means, to import the monetary policy of a country with anti-inflationary policies. Politics influences economic policy, and minimizing this link is one of the best ways of fighting inflation.
Countries that Suffered the Greatest Inflation in the Twentieth century
Countries that suffered the highest rates of inflation in the Twentieth century endured one or more bouts of hyperinflation, went through decades of high inflation rates, or both. The German economy, for example, almost collapsed in 1923 as a result of hyperinflation in which a meal costing 1 Mark at the beginning of World War I cost 1 trillion marks by the end of 1923. Brazil, on the other hand, had inflation rates of over 10% every year from 1951 to 1995, and over 1000% in some years, but never sank into hyperinflation. The cumulative effect over the decades was a complete and steady devaluation in the various currencies that Brazil issued. The country with the worst inflation record in the Twentieth century, Yugoslavia, suffered both types of inflation: double-digit inflation during most of the 1960s, all of the 1970s and 1980s, and a collapse into hyperinflation in the early 1990s.
The table below lists the countries with the worst inflation in the Twentieth century by showing how many units of its currency was needed to purchase the equivalent of one 1900 United States Dollar in 2000. For example, since it took 2 Japanese Yen to purchase 1 US Dollar in 1900, and 114 Yen in 2000, the Depreciation Factor for the Japanese Yen would be 57. The equivalent amounts for the countries listed below are mind-boggling.
Rather than provide histories of each country, it would be easier to look at the factors that caused these countries to suffer inflation since some of the same causes apply to several countries.
From a geographic point of view, there are several interesting things to note. First, the only Asian country in the list is China, primarily because of the hyperinflation it fell into during the last years of the Nationalist Regime in China. No other Asian countries went through hyperinflationary periods in the Twentieth century, though countries like Indonesia have suffered quite high rates of inflation at different points in time.
Second, several South American countries are included in the list, but no Central American or North American countries. Central American countries kept their currencies linked to the United States Dollar during most of the century, minimizing their currencies’ depreciation and their domestic inflation. Many South American countries, on the other hand, suffered both continuous high rates of inflation and periods of hyperinflation. Unlike Central American countries, they pursued independent monetary policies and suffered as a result. South American countries, in general, had higher average inflation rates than the rest of the world throughout the Twentieth century.
Third, European countries on this list mainly went through a period of hyperinflation either after World War I, World War II, or the collapse of the Soviet Union. During most other time periods, inflation rates were moderate.
Finally, only two African countries are on the list. Most African colonies had Currency Boards until the 1960s that limited inflation by tying their currency to European currencies. The French West African countries that still tie their currency to the French Franc have suffered significantly less inflation than the countries that have chosen independent monetary policies. Congo’s inflation occurred under the despotic Mobutu, and Angola’s inflation occurred almost exclusively during the 1990s.
As the monetary dictum goes, inflation is everywhere a monetary phenomenon. This rule is especially true in these cases. Every one of the countries listed here was unable and/or unwilling to pay for government expenditures through raising taxes. Each chose to print money, through excessive issues of currency or open market operations, increasing the money supply and causing inflation. Over time, this action became a self-defeating measure as the inflation reduced real government receipts making the deficit even larger until the economy collapsed into hyperinflation.
We divide our sources of hyperinflation into four categories: post-World War I inflation, post-World War II inflation, post-Soviet Union inflation, and inflationary financing of government deficits leading to a collapse in the currency.
Post-World War I Inflation
After World War I, the Axis countries that lost were in political and financial disarray. Austria-Hungary was broken up into several smaller countries, Poland was recreated, Russia collapsed into civil war, and Germany and other countries fell under severe economic pressures. These countries gradually fell into a vicious circle of government deficits that led to inflation which fed the demand for more government services as economic recession set in leading to even greater inflation. In Poland, Germany, Hungary, Russia and Austria, the government eventually replaced the collapsed paper currencies with new currencies, tying the new currencies to the US Dollar, Gold or some other anchor. Germany’s inflation was the worse, and Germany has been hyper-vigilant against inflation ever since. Though Germany and Austria never suffered high rates of inflation again, Hungary suffered the worst inflation in history after World War II, and both Poland and Russia suffered inflationary bouts after Communism collapsed in each country.
None of the Allied countries suffered hyperinflation after World War I. Prices in most countries had doubled, tripled or quadrupled during World War I, but after the war deflation set in. The United Kingdom and other countries tried to return to the Gold Standard, reestablishing the exchange rates that had existed prior to World War I.
Political and economic collapse was the clear source of inflation after the war. Countries such as Germany and Austria that chose to inflate, rather than address their economic problems directly, discovered the costs of hyperinflation and made sure that hyperinflation never occurred again. Other countries, such as Hungary or Romania were unable to avoid inflation and suffered as a result.
Post-World War II Inflation
Fewer countries suffered from inflation after World War II than after World War I. China’s inflationary collapse had more to do with the civil war that followed World War II than with the war itself. The Communist parts of China had much lower inflation rates during the Civil War than the Nationalist parts of China. The Communist Yuan fell in value from 3.9 Yuan to the Dollar in 1934 to 47,000 by 1949, but the Nationalist Yuan fell in value to 425,000,000 Yuan to the Dollar. Greece suffered its inflation during World War II, and Romania’s inflation was moderate compared to the inflation in Hungary.
The worst inflation in human history occurred in Hungary in 1946 when the Pengo drowned in zeroes. During the spring and summer of 1946, Hungary went through the Pengo, Milpengo (equal to 1 Million Pengoe), Bilpengo (equal to 1 Million Million Pengoe) and Adopengo (Tax Pengo which was supposed to avoid the effects of inflation, but failed). When the inflation ended in July 1946, it took 400 quadrillion Pengoe to purchase 1 Forint, the new currency. This inflation was in no way inevitable.
Since other East European countries were in similar economic situations, it should be recognized that poor economic policies created Hungary’s hyperinflation, not the events themselves. Similarly, the fact that Taiwan and Communist China suffered much lower inflation rates than Nationalist China shows that the degree of inflation was a political choice. These countries suffered inflation because they were unwilling to deal with the economic problems they were facing.
Post-Soviet Union Inflation
The collapse of the Soviet Union led to hyperinflations in many of the countries that made up the former Soviet Union and other Eastern European countries. Almost every country that was a member of the Soviet Union has had to introduce a new currency to replace the depreciated currencies that immediately followed the Soviet Ruble. The degree of inflation varied from moderate inflation in the Baltic States and Central Asian Republics to hyperinflation in the Slavic countries. The table below shows some of the worst cases.
The worst inflation occurred in Yugoslavia, primarily during 1993 when the country was under international sanctions and chose to pay its bills through inflationary finance. As a result, Yugoslavia joined Hungary in sharing the record for worst inflations in history. Yugoslavia introduced a new version of the Dinar in October 1993, and two new versions of the Dinar in January 1994. By the end of January 1994, it took 13,000 million million million “Super” Dinars to buy one Dinar from September 1993!
One of the interesting case histories for inflation in the Twentieth century is Czechoslovakia/Czech Republic. Czechoslovakia could have collapsed into hyperinflation following World War I, World War II or the collapse of Communism, but maintained relative price stability in each of these cases. Czechoslovakia went through only one currency reform during the Twentieth Century, in 1953, when 10 old Czech Koruna were exchanged for 1 new Czech Koruna. Whereas it took the equivalent of ½ New Czech Koruna to get a US Dollar in 1900, it took 37 Czech Koruna in 2000. This certainly was a large depreciation, but nothing compared to the depreciation of any of its neighbors. If Czechoslovakia chose to avoid inflation, so could have its neighbors. In short, inflation and hyperinflation is a choice.
Inflationary Finance and Currency Collapse
Many of the other countries that suffered severe depreciation of their currency during the Twentieth century accomplished this feat through hard and steady work. No South American country faced the political problems caused by the World Wars or the collapse of Communism, but all of them suffered high rates of inflation throughout the Twentieth century.
The source of this inflation was the unwillingness of governments to balance their books and avoid deficits. Government deficits were paid for with expansions in the money supply, which generated inflation. Argentina, Brazil, Uruguay and other South American countries suffered year after year of double-digit inflation that inevitably led to a collapse of the currency into triple- or quadruple-digit inflation before economic reforms replaced the currency with a new currency. Then the country began a new adventure down the road to inflationary collapse. Brazil went through five currency reforms in the Twentieth century, Argentina three reforms, Bolivia, Chile, Nicaragua, Peru and Uruguay two reforms each.
This inflation was in no way inevitable. Panama tied its currency to the Dollar throughout the Twentieth century and suffered no depreciation. Most Central American countries tied their currencies to the U.S. Dollar until the 1970s and avoided inflation. Although it is difficult to separate the causes and effects of inflation, it is notable that Argentina was richer than most European countries in the 1920s, but is now poorer than most European countries. Latin American countries had faced slower growth than most Asian countries. Although inflation in and of itself didn’t cause this result, it certainly contributed to it.
Many countries not on our list have suffered high annual inflation rates without collapsing into hyperinflation. Countries suffer inflation because they are unwilling to deal directly with the economic problems that create inflation. Using the printing presses to avoid these problems only delays the inevitable and worsens the economic costs of dealing with inflation.
The Costs of Inflation
Inflation reduces economic well-being. There are numerous sources of the costs to inflation. Price inflation imposes menu costs (the cost of changing prices), shoe leather costs (the costs of reducing monetary holdings), increased uncertainty among producers and consumers trying to determine the real costs of goods and services, tax distortions, and the cost of adjusting to unexpected changes in inflation. Unexpected inflation redistributes money from creditors to debtors and from employees to employers. In the case of hyperinflation, it can easily wipe out the value of financial assets. This leads to reduced investment and lower economic growth. Variable inflation rates create uncertainty that affects the level of economic output.
