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Hyperinflation – 10 Worst Cases
Originally posted http://www.tothetick.com/hyperinflation-10-worst-cases
I have a neat little app on my smartphone that I like to look at when I’m feeling bored. It won’t change anything in my life, but it makes me think as I see the numbers clocking up, and then suddenly stopping for a few seconds. It’s the app that tells me the how much the National Debt of each country stands at in real-time. As I sit down at my computer screen the USA National Debt amounts to $17 041 241 xxx xxx. Forgive the x’s…they’re not kisses…I tried to get the last six digits, but, there’s no point, they’re moving too fast! Speedie Gonzalez has got into that app! It works out to $54 087 per person. That’s the same value as 3 408 248 816 XXX Big Mac Meals.
Inflation is hot property today, hyperinflation is even hotter! We think we are modern, contemporary, smart and ready to deal with anything. We’ve got that seen-it-all-before, been-there-done-it attitude. But, we are not a patch on what some countries have been through in the worst cases of hyperinflation in history. Here’s the top 10 list of worst cases in history. We’ll start with the worst first…let’s think positive!
1. Hungary 1946
Inflation at its peak reached a staggering figure of 13.6 quadrillion % per month! That’s 13, 600, 000, 000, 000, 000%. The largest denomination bill was a 100 Quintillion note. Prices ended up doubling every 15 hours at the time.
2. Zimbabwe 2008
Prices doubled here every 24.7 hours in November 2008 and inflation reached levels of 79 billion-odd %. They eventually stopped using the official currency and switched to the South African Rand or the $US. A loaf of bread ended up costing $35 million. This is the most recent case. It was Mugabe’s land-redistribution program that caused this.
3. Yugoslavia 1994
In just the one month of January 1994 inflation rose by 313 million %. Prices doubled every 34 hours (which is nothing compared to Hungary). The currency ended up getting revalued 5 times in all between 1993 and 1995, all to no avail. The cause? A recession triggered by overseas borrowing and an on-going political struggle in the 1980s and the following decade.
4. Germany 1923
Adolf Hitler rose to power as a consequence of hyperinflationary pressure (at least one of the reasons). Prices doubled every 3.7 days and inflation stood at 29, 500%. Germany was crippled with the reparation payments after the Treaty of Versailles and the end of World War I.
5. Greece 1944
Prices started rising by 13, 800% in October 1944 and they doubled every 4.3 days. The trouble was the debt incurred by World War II.
6. Poland 1921
Prices rose in 1921 by 251 times in comparison with those of 1914. They doubled every 19.5 days. The Zloty was introduced as the new currency in 1924 in an attempt to start afresh. Inflation stood at 988, 233% in 1924.
7. Mexico 1982
Mexico had a rate of inflation of 10, 000% in 1982 (due mainly to too much social expenditure).
8. Brazil 1994
Inflation was 2, 075.8% at its worst in 1994. The Real was adopted in 1994 and it managed to calm inflation down.
9. Argentina 1981
The highest denomination bill was the one million pesos note. The Peso was revalued three times.
10. Taiwan 1949
This was a knock-on effect from China and the Chinese Civil War. The New Taiwan Dollar was issued in June 1949. The monthly rate of inflation stood at 399%
Inflation can be creeping (mild or moderate inflation) or galloping. We can talk of Hyperinflation and stagflation (inflation and recession). Deflation is not better. We have so many names for it.
Hyperinflation means prices doubling in such a short space of time that we can’t keep up with it all. Hyperinflation comes about at times of trouble, war, conflict, upheaval, change on unprecedented levels. It comes about because we still haven’t learnt how to control it. History repeats itself, we hear people say. Thankfully, it doesn’t repeat itself too often. Fingers crossed.
But, in the time it took for me to write this, the US National Debt is now worth $17 041 308 85xx xxx, that means 3 408 261 915 xxx Big Mac Meals!
