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Hyperinflation

Throughout History, Every Paper Currency Ever Issued Has Eventually Collapsed.

Of course, it's probably too ridiculous to even suggest that the U.S. dollar will prove the exception to this rule. Or is it?

Nature abhors a vacuum and upholds the TANSTAAFL principle, which states, "There Ain't No Such Thing As A Free Lunch." But that doesn't stop central bankers from attempting to get something for (and from) nothing.

Inflation occurs when each piece of unbacked paper money (i.e., not backed by gold, silver or any thing else of substance and therefore intrinsically worthless) is put into circulation (monetized as debt) and thereby lessens the value of all other pieces of paper money already circulating.

The same State inspector who returns each year to certify the fuel flow accuracy of the pump at your local gas station could never certify the 'weights and measures' of paper money since no one can know for certain what it will worth one week from now.

Hyperinflation occurs when ordinary inflation (the publicly accepted historical rate of decay in the purchasing power of paper money) becomes so severe that it passes a critical point, then spins wildly out of control into exponential inflation where the price of anything you could think of purchasing changes, literally by the minute, and always sharply upwards.

In a hyper inflating economy, you won't find prices on produce and other food items in a grocery store, because prices are changing too quickly. Prices are determined by the store manager at the register at the time of checkout.

Diners in restaurants pay for a meal when it is ordered, not at the end of dinner when prices may already have risen. And the joke is that you take a bus to cross town, not a taxi because you pay for the bus when you get in, but you pay for the taxi when you get out.

We've prepared a time table (below on this page) showing the history of hyperinflationary collapse of various paper currencies within the past century (and here in the U.S. during colonial times).

Here is what hyperinflation looks like to the ordinary citizen, in this case in Germany in mid-1923.

"By mid-1923 [German] workers were being paid as often as three times a day. Their wives would meet them, take the money and rush to the shops to exchange it for goods. However, by this time, more and more often, shops were empty. Storekeepers could not obtain goods or could not do business fast enough to protect their cash receipts. Farmers refused to bring produce into the city in return for worthless paper. Food riots broke out. Parties of workers marched into the countryside to dig up vegetables and to loot the farms. Businesses started to close down and unemployment suddenly soared. The economy was collapsing."

Here we see a German housewife burning Deutschmarks in the fireplace. Why? Because they contained more heat energy in BTU's than the firewood they could purchase. The solution? Just burn the government money instead.

The reason behind the historical demise of paper currencies is inherent both in human nature and in the fraud inherent in an unbacked paper currency.

Central bankers emit paper currency by creating (printing) it out of thin air. Then when the economy contracts (following an expansionary phase as it always will under a fiat money system), the all-too-human temptation to avoid deflation (which is anathema to central bankers) becomes too great to resist, so more paper money is printed to avoid allowing an ordinary recession to get out of control and deteriorate into a full blown depression such as the United States experienced in the 1930's.

The current chairman of the Federal Reserve Bank of New York, Benjamin Bernanke, successor to Alan Greenspan, has been dubbed 'helicopter Ben' (lately referred to as 'The Prince Of Paper') for suggesting during the deflationary scare of 2002 that the Federal Reserve could  simply print more money and drop it from helicopters if necessary in order to inject liquidity into the financial system.

The following was obtained from Wikipedia at this page. We re-sorted the entries there by the date of the hyperinflationary period in each listed country.

Bear in mind as you peruse this list that many of these countries are not so-called 'banana republics', but feature capitol cities that are every bit as cosmopolitan as any city in America. Indeed, it would be difficult to tell an aerial photograph of their larger cities from those in the U.S. 

1775
United States
During The Revolutionary War, the Continental Congress authorized the printing of paper called 'Continentals', which depreciated in perceived value so quickly and so badly that, soon, they were 'not worth a continental'. Sailors returning from sea duty and paid for their service in Continentals were seen pinning them to their uniforms and dancing a jig. Barber shops used them to paper the walls.

1922
Austria
Between 1921 and 1922, inflation in Austria reached 134%.

1923
Free City of Danzig
Danzig went through the worst inflation in 1923. In 1922, the highest denomination was 1,000 mark. By 1923, the highest denomination was 10,000,000,000 mark.

1923
Germany
Germany went through the worst inflation in 1923-24. In 1922, the highest denomination was 50,000 mark. By 1923, the highest denomination was 100,000,000,000,000 mark. During the worst times, one U.S. dollar was equal to 80 billion marks.

1944
Greece
Greece went through its worst inflation in 1944. In 1943, the highest denomination was 25,000 drachmai. By 1944, the highest denomination was 100,000,000,000,000 drachmai. In the 1944 currency reform, 1 new drachma was exchanged for 50,000,000,000 drachmai. Another currency reform in 1953 replaced the drachma at an exchange rate of 1 new drachma = 1,000 old drachma. The overall impact of hyperinflation: 1 (1953) drachma = 50,000,000,000,000 pre 1944 drachmai. The Greek inflation rate reached 8.5 billion percent.