All of these inflationary problems result from price inflation of goods and services. Another inflationary problem that is often ignored is asset-price inflation in the stock market, real estate market, or other areas. Asset inflation creates artificial wealth, encouraging firms and consumers to borrow beyond their capacity. When the asset inflation ends, firms and individuals are unable to pay their debts leading to declines in demand and to economic slowdowns. The United States in the 1930s and Japan in the 1990s are examples of this problem. Asset inflation is deceptive because people feel wealthier when it occurs, but when asset values get out of line with the nation’s productive capacity, there will be an inevitable period of “catch up” in which asset prices adjust downward to their real levels.
Both price and asset inflation have their costs.
Fighting Inflation in the Twenty-first century
Will inflation in the Twenty-first century be more like the Nineteenth century or the Twentieth century? Of course, it is impossible to predict this. Inevitably, countries that choose not to deal with their underlying economic problems will create inflationary problems for themselves. Most countries returned to single-digit levels of inflation in the late 1990s, even South American, and former Soviet countries, but some countries continued to inflate. Turkey, the Congo Democratic Republic, and Angola are still suffering high rates of inflation.
Nevertheless, countries do learn from their mistakes. Germany has made sure that it never repeated they hyperinflation of the 1920s, most governments chose to control inflation during World War II and avoid the inflationary finance of World War I, and when the second Oil Crisis occurred in 1979, Central Banks chose to fight inflation rather than succumbing to it as they had after the first Oil Crisis in 1973. After the inflation of the Napoleonic Wars, the United States, United Kingdom, France and other countries made sure that paper money inflation did not return for a century. Hence, there is no reason why we cannot use the lessons of the Twentieth century to fight inflation in the Twenty-first century.
Several conclusions can be made.
Inflation is not the inevitable consequence of political and economic uncertainty.
Although most countries that suffered inflation did so during a period of political and economic uncertainty, inflation occurred because governments were unwilling to deal with the economic problems they faced. Germany and Austria avoided inflation after World War II, and Czechoslovakia avoided the high inflation rates of its neighbors throughout the Twentieth century. Central American countries that tied their currency to the U.S. Dollar avoided the inflationary problems of their South American neighbors. Inflation is a choice.
Government and Central Banks must learn that the economic problems that lead to inflationary finance must be dealt with immediately. Inflation only delays and worsens these economic problems at the cost of economic investment and output.
Independent Central Banks can reduce the Temptation of Inflation
The countries with the best records on inflation in the Twentieth century were also the countries that had independent Central Banks. Of course, this in and of itself is no guarantee of avoiding inflation. Though Switzerland, the United States, and Germany suffered less inflation than most countries after World War II, they still went through brief periods of double-digit inflation. The Central Bank must have a commitment to fighting inflation at all costs.
The European Central Bank will provide an interesting case study in the Twenty-first century. Unlike the Federal Reserve, it is a supranational Central Bank, controlling the money supply of several sovereign countries. There are other supranational Central Banks that control the money supply for several countries, such as the East Caribbean Central Bank or the Banque Centrale des Etats de l’Afrique de l’Ouest, but these act more like currency boards than central banks.
Despite its independence and supranational character, we cannot conclude that the European Central Bank will be free from political influence. Before its first President, Wim Duisenberg, was chosen, the French made sure that he would “voluntarily” resign after four years to allow a French ECB President to replace him.
Although Central Banks make fighting inflation their primary goal, it is not their only goal. The Federal Reserve tries to balance fighting inflation against internal and economic stability, and its record on fighting price inflation in the 1970s and asset inflation in the 1990s is less than perfect. Independent Central Banks and a stronger commitment to fighting inflation can avoid the inflation of the Twentieth century.
Smaller countries should peg their currency to the Euro or Dollar to avoid inflation.
The small countries with the best records in avoiding inflation are the countries that have used Currency Boards or Dollarization. This requires them to give up control over the monetary side of their economy.
Currency Boards or Dollarization in and of themselves do not solve a country’s economic problems. Argentina, Mexico, Korea and others used the stability of their currency to borrow excessively in U.S. Dollars creating financial and economic problems. Currency Boards combined with conservative macroeconomic policies is the best way to control inflation in small countries.
This is the best explanation of why African countries suffered little inflation before 1960, but high inflation thereafter, why non-French African countries have suffered higher rates of inflation than French African countries, and why Central America endured less inflation than South America.
Several countries have taken this route. Argentina, Hong Kong and Bulgaria, among others, now use currency boards to control inflation. Ecuador has dollarized, and the U.S. Dollar is legal tender in Panama and Guatemala. This also explains why the Netherlands Antilles has one of the best inflation records in the Twentieth century.
For small countries, currency boards can act as the equivalent of an independent Central Bank and are probably the best solution.
What lies ahead in the Twenty-first century? No one knows, of course. There will be wars, governments will collapse, ideologies will gain control over economic common sense, and governments will be tempted to use inflation to solve their economic and financial problems. We must remember that inflation is a choice that can be avoided.
One prediction we would like to make here is that if the Twentieth century was a century of the proliferation in currencies, the Twenty-first century will be a century that sees a reduction in the number of world currencies. Central Banks were a growth industry during the Twentieth century. Few countries had a Central Bank in 1900, and most countries and colonies linked their currencies to one another through the Gold Standard.
As countries gradually removed gold and silver from their national monetary systems, and replaced them with paper, inflation resulted. The world will never go back to the Gold Standard. But it can return to a world in which most of the world’s currencies are linked to several central currencies, such as the Dollar, Euro and Yen, or possibly to a single Eurodollar currency. Whether these reserve currencies return to relative price stability and can avoid the problems of the Twentieth century remains uncertain, but it is a goal to aim for.
During the war, the German government used extensive propaganda to hide the inflation from the population
The German government appealed to patriotism to fund the conflict, using slogans like "I gave gold for iron," and "Invest in War Loan."
Furthermore, it censored information heavily:
Every German stock exchange was closed for the duration, so that the effect of Reichsbank policies on stocks and shares was unknown. Further, foreign exchange rates were not published, and only those in contact with neutral markets such as Amsterdam or Zurich could guess what was going on. Only when the war was over, with the veil of censorship lifted but the Allied blockade continuing, did it become clear to all with eyes to read that Germany had already met an economic disaster nearly as shattering as her military one.
The Effect of Monetary Policy
The Fed focuses on the core inflation rate, which excludes gas and food prices. These volatile prices change from month to month, hiding underlying inflation trends.
The Fed sets a target inflation rate of 2%. If the core rate rises much above that, the Fed will execute a contractionary monetary policy. It will increase the federal funds rate. This is the rate at which banks lend to each other overnight. Historically, this action reduces demand and forces prices lower.
The Fed can also lower the federal discount rate, which makes it cheaper to borrow money from the Fed itself. This is an attempt to increase demand and raise prices.
Other tools that the Fed uses are:
- Reserve requirements (the amount banks hold in reserves)
- Open market operations (buying or selling U.S. securities from member banks)
- Reserve interest (paying interest on excess reserves)
In 1956, Phillip Cagan wrote The Monetary Dynamics of Hyperinflation, the book often regarded as the first serious study of hyperinflation and its effects  (though The Economics of Inflation by C. Bresciani-Turroni on the German hyperinflation was published in Italian in 1931  ). In his book, Cagan defined a hyperinflationary episode as starting in the month that the monthly inflation rate exceeds 50%, and as ending when the monthly inflation rate drops below 50% and stays that way for at least a year.  Economists usually follow Cagan's description that hyperinflation occurs when the monthly inflation rate exceeds 50% (this is equivalent to a yearly rate of 12974.63%). 
The International Accounting Standards Board has issued guidance on accounting rules in a hyperinflationary environment. It does not establish an absolute rule on when hyperinflation arises, but instead lists factors that indicate the existence of hyperinflation: 
- The general population prefers to keep its wealth in non-monetary assets or in a relatively stable foreign currency. Amounts of local currency held are immediately invested to maintain purchasing power
- The general population regards monetary amounts not in terms of the local currency but in terms of a relatively stable foreign currency. Prices may be quoted in that currency
- Sales and purchases on credit take place at prices that compensate for the expected loss of purchasing power during the credit period, even if the period is short
- Interest rates, wages, and prices are linked to a price index and
- The cumulative inflation rate over three years approaches, or exceeds, 100%.
While there can be a number of causes of high inflation, almost all hyperinflations have been caused by government budget deficits financed by currency creation. Peter Bernholz analysed 29 hyperinflations (following Cagan's definition) and concludes that at least 25 of them have been caused in this way.  A necessary condition for hyperinflation is the use of paper money, instead of gold or silver coins. Most hyperinflations in history, with some exceptions, such as the French hyperinflation of 1789–1796, occurred after the use of fiat currency became widespread in the late 19th century. The French hyperinflation took place after the introduction of a non-convertible paper currency, the assignat.