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Hyperinflation is caused by input costs rising faster than the ability to absorb it. There is a mad dash into hard assets by those who have enough wealth to buy them causing the price to skyrocket.
Because the coffee shop doesn't grow his own beans, he must buy them from a vendor, who most likely buys them from a traded exchange. If there is a futures market, the price is most likely skyrocketing, causing more speculators to chase the ever rising price, in a vain attept to preserve wealth. Anyone that truly needs the commodity will try to buy as much as they can to lock in lower prices, further compounding the problem.
As it becomes impossible to sell a cup of coffee for $1, it becomes impossible to sell a cup of coffee for $10. Soon the coffe shop sells a cup for $20 knowing that tommorow he will have to sell for $30.
Wages can't keep up, nobody can afford anything, and you get a total collapse.
As it has always been, the cause of the collpase is the stock market. In history the concept of futures trading has destroyed many civilizations. What is supposed to be protection from future price shocks, only ends up causing them. Would oil be trading at $96 if there were no futures market? Would oil have hit $147 if there was no common exchange for speculators to bet on the price?
The answer to the problem of inflation is to kill the parasitic banker class and destroy the source of their power. You end the stock market and futures trading system and you solve just about every problem we have. You would never have another Zuckerberg, Herbalife, Amazon, etc because there would be no possible way to amass a fortune through the selling of stock. You'd actually have to run a successful business to get rich. Sure we'd have a lot less billionaires, but is that really a problem?
What a bunch of nonsense! Your argument is that a free market ("futures") causes inflation! Inflation is caused by expansion of money and credit - END OF STORY.
I vote adr dictator for life.
Hyperinflation by its nature can't last too long. It consumes itself.
I'd like to know what happens after.
"Devalued" is more appropriate than "Revalued"
"5. Greece 1944
Prices started rising by 13, 800% in October 1944 and they doubled every 4.3 days. The trouble was the debt incurred by World War II."
That debt was forced upon them by the nazis. For this and damages done to Greece by the nazis, the Greek now want to claim compensation with Germany.
Never run a-fowl of inflation again - we should barter black swans! :D
CORRECTION re Greece: Greece was occupied by the Germans 1940-1944. The Germans also occupied the printing press for drachmae, and bought all the agri products for the German army to eat with newly printed drachma. This starved to death 80,000 Greeks. My father showed me the pictures. Upon liberation the Greeks (sane, then) dropped 6 zeroes fom the currency.
BTW, more like 300-400 thousand greeks died in the starvation.
They also didnt merely buy up all the food with freshly printed drachmae market-style, the compelled people to sell. Also, the occupation government was forced to 'loan' hard money to the german regime (they used the same template in all the occupied countries) which of course disappeared. the english gold sovereign was real money in greece until the 60s when the government outlawed e.g. contracts or property sales denominated in sovereigns.. then the USD was what people held on to for the next few decades.
11. America 2013 - Bunghole Benny as he became known pulled the needle off the record player and the musical chair printing presses stopped. All the rats raced for the last chair as the country collapsed in upon itself. The fake two party democratic system blamed each other all the way to the bottom of the once great Constitutional Republic. The Tea Party was still awaiting for approval from the IRS for tax exempt status as the country failed. On a positive note the country reduced obesity levels to less than 1% after the food ran out.
Michelle will be proud of America then.
Oh. Wonderful.
Inflation????
Inflation?
Yes, garden variety inflation, by about 2020-2022.
Plan accordingly.
Inflation is a barbarous relic
Ever since we invented the Nobel (not really) prize in Economics there is no inflation anymore
tequila and tampons ,,, full guest bedroom of each and you will be a wealthy man/woman. Lead, brass, au, and ag always good too.
Tampons for the apocalypse!
Oddly enough, I *have* stockpiled quite a few boxes of tampons over the past few months. My plan is to use them to plug the bullet holes that I'm sure to incur defending my stash and homestead from the psychotic roving hordes of post-apocalyptic Mad Max road warriors that are sure to be gunning for it.
