We’ve talked about the little-discussed early American hyperinflation (and the current threats of dollar collapse). We’ve talked about Argentina’s maddening capital controls and their effect on sky-high inflation rates.
Neither of those countries, however, can hold a candle to some of the worst cases of hyperinflation in modern history. You’ve seen photos of Germans sweeping worthless Deutsche marks into the gutter or using their hyperinflated fiat currency as wallpaper. Now, read about the biggest monetary debacles ever.
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The five worst cases of hyperinflation in history
5. Greece 1944
How does 18% inflation — every… single… day — sound? We’re just getting warmed up, but that’s exactly what happened in WWII-era Greece. Their monetary value halved every few days. Greece’s fiscal budget balance went from a sizable surplus on the eve of the war to a deficit three times that size the very next year. The culprit: a dramatic drop in foreign trade thanks to World War II. When Axis powers invaded Greece later that year, things went form bad to worse.
Axis powers forced Greece to support 400,000 Axis soldiers and offer them financial indemnity. That cost Greece a fortune. Of course, occupations are rarely good for business, and national income in Greece plummeted 70% in the early years of the war. As tax revenues evaporated and Greece couldn’t pay its war bills, the country resorted to using its central bank to print the money it needed. The result was one of the worst cases of hyperinflation in history.
4. Weimar Germany 1923
After losing World War I, Germany was forced to repay huge war debts to the victors. However, Germany was forbidden to use its “Papiermark” currency to pay reparations since the fiat currency’s value had already declined significantly due to heavy borrowing to pay war costs. In order to pay its debts, Weimar Germany was forced to sell huge amounts of the mark for foreign currencies with which they were eligible to make payments. The Germany government started selling marks at any price to get cash in the door, which eventually led to hyperinflation.
Adolf Hitler rose to power, in part, as a result of of this period of crazy hyperinflation. With prices doubling every 3.7 days and inflation at 29,500%, Germans were exhausted by the post-war reparations and were all too eager to hear Hitler’s message.
3. Yugoslavia 1994
When the Soviet Union fell, it hit Yugoslavia hard. The country’s decreased role in geopolitics and its failed communist system of government caused Yugoslavia to break up into several countries along ethnic lines. This trigged the wars that made headlines in the 1990s as new sovereign nations sought independence.
Meanwhile, the former Yugoslav nations refused to trade with each other, causing economic activity to come to a halt. Economic sanctions from the West came next and made matters worse. However, it was the decision of the newly-formed Federal Republic of Yugoslavia to retain communist policies that caused it to overspend, over-borrow and lose control of money creation. Enter hyperinflation. In January 1994 alone, inflation was 313 MILLION percent. Prices doubled every 34 hours as the currency was eventually revalued five times in two years.
2. Zimbabwe 2008
Imagine prices doubling every twenty-four hours. That’s exactly what happened in Zimbabwe’s run-in with hyperinflation in November 2008 when inflation reached unheard of levels of 79 billion percent. Eventually, runaway inflation caused the Zimbabwe government to ditch their currency and use the South African Rand or the US dollar… long after their citizens wished to do the same, of course.
After Robert Mugabe’s “land reforms” (read: private property confiscation), the Zimbabwe economy came to a screeching halt that lasted for years. Just as happened in Rhodesia in the 1970s, attempts to redistribute land from white Zimbabweans for political capital sent the economy into a free fall, prompted capital flight, and sent people running for the hills. Of course, pouring money into neighboring Congo’s civil wars didn’t help, either. During this period of hyperinflation, a loaf of bread cost 35 million Zimbabwe dollars.
1. Hungary 1946
World War II left Hungary economically devastated. Thanks to being in a war-zone, Hungarian reserves were already largely depleted by the time the war was over. Of course, taking on a ton of debt to help Germany fight in the war — a debt that was never repaid — didn’t help.
After the war, Hungary was forced to repay reparations to the Soviets. As the Allies took control of its budget and reparations reached nearly half of all revenues, hyperinflation set in. At its peak, inflation reached a mind-boggling 13.6 quadrillion percent — per month. The largest bank note denomination was 100 QUINTILLION. The world’s worst hyperinflation caused prices to double every fifteen hours.
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