Money supply Edit
Monetarist theories hold that hyperinflation occurs when there is a continuing (and often accelerating) rapid increase in the amount of money that is not supported by a corresponding growth in the output of goods and services. [ citation needed ]
The increases in price that can result from rapid money creation can create a vicious circle, requiring ever growing amounts of new money creation to fund government deficits. Hence both monetary inflation and price inflation proceed at a rapid pace. Such rapidly increasing prices cause widespread unwillingness of the local population to hold the local currency as it rapidly loses its buying power. Instead, they quickly spend any money they receive, which increases the velocity of money flow this in turn causes further acceleration in prices.  This means that the increase in the price level is greater than that of the money supply.  The real stock of money, M/P, decreases. Here M refers to the money stock and P to the price level.
This results in an imbalance between the supply and demand for the money (including currency and bank deposits), causing rapid inflation. Very high inflation rates can result in a loss of confidence in the currency, similar to a bank run. Usually, the excessive money supply growth results from the government being either unable or unwilling to fully finance the government budget through taxation or borrowing, and instead it finances the government budget deficit through the printing of money. 
Governments have sometimes resorted to excessively loose monetary policy, as it allows a government to devalue its debts and reduce (or avoid) a tax increase. Monetary inflation is effectively a flat tax on creditors that also redistributes proportionally to private debtors. Distributional effects of monetary inflation are complex and vary based on the situation, with some models finding regressive effects  but other empirical studies progressive effects.  As a form of tax, it is less overt than levied taxes and is therefore harder to understand by ordinary citizens. Inflation can obscure quantitative assessments of the true cost of living, as published price indices only look at data in retrospect, so may increase only months later. Monetary inflation can become hyperinflation if monetary authorities fail to fund increasing government expenses from taxes, government debt, cost cutting, or by other means, because either
- during the time between recording or levying taxable transactions and collecting the taxes due, the value of the taxes collected falls in real value to a small fraction of the original taxes receivable or
- government debt issues fail to find buyers except at very deep discounts or
- a combination of the above.
Theories of hyperinflation generally look for a relationship between seigniorage and the inflation tax. In both Cagan's model and the neo-classical models, a tipping point occurs when the increase in money supply or the drop in the monetary base makes it impossible for a government to improve its financial position. Thus when fiat money is printed, government obligations that are not denominated in money increase in cost by more than the value of the money created.
From this, it might be wondered why any rational government would engage in actions that cause or continue hyperinflation. One reason for such actions is that often the alternative to hyperinflation is either depression or military defeat. The root cause is a matter of more dispute. In both classical economics and monetarism, it is always the result of the monetary authority irresponsibly borrowing money to pay all its expenses. These models focus on the unrestrained seigniorage of the monetary authority, and the gains from the inflation tax.
In neo-classical economic theory, hyperinflation is rooted in a deterioration of the monetary base, that is the confidence that there is a store of value that the currency will be able to command later. In this model, the perceived risk of holding currency rises dramatically, and sellers demand increasingly high premiums to accept the currency. This in turn leads to a greater fear that the currency will collapse, causing even higher premiums. One example of this is during periods of warfare, civil war, or intense internal conflict of other kinds: governments need to do whatever is necessary to continue fighting, since the alternative is defeat. Expenses cannot be cut significantly since the main outlay is armaments. Further, a civil war may make it difficult to raise taxes or to collect existing taxes. While in peacetime the deficit is financed by selling bonds, during a war it is typically difficult and expensive to borrow, especially if the war is going poorly for the government in question. The banking authorities, whether central or not, "monetize" the deficit, printing money to pay for the government's efforts to survive. The hyperinflation under the Chinese Nationalists from 1939 to 1945 is a classic example of a government printing money to pay civil war costs. By the end, currency was flown in over the Himalayas, and then old currency was flown out to be destroyed.
Hyperinflation is a complex phenomenon and one explanation may not be applicable to all cases. In both of these models, however, whether loss of confidence comes first, or central bank seigniorage, the other phase is ignited. In the case of rapid expansion of the money supply, prices rise rapidly in response to the increased supply of money relative to the supply of goods and services, and in the case of loss of confidence, the monetary authority responds to the risk premiums it has to pay by "running the printing presses."
Nevertheless, the immense acceleration process that occurs during hyperinflation (such as during the German hyperinflation of 1922/23) still remains unclear and unpredictable. The transformation of an inflationary development into the hyperinflation has to be identified as a very complex phenomenon, which could be a further advanced research avenue of the complexity economics in conjunction with research areas like mass hysteria, bandwagon effect, social brain, and mirror neurons. 
Supply shocks Edit
A number of hyperinflations were caused by some sort of extreme negative supply shock, often but not always associated with wars, the breakdown of the communist system or natural disasters. 
Since hyperinflation is visible as a monetary effect, models of hyperinflation center on the demand for money. Economists see both a rapid increase in the money supply and an increase in the velocity of money if the (monetary) inflating is not stopped. Either one, or both of these together are the root causes of inflation and hyperinflation. A dramatic increase in the velocity of money as the cause of hyperinflation is central to the "crisis of confidence" model of hyperinflation, where the risk premium that sellers demand for the paper currency over the nominal value grows rapidly. The second theory is that there is first a radical increase in the amount of circulating medium, which can be called the "monetary model" of hyperinflation. In either model, the second effect then follows from the first—either too little confidence forcing an increase in the money supply, or too much money destroying confidence.
In the confidence model, some event, or series of events, such as defeats in battle, or a run on stocks of the specie that back a currency, removes the belief that the authority issuing the money will remain solvent—whether a bank or a government. Because people do not want to hold notes that may become valueless, they want to spend them. Sellers, realizing that there is a higher risk for the currency, demand a greater and greater premium over the original value. Under this model, the method of ending hyperinflation is to change the backing of the currency, often by issuing a completely new one. War is one commonly cited cause of crisis of confidence, particularly losing in a war, as occurred during Napoleonic Vienna, and capital flight, sometimes because of "contagion" is another. In this view, the increase in the circulating medium is the result of the government attempting to buy time without coming to terms with the root cause of the lack of confidence itself.
In the monetary model, hyperinflation is a positive feedback cycle of rapid monetary expansion. It has the same cause as all other inflation: money-issuing bodies, central or otherwise, produce currency to pay spiraling costs, often from lax fiscal policy, or the mounting costs of warfare. When business people perceive that the issuer is committed to a policy of rapid currency expansion, they mark up prices to cover the expected decay in the currency's value. The issuer must then accelerate its expansion to cover these prices, which pushes the currency value down even faster than before. According to this model the issuer cannot "win" and the only solution is to abruptly stop expanding the currency. Unfortunately, the end of expansion can cause a severe financial shock to those using the currency as expectations are suddenly adjusted. This policy, combined with reductions of pensions, wages, and government outlays, formed part of the Washington consensus of the 1990s.
Whatever the cause, hyperinflation involves both the supply and velocity of money. Which comes first is a matter of debate, and there may be no universal story that applies to all cases. But once the hyperinflation is established, the pattern of increasing the money stock, by whichever agencies are allowed to do so, is universal. Because this practice increases the supply of currency without any matching increase in demand for it, the price of the currency, that is the exchange rate, naturally falls relative to other currencies. Inflation becomes hyperinflation when the increase in money supply turns specific areas of pricing power into a general frenzy of spending quickly before money becomes worthless. The purchasing power of the currency drops so rapidly that holding cash for even a day is an unacceptable loss of purchasing power. As a result, no one holds currency, which increases the velocity of money, and worsens the crisis.
Because rapidly rising prices undermine the role of money as a store of value, people try to spend it on real goods or services as quickly as possible. Thus, the monetary model predicts that the velocity of money will increase as a result of an excessive increase in the money supply. At the point when money velocity and prices rapidly accelerate in a vicious circle, hyperinflation is out of control, because ordinary policy mechanisms, such as increasing reserve requirements, raising interest rates, or cutting government spending will be ineffective and be responded to by shifting away from the rapidly devalued money and towards other means of exchange.
During a period of hyperinflation, bank runs, loans for 24-hour periods, switching to alternate currencies, the return to use of gold or silver or even barter become common. Many of the people who hoard gold today expect hyperinflation, and are hedging against it by holding specie. There may also be extensive capital flight or flight to a "hard" currency such as the US dollar. This is sometimes met with capital controls, an idea that has swung from standard, to anathema, and back into semi-respectability. All of this constitutes an economy that is operating in an "abnormal" way, which may lead to decreases in real production. If so, that intensifies the hyperinflation, since it means that the amount of goods in "too much money chasing too few goods" formulation is also reduced. This is also part of the vicious circle of hyperinflation.
Once the vicious circle of hyperinflation has been ignited, dramatic policy means are almost always required. Simply raising interest rates is insufficient. Bolivia, for example, underwent a period of hyperinflation in 1985, where prices increased 12,000% in the space of less than a year. The government raised the price of gasoline, which it had been selling at a huge loss to quiet popular discontent, and the hyperinflation came to a halt almost immediately, since it was able to bring in hard currency by selling its oil abroad. The crisis of confidence ended, and people returned deposits to banks. The German hyperinflation (1919 – November 1923) was ended by producing a currency based on assets loaned against by banks, called the Rentenmark. Hyperinflation often ends when a civil conflict ends with one side winning.
Although wage and price controls are sometimes used to control or prevent inflation, no episode of hyperinflation has been ended by the use of price controls alone, because price controls that force merchants to sell at prices far below their restocking costs result in shortages that cause prices to rise still further.
Nobel prize winner Milton Friedman said "We economists don't know much, but we do know how to create a shortage. If you want to create a shortage of tomatoes, for example, just pass a law that retailers can't sell tomatoes for more than two cents per pound. Instantly you'll have a tomato shortage. It's the same with oil or gas." 