Oh, and I'm sure my wife will find a use for them, too.
Does this mean that I've "hedged accordingly?"
Hyperinflation is a result of the loss of confidence in the government. It's a political event, not monetary. This is not to say we or the world are not losing confidence in the US, but it's certainly not to the point where we abandon the currency. On the contrary, inflows into the USD are rising.
http://armstrongeconomics.com/2013/05/21/long-live-the-dollar/
I, for one, lost confidence in this government a long time ago. I doubt this is moving the needle much, though.
There will not be hyperinflation.
There hasn't been nearly enough printing to cause it, and there won't be.
Not because the PTB know any better, but because....math.
I disagree with your statement. If you mean that there hasn't been nearly enough printing, aka QE, I would agree. What you really have to look at though is total dollars 'out there', inlcuding debt money that have been "printed" over the years. Those numbers are huge.
Hyperinflation can happen to the US. And it can happen with serious deflation as well as high inflation. Either could cause the loss of confidence where holders seek tangible goods. That is all it will take.
So much currency yet so little money.
"Deflation is not better."
It is if you're not in debt...
Not if you work for a living in the private sector. Most companies have debt obligations that they will be unable to meet in a deflationary environment.
"A loaf of bread ended up costing $35 million."
LOL...that's awesome...
He didn't mention that the loaf of bread was the size of Texas and came with a giant side of dipping sauce.
Well...that's pretty awesome, too!
Hyperinflation is NOT coming to America. The reason is that the government not only doesn't want it but could not even survive it. The US government collects all tax revenue in dollars. If the dollar is inflated into worthlessness how does that benefit the powers that be? What the Fed wants is controlled inflation about 10% (real rate, not phony CPI) inflation.
In most recemt cases of hyperinflation the government in question had some income in hard currency. For instance:
Germany: The Weimar republic collected heavy import tarifs in US dollars or British pounds. The government actually thrived during the hyperinflation period.
Zimbabwe: The government collected mining royalties in hard currencies and sold hydroelectric power for Rands. All of it went to Mugabe's pockets but still ...
Argentina: The govenment encouraged people to convert their savings into US dollar denominated savings accounts and then confiscated them. This got them thru the crisis but just barely.
Watch out if the US suddenly gets an interest in collecting taxes or starts charging tarifs in some other currency. Then it will truely be game over.
The most likely situration for the US is biflation:
https://en.wikipedia.org/wiki/Biflation
The price of essential commodities rises while non essential commodities falls. Big Macs go up while gold falls. Sound familiar?
McDoubles have been $.99 for 10 years. There is no inflation
Yet a double cheeseburger used to be a dollar. Now they are $1.39.
If you buy your own groceries, you've (probably) noticed that the prices there are rising at a brisker-than-usual clip during the past few months, too. Coffee, sugar, milk, OJ, flour...all up. I'm not an economist (historian by edu-macation), so I cannot tell you that this is all due to "inflation." But when prices rise like this, it sure looks and smells like inflation to me.
+1 for being informed.
I almost forgot about Argentina's pioneering of 'The Cyprus' maneuvre.
They may want 10%, but what happens when it becomes politically or economically expedient for some other nations to significantly reduce their holdings of US debt?
ARGENTINA's move was known as "El Corralito" == "The Little Fence"
"Your money is still there; it's just "fenced off."
Yea, right!
And the Argentines responded with "Caserolazos" -==tens of thousands of people marching in the street, beating on their steel "Casserole" pans.
The gov will not be able to control it, hyperinflation is different from odinary inflation. It happens because people do not want to hold currancy and will buy anythihg and everything to avoid keeping currancy.