Hyperinflation increases stock market prices, wipes out the purchasing power of private and public savings, distorts the economy in favor of the hoarding of real assets, causes the monetary base (whether specie or hard currency) to flee the country, and makes the afflicted area anathema to investment.
One of the most important characteristics of hyperinflation is the accelerating substitution of the inflating money by stable money—gold and silver in former times, then relatively stable foreign currencies after the breakdown of the gold or silver standards (Thiers' Law). If inflation is high enough, government regulations like heavy penalties and fines, often combined with exchange controls, cannot prevent this currency substitution. As a consequence, the inflating currency is usually heavily undervalued compared to stable foreign money in terms of purchasing power parity. So foreigners can live cheaply and buy at low prices in the countries hit by high inflation. It follows that governments that do not succeed in engineering a successful currency reform in time must finally legalize the stable foreign currencies (or, formerly, gold and silver) that threaten to fully substitute the inflating money. Otherwise, their tax revenues, including the inflation tax, will approach zero.  The last episode of hyperinflation in which this process could be observed was in Zimbabwe in the first decade of the 21st century. In this case, the local money was mainly driven out by the US dollar and the South African rand.
Enactment of price controls to prevent discounting the value of paper money relative to gold, silver, hard currency, or other commodities fail to force acceptance of a paper money that lacks intrinsic value. If the entity responsible for printing a currency promotes excessive money printing, with other factors contributing a reinforcing effect, hyperinflation usually continues. Hyperinflation is generally associated with paper money, which can easily be used to increase the money supply: add more zeros to the plates and print, or even stamp old notes with new numbers.  Historically, there have been numerous episodes of hyperinflation in various countries followed by a return to "hard money". Older economies would revert to hard currency and barter when the circulating medium became excessively devalued, generally following a "run" on the store of value.
Much attention on hyperinflation centers on the effect on savers whose investments become worthless. Interest rate changes often cannot keep up with hyperinflation or even high inflation, certainly with contractually fixed interest rates. For example, in the 1970s in the United Kingdom inflation reached 25% per annum, yet interest rates did not rise above 15%—and then only briefly—and many fixed interest rate loans existed. Contractually, there is often no bar to a debtor clearing his long term debt with "hyperinflated cash", nor could a lender simply somehow suspend the loan. Contractual "early redemption penalties" were (and still are) often based on a penalty of n months of interest/payment again no real bar to paying off what had been a large loan. In interwar Germany, for example, much private and corporate debt was effectively wiped out—certainly for those holding fixed interest rate loans.
Ludwig von Mises used the term "crack-up boom" (German: Katastrophenhausse) to describe the economic consequences of an unmitigated increasing in the base-money supply.  As more and more money is provided, interest rates decline towards zero. Realizing that fiat money is losing value, investors will try to place money in assets such as real estate, stocks, even art as these appear to represent "real" value. Asset prices are thus becoming inflated. This potentially spiraling process will ultimately lead to the collapse of the monetary system. The Cantillon effect  says that those institutions that receive the new money first are the beneficiaries of the policy.
Hyperinflation is ended by drastic remedies, such as imposing the shock therapy of slashing government expenditures or altering the currency basis. One form this may take is dollarization, the use of a foreign currency (not necessarily the U.S. dollar) as a national unit of currency. An example was dollarization in Ecuador, initiated in September 2000 in response to a 75% loss of value of the Ecuadorian sucre in early 2000. But usually the "dollarization" takes place in spite of all efforts of the government to prevent it by exchange controls, heavy fines and penalties. The government has thus to try to engineer a successful currency reform stabilizing the value of the money. If it does not succeed with this reform the substitution of the inflating by stable money goes on. Thus it is not surprising that there have been at least seven historical cases in which the good (foreign) money did fully drive out the use of the inflating currency. In the end, the government had to legalize the former, for otherwise its revenues would have fallen to zero. 
Hyperinflation has always been a traumatic experience for the people who suffer it, and the next political regime almost always enacts policies to try to prevent its recurrence. Often this means making the central bank very aggressive about maintaining price stability, as was the case with the German Bundesbank, or moving to some hard basis of currency, such as a currency board. Many governments have enacted extremely stiff wage and price controls in the wake of hyperinflation, but this does not prevent further inflation of the money supply by the central bank, and always leads to widespread shortages of consumer goods if the controls are rigidly enforced.
In countries experiencing hyperinflation, the central bank often prints money in larger and larger denominations as the smaller denomination notes become worthless. This can result in the production of unusually large denominations of banknotes, including those denominated in amounts of 1,000,000,000 or more.
- By late 1923, the Weimar Republic of Germany was issuing two-trillion mark banknotes and postage stamps with a face value of fifty billion marks. The highest value banknote issued by the Weimar government's Reichsbank had a face value of 100 trillion marks (10 14 100,000,000,000,000 100 million million).  At the height of the inflation, one US dollar was worth 4 trillion German marks. One of the firms printing these notes submitted an invoice for the work to the Reichsbank for 32,776,899,763,734,490,417.05 (3.28 × 10 19 , roughly 33 quintillion) marks. 
- The largest denomination banknote ever officially issued for circulation was in 1946 by the Hungarian National Bank for the amount of 100 quintillion pengő (10 20 100,000,000,000,000,000,000 100 million million million) image. (A banknote worth 10 times as much, 10 21 (1 sextillion) pengő, was printed but not issued image.) The banknotes did not show the numbers in full: "hundred million b.-pengő" ("hundred million trillion pengő") and "one milliard b.-pengő" were spelled out instead. This makes the 100,000,000,000,000 Zimbabwean dollar banknotes the note with the greatest number of zeros shown.
- The Post-World War II hyperinflation of Hungary held the record for the most extreme monthly inflation rate ever – 41.9 quadrillion percent (4.19 × 10 16 % 41,900,000,000,000,000%) for July 1946, amounting to prices doubling every 15.3 hours. By comparison, on 14 November 2008, Zimbabwe's annual inflation rate was estimated to be 89.7 sextillion (10 21 ) percent.  The highest monthly inflation rate of that period was 79.6 billion percent (7.96 × 10 10 % 79,600,000,000%), and a doubling time of 24.7 hours.
One way to avoid the use of large numbers is by declaring a new unit of currency. (As an example, instead of 10,000,000,000 dollars, a central bank might set 1 new dollar = 1,000,000,000 old dollars, so the new note would read "10 new dollars".) One example of this is Turkey's revaluation of the Lira on 1 January 2005, when the old Turkish lira (TRL) was converted to the New Turkish lira (TRY) at a rate of 1,000,000 old to 1 new Turkish Lira. While this does not lessen the actual value of a currency, it is called redenomination or revaluation and also occasionally happens in countries with lower inflation rates. During hyperinflation, currency inflation happens so quickly that bills reach large numbers before revaluation.
Some banknotes were stamped to indicate changes of denomination, as it would have taken too long to print new notes. By the time new notes were printed, they would be obsolete (that is, they would be of too low a denomination to be useful).
Metallic coins were rapid casualties of hyperinflation, as the scrap value of metal enormously exceeded its face value. Massive amounts of coinage were melted down, usually illicitly, and exported for hard currency.
Governments will often try to disguise the true rate of inflation through a variety of techniques. None of these actions addresses the root causes of inflation and if discovered, they tend to further undermine trust in the currency, causing further increases in inflation. Price controls will generally result in shortages and hoarding and extremely high demand for the controlled goods, causing disruptions of supply chains. Products available to consumers may diminish or disappear as businesses no longer find it economic to continue producing and/or distributing such goods at the legal prices, further exacerbating the shortages.
There are also issues with computerized money-handling systems. In Zimbabwe, during the hyperinflation of the Zimbabwe dollar, many automated teller machines and payment card machines struggled with arithmetic overflow errors as customers required many billions and trillions of dollars at one time. 
In 1922, inflation in Austria reached 1,426%, and from 1914 to January 1923, the consumer price index rose by a factor of 11,836, with the highest banknote in denominations of 500,000 Austrian krones.  [a] After World War I, essentially all State enterprises ran at a loss, and the number of state employees in the capital, Vienna, was greater than in the earlier monarchy, even though the new republic was nearly one-eighth of the size. 
Observing the Austrian response to developing hyperinflation, which included the hoarding of food and the speculation in foreign currencies, Owen S. Phillpotts, the Commercial Secretary at the British Legation in Vienna wrote: "The Austrians are like men on a ship who cannot manage it, and are continually signalling for help. While waiting, however, most of them begin to cut rafts, each for himself, out of the sides and decks. The ship has not yet sunk despite the leaks so caused, and those who have acquired stores of wood in this way may use them to cook their food, while the more seamanlike look on cold and hungry. The population lack courage and energy as well as patriotism." 
- Start and end date: October 1921 – September 1922
- Peak month and rate of inflation: August 1922, 129% 
Increasing hyperinflation in Bolivia has plagued, and at times crippled, its economy and currency since the 1970s. At one time in 1985, the country experienced an annual inflation rate of more than 20,000%. Fiscal and monetary reform reduced the inflation rate to single digits by the 1990s, and in 2004 Bolivia experienced a manageable 4.9% rate of inflation. 
In 1987, the Bolivian peso was replaced by a new boliviano at a rate of one million to one (when 1 US dollar was worth 1.8–1.9 million pesos). At that time, 1 new boliviano was roughly equivalent to 1 U.S. dollar.
Brazilian hyperinflation lasted from 1985 (the year when the military dictatorship ended) to 1994, with prices rising by 184,901,570,954.39% (or 1.849 × 10 11 percent) in that time  due to the uncontrolled printing of money.  There were many economic plans that tried to contain hyperinflation including zeroes cuts, price freezes and even confiscation of bank accounts.  
The highest value was in March 1990, when the government inflation index reached 82.39%.   Hyperinflation ended in July 1994 with the Real Plan during the government of Itamar Franco.  During the period of inflation Brazil adopted a total of six different currencies, as the government constantly changed due to rapid devaluation and increase in the number of zeros.  
- Start and End Date: Jan. 1985 – Mid-Jul. 1994
- Peak Month and Rate of Inflation: Mar. 1990, 82.39% 
From 1948 to 1949, near the end of the Chinese Civil War, the Republic of China went through a period of hyperinflation. In 1947, the highest denomination bill was 50,000 yuan. By mid-1948, the highest denomination was 180,000,000 yuan. The 1948 currency reform replaced the yuan by the gold yuan at an exchange rate of 1 gold yuan = 3,000,000 yuan. In less than a year, the highest denomination was 10,000,000 gold yuan. In the final days of the civil war, the silver yuan was briefly introduced at the rate of 500,000,000 gold yuan. Meanwhile, the highest denomination issued by a regional bank was 6,000,000,000 yuan (issued by Xinjiang Provincial Bank in 1949). After renminbi was instituted by the new communist government, hyperinflation ceased, with a revaluation of 1:10,000 old yuan in 1955.
- First episode:
- Start and end date: July 1943 – August 1945
- Peak month and rate of inflation: June 1945, 302%
- Second episode:
- Start and end date: October 1947 – mid May 1949
- Peak month and rate of inflation: April 5,070% 
During the French Revolution and first Republic, the National Assembly issued bonds, some backed by seized church property, called assignats.  Napoleon replaced them with the franc in 1803, at which time the assignats were basically worthless. Stephen D. Dillaye pointed out that one of the reasons for the failure was massive counterfeiting of the paper currency, largely through London. According to Dillaye: "Seventeen manufacturing establishments were in full operation in London, with a force of four hundred men devoted to the production of false and forged Assignats." 
- Start and end date: May 1795 – November 1796
- Peak month and rate of inflation: mid August 1796, 304% 
Germany (Weimar Republic) Edit
By November 1922, the value in gold of money in circulation had fallen from £300 million before World War I to £20 million. The Reichsbank responded by the unlimited printing of notes, thereby accelerating the devaluation of the mark. In his report to London, Lord D'Abernon wrote: "In the whole course of history, no dog has ever run after its own tail with the speed of the Reichsbank."   Germany went through its worst inflation in 1923. In 1922, the highest denomination was 50,000 marks. By 1923, the highest denomination was 100,000,000,000,000 (10 14 ) Marks. In December 1923 the exchange rate was 4,200,000,000,000 (4.2 × 10 12 ) Marks to 1 US dollar.  In 1923, the rate of inflation hit 3.25 × 10 6 percent per month (prices double every two days). Beginning on 20 November 1923, 1,000,000,000,000 old Marks were exchanged for 1 Rentenmark, so that 4.2 Rentenmarks were worth 1 US dollar, exactly the same rate the Mark had in 1914. 
- First phase:
- Start and end date: January 1920 – January 1920
- Peak month and rate of inflation: January 1920, 56.9%
- Second phase:
- Start and end date: August 1922 – December 1923
- Peak month and rate of inflation: November 1923, 29,525% 
Greece (German–Italian occupation) Edit
With the German invasion in April 1941, there was an abrupt increase in prices. This was due to psychological factors related to the fear of shortages and to the hoarding of goods. During the German and Italian Axis occupation of Greece (1941–1944), the agricultural, mineral, industrial etc. production of Greece were used to sustain the occupation forces, but also to secure provisions for the Afrika Korps. One part of these "sales" of provisions was settled with bilateral clearing through the German DEGRIGES and the Italian Sagic companies at very low prices. As the value of Greek exports in drachmas fell, the demand for drachmas followed suit and so did its forex rate. While shortages started due to naval blockades and hoarding, the prices of commodities soared. The other part of the "purchases" was settled with drachmas secured from the Bank of Greece and printed for this purpose by private printing presses. As prices soared, the Germans and Italians started requesting more and more drachmas from the Bank of Greece to offset price increases each time prices increased, the note circulation followed suit soon afterwards. For the year starting November 1943, the inflation rate was 2.5 × 10 10 %, the circulation was 6.28 × 10 18 drachmae and one gold sovereign cost 43,167 billion drachmas. The hyperinflation started subsiding immediately after the departure of the German occupation forces, but inflation rates took several years before they fell below 50%. 
- Start and end date: June 1941 – January 1946
- Peak month and rate of inflation: December 1944, 3.0 × 10 10 %
The Treaty of Trianon and political instability between 1919 and 1924 led to a major inflation of Hungary's currency. In 1921, in an attempt to stop this inflation, the national assembly of Hungary passed the Hegedüs reforms, including a 20% levy on bank deposits, but this precipitated a mistrust of banks by the public, especially the peasants, and resulted in a reduction in savings, and thus an increase in the amount of currency in circulation.  Due to the reduced tax base, the government resorted to printing money, and in 1923 inflation in Hungary reached 98% per month.
Between the end of 1945 and July 1946, Hungary went through the highest inflation ever recorded. In 1944, the highest banknote value was 1,000 pengő. By the end of 1945, it was 10,000,000 pengő, and the highest value in mid-1946 was 100,000,000,000,000,000,000 (10 20 ) pengő. A special currency, the adópengő (or tax pengő) was created for tax and postal payments.  The inflation was such that the value of the adópengő was adjusted each day by radio announcement. On 1 January 1946, one adópengő equaled one pengő, but by late July, one adópengő equaled 2,000,000,000,000,000,000,000 or 2×10 21 (2 sextillion) pengő.
When the pengő was replaced in August 1946 by the forint, the total value of all Hungarian banknotes in circulation amounted to 1 ⁄ 1,000 of one US cent.  Inflation had peaked at 1.3 × 10 16 % per month (i.e. prices doubled every 15.6 hours).  On 18 August 1946, 400,000,000,000,000,000,000,000,000,000 or 4 × 10 29 pengő (four hundred quadrilliard on the long scale used in Hungary, or four hundred octillion on short scale) became 1 forint.
- Start and end date: August 1945 – July 1946
- Peak month and rate of inflation: July 1946, 41.9 × 10 15 % 
Malaya (Japanese occupation) Edit
Malaya and Singapore were under Japanese occupation from 1942 until 1945. The Japanese issued "banana notes" as the official currency to replace the Straits currency issued by the British. During that time, the cost of basic necessities increased drastically. As the occupation proceeded, the Japanese authorities printed more money to fund their wartime activities, which resulted in hyperinflation and a severe depreciation in value of the banana note.
From February to December 1942, $100 of Straits currency was worth $100 in Japanese scrip, after which the value of Japanese scrip began to erode, reaching $385 on December 1943 and $1,850 one year later. By 1 August 1945, this had inflated to $10,500, and 11 days later it had reached $95,000. After 13 August 1945, Japanese scrip had become valueless. 
North Korea Edit
North Korea has most likely experienced hyperinflation from December 2009 to mid-January 2011. Based on the price of rice, North Korea's hyperinflation peaked in mid-January 2010, but according to black market exchange-rate data, and calculations based on purchasing power parity, North Korea experienced its peak month of inflation in early March 2010. These data points are unofficial, however, and therefore must be treated with a degree of caution. 
In modern history, Peru underwent a period of hyperinflation period in the 1980s to the early 1990s starting with President Fernando Belaúnde's second administration, heightened during Alan García's first administration, to the beginning of Alberto Fujimori's term. Over 3,210,000,000 old soles would be worth one USD. Garcia's term introduced the inti, which worsened inflation into hyperinflation. Peru's currency and economy were stabilized under Fujimori's Nuevo Sol program, which has remained Peru's currency since 1991. 
Poland has gone through two episodes of hyperinflation since the country regained independence following the end of World War I, the first in 1923, the second in 1989–1990. Both events resulted in the introduction of new currencies. In 1924, the złoty replaced the original currency of post-war Poland, the mark. This currency was subsequently replaced by another of the same name in 1950, which was assigned the ISO code of PLZ. As a result of the second hyperinflation crisis, the current new złoty was introduced in 1990 (ISO code: PLN). See the article on Polish złoty for more information about the currency's history.
The newly independent Poland had been struggling with a large budget deficit since its inception in 1918 but it was in 1923 when inflation reached its peak. The exchange rate to the American dollar went from 9 Polish marks per dollar in 1918 to 6,375,000 marks per dollar at the end of 1923. A new personal 'inflation tax' was introduced. The resolution of the crisis is attributed to Władysław Grabski, who became prime minister of Poland in December 1923. Having nominated an all-new government and being granted extraordinary lawmaking powers by the Sejm for a period of six months, he introduced a new currency, established a new national bank and scrapped the inflation tax, which took place throughout 1924. 
The economic crisis in Poland in the 1980s was accompanied by rising inflation when new money was printed to cover a budget deficit. Although inflation was not as acute as in 1920s, it is estimated that its annual rate reached around 600% in a period of over a year spanning parts of 1989 and 1990. The economy was stabilised by the adoption of the Balcerowicz Plan in 1989, named after the main author of the reforms, minister of finance Leszek Balcerowicz. The plan was largely inspired by the previous Grabski's reforms. 