Hyperinflation talks confused me a lot until this point settled in my mind. My childhood was in the Soviet Union during hyperinflation times (how come they missed this example in the article?????). Unemployment was soaring. Jobs weren't paying anything. Doctors, teachers and everybody in public sector was below poverty line. Government stopped paying pensions, and seniors were feeding off the dumpster. And yet, we went from 1:1 Ruble: USD to millions of rubles for USD. We actually had paper bills with millions written on them in about 1993-94. This happened over 1-2 year time frame.
Incomes were in deep shit. But this doesn't help to stop hyperinflation. We called rubles "made of wood" because nobody wanted them. If you get any pocket change, you stop at the currency kiosk and change it into USD, later into EUR. Currency kiosks were (and still probably are) everywhere.
My point is that yes, you don't need income growth to generate hyperinflation. All you need is money circulation velocity going to infinity, which is when noone wants to hold their country's currency. Imagine those trillions from pension and savings accounts immediately going anywhere, but USD - that's what hyperinflation looks like. I don't belive US is quite there yet, though.
You are spot on with your thoughts. The other thing to ponder.....do you think there are lots of dollars out there across the world? We've been printing for decades as reserve currency. The other even larger factor is debt money. Some say this isn't real money.....some truth to that but only partial. When it comes to loss of faith. People that "own" debt money will want to get out just as much as someone with "real money"
The truth of the matter is that faith in the currency is a thin line and our leaders have seen fit to do all the wrong things over the past decades to push us right to the edge. Bernanke has no choice but to QE. If he stopped QE, the economy would spiral down, hugh deflation and very possible hyperinflation as folks lost faith in the system. So his QE is a bad choice but not the worse choice. With it though, he knows he runs the risk of loss of faith in the currency also. That is why you hear all this nonsensical cross-talk about maybe ending QE, blah, blah, blah. They have to keep doubt in people's minds that QE isn't forever. But where the world economy is right now, there is NO WAY they could end QE. No way.
Buy you PMs as they price down. What you can afford and what you can hold. It will pay off.
You're about to relive your childhood in the near future
Unless a group of extraordinary global bankers were to get together and inflate concurrently while doing their damnedest to make sure the product of their presses never reaches escape velocity to the population.
What about Star Date 3259.2, when Provider One opened the bidding at 300 quatloos for the newcomers, and then Provider Three drove the bidding up to 1,050 quatloos in just a matter of moments?
Is a quatloo like a Bitcoin?
even better, it's a Galactic bitcoin! Maybe it will be called Borg-Coin one day...
It may be worse then serious inflation...it may be an aggravated Stagflation where private sector wages don't budge (or even drop more) while food, energy, etc rise.
See Adam Fergusson's book for a good read (a must read) on this subject:
http://www.amazon.com/Adam-Fergusson/e/B001KIKIVW
There also a good article here on ZH awhile back about him:
http://www.zerohedge.com/news/when-money-dies-author-adam-fergusson-and-...
My father was alive in hungary in 1946 he was only 10 years old, but remembers his parents not being able to afford shoes, how many among us would be able to walk to school all winter with no shoes? I think it's only a matter of time till we start to find out.
http://www.youtube.com/watch?v=Mk4fycfFatQ
Handmade Mens Shoes - How Its MadeSteel...com'on....do you really think that the Starbucks clutching, smart phone obsessed, obese and tattooed population in this country can handle anything that requires a survivalist mentality? No freeking way. They'll cry and whine and bitch and moan. Eventually, they'll figure it out that suicide is the way out of all their troubles.
Really...can you imagine some guy handing a fish line and hook to one of these clowns and saying "If you're hungry...there's fish in that pond over there...go get one and we'll cook it up."
I imagine Darwin Awards will experience their own hyper-inflation scene...
America will have hyperinflation when civil war 2 breaks out.
America will have civil war WHEN hyperinflation breaks out.
Be careful what you wish for. I for one, hope we never see that. I`ve talked to people who survived war... and it`s not the video game fantasy that it may appear.
There`s a reset coming along with civil unrest, but civil war - no. What we need is good government, not no government.
Is there such a thing as good government? Name one.