The Japanese government occupying the Philippines during World War II issued fiat currencies for general circulation. The Japanese-sponsored Second Philippine Republic government led by Jose P. Laurel at the same time outlawed possession of other currencies, most especially "guerrilla money". The fiat money's lack of value earned it the derisive nickname "Mickey Mouse money". Survivors of the war often tell tales of bringing suitcases or bayong (native bags made of woven coconut or buri leaf strips) overflowing with Japanese-issued bills. Early on, 75 Mickey Mouse pesos could buy one duck egg.  In 1944, a box of matches cost more than 100 Mickey Mouse pesos. 
In 1942, the highest denomination available was 10 pesos. Before the end of the war, because of inflation, the Japanese government was forced to issue 100-, 500-, and 1000-peso notes.
- Start and end date: January 1944 – December 1944
- Peak month and rate of inflation: January 1944, 60% 
Soviet Union Edit
A seven-year period of uncontrollable spiralling inflation occurred in the early Soviet Union, running from the earliest days of the Bolshevik Revolution in November 1917 to the reestablishment of the gold standard with the introduction of the chervonets as part of the New Economic Policy. The inflationary crisis effectively ended in March 1924 with the introduction of the so-called "gold ruble" as the country's standard currency.
The early Soviet hyperinflationary period was marked by three successive redenominations of its currency, in which "new rubles" replaced old at the rates of 10,000:1 (1 January 1922), 100:1 (1 January 1923), and 50,000:1 (7 March 1924), respectively.
Between 1921 and 1922, inflation in the Soviet Union reached 213%.
Venezuela's hyperinflation began in November 2016.  Inflation of Venezuela's bolivar fuerte (VEF) in 2014 reached 69%  and was the highest in the world.   In 2015, inflation was 181%, the highest in the world and the highest in the country's history at that time,   800% in 2016,  over 4,000% in 2017,     and 1,698,488% in 2018,  with Venezuela spiraling into hyperinflation.  While the Venezuelan government "has essentially stopped" producing official inflation estimates as of early 2018, one estimate of the rate at that time was 5,220%, according to inflation economist Steve Hanke of Johns Hopkins University. 
Inflation has affected Venezuelans so much that in 2017, some people became video game gold farmers and could be seen playing games such as RuneScape to sell in-game currency or characters for real currency. In many cases, these gamers made more money than salaried workers in Venezuela even though they were earning just a few dollars per day.  During the Christmas season of 2017, some shops would no longer use price tags since prices would inflate so quickly, so customers were required to ask staff at stores how much each item was. 
The International Monetary Fund estimated in 2018 that Venezuela's inflation rate would reach 1,000,000% by the end of the year.  This forecast was criticized by Steve H. Hanke, professor of applied economics at The Johns Hopkins University and senior fellow at the Cato Institute. According to Hanke, the IMF had released a "bogus forecast" because "no one has ever been able to accurately forecast the course or the duration of an episode of hyperinflation. But that has not stopped the IMF from offering inflation forecasts for Venezuela that have proven to be wildly inaccurate". 
In July 2018, hyperinflation in Venezuela was sitting at 33,151%, "the 23rd most severe episode of hyperinflation in history". 
In April 2019, the International Monetary Fund estimated that inflation would reach 10,000,000% by the end of 2019. 
In May 2019, the Central Bank of Venezuela released economic data for the first time since 2015. According to this release, the inflation of Venezuela was 274% in 2016, 863% in 2017 and 130,060% in 2018.  The annualised inflation rate as of April 2019 was estimated to be 282,972.8% as of April 2019, and cumulative inflation from 2016 to April 2019 was estimated at 53,798,500%. 
The new reports imply a contraction of more than half of the economy in five years, according to the Financial Times "one of the biggest contractions in Latin American history".  According to undisclosed sources from Reuters, the release of these numbers was due to pressure from China, a Maduro ally. One of these sources claims that the disclosure of economic numbers may bring Venezuela into compliance with the IMF, making it harder to support Juan Guaidó during the presidential crisis.  At the time, the IMF was not able to support the validity of the data as they had not been able to contact the authorities. 
- Start and end date: November 2016 – present
- Peak month and rate of inflation: April 2018, 234% (Hanke estimate)  September 2018, 233% (National Assembly estimate) 
Yugoslavia went through a period of hyperinflation and subsequent currency reforms from 1989 to 1994 (SFR Yugoslavia until April 1992, later FR Yugoslavia) . One of several regional conflicts accompanying the dissolution of Yugoslavia was the Bosnian War (1992–1995). The Belgrade government of Slobodan Milošević backed ethnic Serbian forces in the conflict, resulting in a United Nations boycott of Yugoslavia. The UN boycott collapsed an economy already weakened by regional war, with the projected monthly inflation rate accelerating to one million percent by December 1993 (prices double every 2.3 days). 
The highest denomination in 1988 was 50,000 dinars. By 1989, it was 2,000,000 dinars. In the 1990 currency reform, 1 new dinar was exchanged for 10,000 old dinars. In the 1992 currency reform, 1 new dinar was exchanged for 10 old dinars. The highest denomination in 1992 was 50,000 dinars. By 1993, it was 10,000,000,000 dinars. In the 1993 currency reform, 1 new dinar was exchanged for 1,000,000 old dinars. Before the year was over, however, the highest denomination was 500,000,000,000 dinars. In the 1994 currency reform, 1 new dinar was exchanged for 1,000,000,000 old dinars. In another currency reform a month later, 1 novi dinar was exchanged for 13 million dinars (1 novi dinar = 1 German mark at the time of exchange). The overall impact of hyperinflation was that 1 novi dinar was equal to 1 × 10 27 – 1.3 × 10 27 pre-1990 dinars. Yugoslavia's rate of inflation hit 5 × 10 15 % cumulative inflation over the time period 1 October 1993 and 24 January 1994.
- First episode:
- Start and End Date: Sept. 1989 – Dec. 1989
- Peak month and rate of inflation: December 1989, 59.7%
- Second episode:
- Start and end date: April 1992 – January 1994
- Peak month and rate of inflation: January 1994, 3.13 × 10 9 % 
Hyperinflation in Zimbabwe was one of the few instances that resulted in the abandonment of the local currency. At independence in 1980, the Zimbabwe dollar (ZWD) was worth about US$1.25. Afterwards, however, rampant inflation and the collapse of the economy severely devalued the currency. Inflation was relatively steady until the early 1990s when economic disruption caused by failed land reform agreements and rampant government corruption resulted in reductions in food production and the decline of foreign investment. Several multinational companies began hoarding retail goods in warehouses in Zimbabwe and just south of the border, preventing commodities from becoming available on the market.     The result was that to pay its expenditures Mugabe's government and Gideon Gono's Reserve Bank printed more and more notes with higher face values.
Hyperinflation began early in the 21st century, reaching 624% in 2004. It fell back to low triple digits before surging to a new high of 1,730% in 2006. The Reserve Bank of Zimbabwe revalued on 1 August 2006 at a ratio of 1,000 ZWD to each second dollar (ZWN), but year-to-year inflation rose by June 2007 to 11,000% (versus an earlier estimate of 9,000%). Larger denominations were progressively issued in 2008:
- 5 May: banknotes or "bearer cheques" for the value of ZWN 100 million and ZWN 250 million. 
- 15 May: new bearer cheques with a value of ZWN 500 million (then equivalent to about US$2.50). 
- 20 May: a new series of notes ("agro cheques") in denominations of $5 billion, $25 billion and $50 billion.
- 21 July: "agro cheque" for $100 billion. 
Inflation by 16 July officially surged to 2,200,000%  with some analysts estimating figures surpassing 9,000,000%.  As of 22 July 2008 the value of the ZWN fell to approximately 688 billion per US$1, or 688 trillion pre-August 2006 Zimbabwean dollars.  [ failed verification ]
|Date of |
|1 August 2006||ZWN||1 000 ZWD|
|1 August 2008||ZWR||10 10 ZWN|
= 10 13 ZWD
|2 February 2009||ZWL||10 12 ZWR|
= 10 22 ZWN
= 10 25 ZWD
On 1 August 2008, the Zimbabwe dollar was redenominated at the ratio of 10 10 ZWN to each third dollar (ZWR).  On 19 August 2008, official figures announced for June estimated the inflation over 11,250,000%.  Zimbabwe's annual inflation was 231,000,000% in July  (prices doubling every 17.3 days). By October 2008 Zimbabwe was mired in hyperinflation with wages falling far behind inflation. In this dysfunctional economy hospitals and schools had chronic staffing problems, because many nurses and teachers could not afford bus fare to work. Most of the capital of Harare was without water because the authorities had stopped paying the bills to buy and transport the treatment chemicals. Desperate for foreign currency to keep the government functioning, Zimbabwe's central bank governor, Gideon Gono, sent runners into the streets with suitcases of Zimbabwean dollars to buy up American dollars and South African rand. 
For periods after July 2008, no official inflation statistics were released. Prof. Steve H. Hanke overcame the problem by estimating inflation rates after July 2008 and publishing the Hanke Hyperinflation Index for Zimbabwe.  Prof. Hanke's HHIZ measure indicated that the inflation peaked at an annual rate of 89.7 sextillion percent (89,700,000,000,000,000,000,000%, or 8.97 × 10 22 %) in mid-November 2008. The peak monthly rate was 79.6 billion percent, which is equivalent to a 98% daily rate, or around 7 × 10 ^ 108 % yearly rate. At that rate, prices were doubling every 24.7 hours. Note that many of these figures should be considered mostly theoretical since hyperinflation did not proceed at this rate over a whole year. 
At its November 2008 peak, Zimbabwe's rate of inflation approached, but failed to surpass, Hungary's July 1946 world record.  On 2 February 2009, the dollar was redenominated for the third time at the ratio of 10 12 ZWR to 1 ZWL, only three weeks after the $100 trillion banknote was issued on 16 January,   but hyperinflation waned by then as official inflation rates in USD were announced and foreign transactions were legalised,  and on 12 April the Zimbabwe dollar was abandoned in favour of using only foreign currencies. The overall impact of hyperinflation was US$1 = 10 25 ZWD.
- Start and end date: March 2007 – mid November 2008
- Peak month and rate of inflation: mid November 2008, 7.96 × 10 10 % 
Ironically, following the abandonment of the ZWR and subsequent use of reserve currencies, banknotes from the hyperinflation period of the old Zimbabwe dollar began attracting international attention as collectors items, having accrued numismatic value, selling for prices many orders of magnitude higher than their old purchasing power.  
Countries have experienced periods of very high inflation, that did not reach hyperinflation, as defined as a monthly inflation rate exceeding 50% per month.
Ancient China Edit
As the first user of fiat currency, China was also the first country to experience high inflation. Paper currency was introduced during the Tang Dynasty, and was generally welcomed. It maintained its value, as successive Chinese governments put in place strict controls on issuance. The convenience of paper currency for trade purposes led to strong demand for paper currency. It was only when discipline on quantity supplied broke down that inflation emerged.  The Yuan Dynasty (1271–1368) was the first to print large amounts of fiat paper money to fund its wars, resulting in very high inflation.
Ancient Rome Edit
During the Crisis of the Third Century, Rome underwent high inflation caused by years of coinage devaluation. 
Holy Roman Empire Edit
Between 1620 and 1622 the Kreuzer fell from 1 Reichsthaler to 124 Kreuzer in end of 1619 to 1 Reichstaler to over 600 (regionally over 1000) Kreuzer in end of 1622, during the Thirty Years' War. This is a monthly inflation rate of over 20.6% (regionally over 34.4%).
Between 1987 and 1995 the Iraqi Dinar went from an official value of 0.306 Dinars/USD (or US$3.26 per dinar, though the black market rate is thought to have been substantially lower) to 3,000 dinars/USD due to government printing of tens of trillions of dinars starting with a base of only tens of billions. That equates to approximately 315% inflation per year averaged over that eight-year period. 
In spite of increased oil prices in the late 1970s (Mexico is a producer and exporter), Mexico defaulted on its external debt in 1982. As a result, the country suffered a severe case of capital flight and several years of acute inflation and peso devaluation, leading to an accumulated inflation rate of almost 27,000% between December 1975 and late 1988. On 1 January 1993, Mexico created a new currency, the nuevo peso ("new peso", or MXN), which chopped three zeros off the old peso (One new peso was equal to 1,000 old MXP pesos).
Between 1998 and 1999, Ecuador faced a period of economic instability that resulted from a combined banking crisis, currency crisis, and sovereign debt crisis.  Severe inflation and devaluation of the Ecuadorean Sucre lead to President Jamil Mahuad announcing on 9 January 2000 that the US dollar would be adopted as the national currency.
Despite the government's efforts to curb inflation, the Sucre depreciated rapidly at the end of 1999, resulting in widespread informal use of U.S. dollars in the financial system. As a last resort to prevent hyperinflation, the government formally adopted the U.S. dollar in January 2000. The stability of the new currency was a necessary first step towards economic recovery, but the exchange rate was fixed at 25,000:1, which resulted in great losses of wealth. 
Roman Egypt Edit
In Roman Egypt, where the best documentation on pricing has survived, the price of a measure of wheat was 200 drachmae in 276 AD, and increased to more than 2,000,000 drachmae in 334 AD, roughly 1,000,000% inflation in a span of 58 years. 
Although the price increased by a factor of 10,000 over 58 years, the annual rate of inflation was only 17.2% (1.4% monthly) compounded.
Romania experienced high inflation in the 1990s. The highest denomination in 1990 was 100 lei and in 1998 was 100,000 lei. By 2000 it was 500,000 lei. In early 2005 it was 1,000,000 lei. In July 2005 the lei was replaced by the new leu at 10,000 old lei = 1 new leu. Inflation in 2005 was 9%.  In July 2005 the highest denomination became 500 lei (= 5,000,000 old lei).
The Second Transnistrian ruble consisted solely of banknotes and suffered from high inflation, necessitating the issue of notes overstamped with higher denominations. 1 and sometimes 10 rubles become 10,000 rubles, 5 rubles become 50,000 and 10 rubles become 100,000 rubles. In 2000, a new ruble was introduced at a rate of 1 new ruble = 1,000,000 old rubles.
Since the end of 2017 Turkey has high inflation rates. It is speculated that the new elections took place frustrated because of the impending crisis to forestall.    In October 2017, inflation was at 11.9%, the highest rate since July 2008.  The Turkish lira fall from 1.503 TRY = 1 US dollar in 2010 to 5.5695 TRY = 1 US dollar in August 2018. 
United States Edit
During the Revolutionary War, when the Continental Congress authorized the printing of paper called continental currency, the monthly inflation rate reached a peak of 47% in November 1779 (Bernholz 2003: 48). These notes depreciated rapidly, giving rise to the expression "not worth a continental". One cause of the inflation was counterfeiting by the British, who ran a press on HMS Phoenix, moored in New York Harbor. The counterfeits were advertised and sold almost for the price of the paper they were printed on. 
During the U.S. Civil War between January 1861 and April 1865, the Confederate States decided to finance the war by printing money. The Lerner Commodity Price Index of leading cities in the eastern Confederacy states subsequently increased from 100 to 9,200 in that time.  In the final months of the Civil War, the Confederate dollar was almost worthless. Similarly, the Union government inflated its greenbacks, with the monthly rate peaking at 40% in March 1864 (Bernholz 2003: 107). 
Vietnam went through a period of chaos and high inflation in the late 1980s, with inflation peaking at 774% in 1988, after the country's "price-wage-currency" reform package, led by then-Deputy Prime Minister Trần Phương, had failed.  High inflation also occurred in the early stages of the socialist-oriented market economic reforms commonly referred to as the Đổi Mới.
Inflation rate is usually measured in percent per year. It can also be measured in percent per month or in price doubling time.
Often, at redenominations, three zeroes are cut from the bills. It can be read from the table that if the (annual) inflation is for example 100%, it takes 3.32 years to produce one more zero on the price tags, or 3 × 3.32 = 9.96 years to produce three zeroes. Thus can one expect a redenomination to take place about 9.96 years after the currency was introduced.
Adjusting for inflation
Most agents overstate the upward movement in house prices. That's because their house price figures are nominal, i.e., not adjusted for inflation. If house prices have risen by 5% during the past year, but inflation has been 5%, the real increase in the value of the house has been zero.
That's why our graphs show house price changes both nominal and real.
Nominal house price changes = the figures published by most official statistical sources.
Real house price changes = house price changes after adjusting for inflation.
What Were the Causes of Germany's Hyperinflation of 1921-1923?
Among the defining features of early twentieth-century Europe and one of the contributing factors to World War II, was the economic maelstrom known as “hyperinflation” that ravaged Germany from 1921 until 1923. Although the short period is often overlooked in popular histories of the period, there is no denying the impacts that the process had on Germany, Europe, and the world. Because of the hyperinflation of the 1920s, the effects of the later worldwide Great Depression were accentuated in Germany, which ultimately undermined the legitimacy – at least in the eyes of the German people – of the Weimar government.
As the Weimar government attempted to fix the economy that was seemingly spiraling out of control, the German people turned to organizations on the far right and left wings of the political spectrum for answers. Despite eventually being able to end the crippling process of hyperinflation by 1923, the damage had already been done to Weimar government, which was living on borrowed time at that point.
In the nearly full century since Germany’s bout with hyperinflation, historians and economists have examined Weimar government records, private business reports, and anecdotal sources such as letters, in order to determine the extent of the process and ultimately how it began. Scholars have learned that Germany’s hyperinflation was actually quite a complicated process and there have been a number of factors identified as contributing to its origin. Essentially, all of the ingredients that went into creating Germany’s hyperinflation can be grouped into three categories: the excessive printing of paper money the inability of the Weimar government to repay debts and reparations incurred from World War I and political problems, both domestic and foreign.
Inflation and Hyperinflation
In order for one to understand the causes of Germany’s hyperinflation during the early 1920s, one must first understand how the process is related to and also different from a standard inflationary cycle. Simply stated, inflation is when the prices of goods rises, causing an imbalance in the money supply if it happens too quickly.
During an inflationary cycle, there is too much money in circulation, which causes the currency to devalue and the prices of commodities to increase in proportion. Although the reasons for a typical inflationary cycle are complicated, most economists point toward excessive printing of money or other currency manipulation by the central banks – “Quantitative Easing” during the last recession would be an example of this – as the primary factor.
Basic goods such as food and fuel are affected first, but eventually the process will influence the prices on everything. As troubling as inflation can be to an individual’s pocket book, or even an entire nation’s economy, it is nothing compared to the process of hyperinflation. The process of hyperinflation is when inflation continues to increase unabated until there is a 1000% in prices over the course of a year.  When the German economy transitioned from an inflationary to a hyperinflationary cycle in 1921, it was an extremely difficult burden for the average German to bear.
As the prices of goods soared at what were until then unimaginable levels, Germans increasingly found it difficult to purchase even the most basic items. For example, one loaf of bread coast twenty-nine pfenning when World War I began in 1914, but by the summer of 1923 that same loaf of bread cost 1,200 Reischsmarks and just a few months later, in November, the price had soared to an astronomical 428 billion Reichsmarks!  Because of the steep price increases Germans were forced to improvise in a number of different ways. Many would pay for meals as they ordered because the prices would increase significantly in the time it took to eat while others used the virtually worthless bills to heat their homes. All Germans, no matter their income level, had to devise ways to deal with the new economic reality.
The Causes of Germany’s Hyperinflation
As the average German struggled to survive during the crippling period of hyperinflation during the early 1920s, government leaders and economists searched for its cause in order to rectify the situation. They quickly found that there was not one single cause, but instead the cycle was brought forth by a number of contributing factors that combined to form a perfect storm of economic collapse. As noted above, the first place to look during any inflationary cycle is the amount of currency in circulation. In Germany’s case, one must first understand the historical context of the cycle. Before World War I, Germany was on the “Classical Gold Standard” system, which meant that all of its currency in circulation had to be backed by physical gold. Nations that were part of the Gold Standard – which included nearly every industrialized nation-state and their colonies in the nineteenth and early twentieth centuries – generally saw very little inflation because the requirement to back all currency with gold placed restraint on the printing of money. Once the world entered World War I, though, the Gold Standard was quickly scrapped by countries that needed funds to pay for their war efforts. Germany was one such nation.
To fund its war effort, the Imperial German government incurred a 150 billion mark debt. It also began a policy of excessive currency printing so that by the end of the war there was six times more money in circulation than when the war began.  Once the war was over, the new German government – commonly referred to as the “Weimar” government for the capital it chose – continued the policy of excessive printing in a move to manipulate its currency in order to help the struggling economy. Weimar economists theorized that devaluing their currency would help Germany’s industrial sector rebuild because the prices of its exports would be more attractive to foreign investors. Foreign investors could simply buy more German exports with their own currency, which was worth much more than the Reichsmark.  The economists were correct in that German exports temporarily increased, but they failed to consider the plethora of other factors that were driving the inflationary cycle.
As one of the “losers” in World War I, Germany was forced to pay exorbitant reparations to the “winners,” primarily France and Belgium, for the damage done to those countries. The reparations payments, which were putative more than anything, resulted in an adverse balance of payments in Germany. The Weimar government, as well as German corporations, had difficulties obtaining credit abroad to fund industries that could inject money into the economy needed to make the payments, which combined with a loss of territory under the Treaty of Versailles, meant that Germany needed to import more raw materials to keep its industry going. The result was a further devaluation of the Reichsmark. As with the domestic debts it incurred from the war, the German government saw devaluation of the currency as a viable option, but the reality was that it gave itself little room for economic maneuvering. 
The fiscal corner that the Weimar government found itself in as the result of wartime debts incurred by and reparations forced upon the previous government, was further exacerbated by its own leaders’ inability to grasp the complexity of the situation that was rapidly unfolding. The Weimar government became extremely myopic and was plagued with what seemed to be eternal gridlock in the halls of the Reichstag (the German parliament). The left and right wing parties were nearly equal in the Reichstag in 1921. To many people today, this may seem like the optimal form of “checks and balances,” but in early 1920s Germany it resulted in political stalemate where neither side was willingly to give ground. Among some of the most fundamental issues that neither side could agree upon was the need to raise taxes for social services, such as the payment of military pensions for veterans.
In order to rectify the situation, the government decided to print more money, which in turn devalued the already plummeting Reichsmark. The inability to provide for basic social services with non-inflated currency stemmed from the Weimar government’s inability to grasp the scope of the situation. Officials and economists in the Weimar government viewed Germany’s economic woes through the lens of the nineteenth century instead of seeing it as it really was – an economic process taking place within a complex system that was integrated with the economies of the other industrialized nations. 
The final nail in the German economy’s coffin of the early 1920s was actually two unforeseen events that took place both inside and outside of Germany’s borders. The first event was the assassination of German foreign minister Walther Rathenau in June 1922. The assassination caused political panic in the increasingly unstable Germany and set off a speculation crisis that saw the Reichsmark plunge in value on world currency markets. Rathenau’s assassination was followed by the occupation of the Ruhr Valley by French and Belgian military forces in January 1923. The French and Belgian governments hoped that by occupying the mineral and industrially rich Ruhr Valley they could force the Germans to make reparations payments but the occupation had the opposite effect. The occupation of the Ruhr further crippled industrial output, which in turn devalued the German currency even more. By November 1923, the Reichsmark was worth only one-trillionth of its pre-World War I value. 
The End of the Cycle and Its Results
Although Germany’s bout with hyperinflation was a gradual process and took a while to peak, it ended rather quickly. After numerous failed attempts to alleviate the process, the Weimar government introduced a new currency known as the Rentenmark in 1923. Unlike the Reichsmark, which was not backed by gold or any other tangible asset, the Rentenmark was back by real estate. When the Rentenmark was first introduced in October 1923, one bill was worth an astonishing one trillion Reichsmarks!  Although the Weimar government was able to effectively end the hyperinflation by the end of the year, the damage had already been done to the German economy, political system, and greater society.
Among the many different groups who suffered due to the hyperinflation and never were really able to get back on their feet, were members of the German middle class. Middle class workers and small business owners were especially hit hard when they saw their savings evaporate overnight.  Many middle class retirees found themselves back at work and many others had to rely on the goodwill of friends and family just to make ends meet. All of this resulted in a loss of confidence in the Weimar government, which was further exposed as being weak and ineffective when Germany had a brief economic Depression in 1925-26. Despite the hardships that hyperinflation caused in Germany, there were some who were able to profit from it.
There are always people who prosper during times of economic distress, even during a near collapse. In the case of Germany’s hyperinflation, people who were in debt came out ahead since the amount owed on any debt only increases due to interest rates debtors were able to use inflated currency to quickly pay off their debts. Those with a keen sense of business acumen quickly picked up on this and took out loans to buy items of real value – real estate, gold, and artworks for instance – which they were then able to quickly turn into profit. Stock market speculators and exporters of German goods also came out ahead financially once the smoke of the hyperinflation cleared in 1923. 
Perhaps the biggest beneficiaries of Germany’s hyperinflation, though, were the far rightwing and leftwing political parties and paramilitary organizations. As the Weimar government appeared to be unable to deal with the economic problems of the 1920s, more and more Germans began turning to extreme organizations for answers. Rightwing paramilitary groups such as the Freikorps engaged in armed battles with communist organizations like the Spartacus League on the streets of nearly every major German city during the 1920s, which left hundreds dead by the end of the decade.  Eventually, the National Socialist German Worker’s Party presented itself as a viable alternative to what it described as a weak and degenerate Weimar government.
The period after World War I was an extremely critical juncture in world history where the stage was set for World War II. Among the most important factors that led to World War II, albeit indirectly, was the hyperinflationary cycle Germany experienced from 1921 through 1923. During that period, the Weimar government watched as prices soared over 1000% and sat helplessly as its currency essentially lost all of its value. The factors that contributed to that short but devastating cycle can be attributed to excessive printing of currency, the inability to pay off wartime debts and reparations, and a couple of major political events. Although the Weimar government was eventually able to quell the hyperinflationary cycle, the German people lost confidence in the government and so began looking elsewhere for political answers.
2. Zimbabwe, Nov. 2008
Highest monthly inflation: 79,600,000,000%
Prices doubled every: 24.7 hours
The most recent example of hyperinflation, Zimbabwe's currency woes hit a peak in November 2008, reaching a monthly inflation rate of approximately 79 billion percent, according to the Cato Institute. Although the Zimbabwean government stopped reporting official inflation statistics during the worst months of the country's hyperinflation, the report uses standard economic theory (comparisons of purchasing power parity) to determine Zimbabwe's worst rates of inflation.
With prices almost doubling every 24 hours, just days after issuing a $100 million bill, the Reserve Bank issued a $200 million bill and capped bank withdrawals at $500,000, which at the time was equal to about
1. Hungary 1946
Highest monthly inflation: 13,600,000,000,000,000%
Prices doubled every: 15.6 hours
The worst case of hyperinflation ever recorded occurred in Hungary in the first half of 1946. By the midpoint of the year, Hungary's highest denomination bill was the 100,000,000,000,000,000,000 (One Hundred Quintillion) pengo, compared to 1944s highest denomination, 1,000 pengo. At the height of Hungary's inflation, the CATO study estimates that the daily inflation rate stood at 195 percent, with prices doubling approximately every 15.6 hours, coming out to a monthly inflation rate of 13.6 quadrillion percent.
The situation was so dire that the government adopted a special currency that was created explicitly for tax and postal payments and was adjusted each day via radio. The pengo was eventually replaced later that year in a currency revaluation, but it is estimated that when the currency was replaced in August 1946, the total of all Hungarian banknotes in circulation equaled the value of one one-thousandth of a US Dollar..25 US. When the $100 million bill was introduced, prices soared, and reports from the country described that the price for a loaf of bread rose from $2 million to $35 million overnight. At one point, the government even declared inflation to be "illegal" and arrested the executives of companies for raising prices on their products.
The situation became so dire that shops in the country simply began refusing the currency and the US dollar, as well as the South African rand became the de facto medium of exchange. Inflation finally came to the end with direct intervention by the Reserve Bank of Zimbabwe that re-priced the currency, pegging it to the US dollar. The government also issued regulations that shut down the country's stock exchange.