1946
Hungary
Hungary went through the worst inflation in modern history in 1945-46. Before 1945, the highest denomination was 1,000 pengo. By the end of 1945, it was 10,000,000 pengo. The highest denomination in mid-1946 was 100,000,000,000,000,000,000 pengo. Banknotes The rate of inflation was 4.19 quintillion percent. A special currency the adopengo - or tax pengo - was created for tax and postal payments [2]. The value of the adopengo was adjusted each day, by radio announcement. On January 1, 1946 one adopengo equaled one pengo. By late July, one adopengo equaled 2,000,000,000,000,000,000,000 or 2×1021 pengo. One source [3] states that this hyperinflation was purposely started by trained Russian Marxists in order to destroy the Hungarian middle and upper classes. The 1946 currency reform changed the currency to forint. Previously, between 1922 and 1924 inflation in Hungary reached 98%.

1949
China
China went through the worst inflation 1948-49. In 1947, the highest denomination 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 1 year, the highest denomination was 10,000,000 gold yuan. The highest denomination by a regional bank was 6,000,000,000 yuan issued by Sinkiang Provincial Bank in 1949

1949
Taiwan
Severe inflation existed in the late 1940s due to factors such as corruption and the 228 Incident. Increasingly higher denominations were issued on the island, up to one million yuan. Inflation was eventually controlled after the new Taiwan dollar was issued in 1949 at a ratio of 40,000-to-1 against the old Taiwan nationalist yuan.

1987
Bolivia
Bolivia went through the worst inflation between 1984 and 1986. Before 1984, the highest denomination was 1,000 pesos bolivianos. By 1985, the highest denomination was 10 Million pesos bolivianos. In the 1987 currency reform, peso boliviano was replaced by boliviano which was pegged to U. S. dollar.

1984
Israel
Inflation accelerated in the 1970s, rising steadily from 13% in 1971 to 111% in 1979.From 133% in 1980, it leaped to 191% in 1983 and then to 445% in 1984, threatening to become a four-digit figure within a year or two. In 1985 Israel froze all prices by law. In 1985, inflation fell to 185% (less than half the rate in 1984). Within a few months, the authorities began to lift the price freeze on some items; in other cases it took almost a year. In 1986, inflation was down to just 19%.

1990
Nicaragua
Nicaragua went through the worst inflation from 1987 to 1990. Before 1987, the highest denomination was 1,000 cordobas. By 1987, it was 500,000 cordobas. In the 1988 currency reform, 1 new cordoba was exchanged for 1,000 old cordobas. The highest denomination in 1990 was 10,000,000 new cordobas. In the mid-1990 currency reform, 1 gold cordoba was exchanged for 5,000,000 new cordobas. The overall impact of hyperinflation: 1 gold cordoba = 5,000,000,000 pre 1988 cordobas.

1991
Peru
Peru went through the worst inflation from 1984 to 1990. The highest denomination in 1984 was 50,000 soles de oro. By 1985, it was 500,000 soles de oro. In the 1985 currency reform, 1 intis was exchanged for 1000 soles de oro. In 1986, the highest denomination was 1,000 intis. It was 5,000,000 intis by 1990. In the 1991 currency reform, 1 nuevo sol was exchanged for 1,000,000 intis. The overall impact of hyperinflation: 1 nuevo sol = 1,000,000,000 pre 1985 soles de oro.

1992
Argentina
Argentina went through steady inflation from 1975 to 1991. At the beginning of 1975, the highest denomination was 1,000 pesos. In late 1976, the highest denomination was 5,000 pesos. In early 1979, the highest denomination was 10,000 pesos. By the end of 1981, the highest denomination was 1,000,000 pesos. In the 1983 currency reform, 1 Peso Argentino was exchanged for 10,000 pesos. In the 1985 currency reform, 1 austral was exchanged for 1,000 pesos argentino. In the 1992 currency reform, 1 new peso was exchanged for 10,000 australes. The overall impact of hyperinflation: 1 new peso = 100,000,000,000 pre-1983 pesos.

1993
Bosnia-Herzegovina
Bosnia-Hezegovina went through its worst inflation in 1993. In 1992, the highest denomination was 1,000 dinara. By 1993, the highest denomination was 100,000,000 dinara. In the Republika Srpska, the highest denomination was 10,000 dinara in 1992 and 10,000,000,000 dinara in 1993. 50,000,000,000 dinara notes were also printed in 1993 but never issued.

1993
Krajina
Krajina went through the worst inflation in 1993. In 1992, the highest denomination was 50,000 dinara. By 1993, the highest denomination was 50,000,000,000 dinara. Note that this unrecognized country was reincorporated into Croatia in 1998.

1993
Poland
Poland went through the worst inflation between 1990 and 1993. The highest denomination in 1989 was 200,000 zlotych. It was 1,000,000 zlotych in 1991 and 2,000,000 zlotych in 1992. In the 1994 currency reform, 1 new zloty was exchanged for 10,000 old zlotych. Previously between 1922 and 1924, Polish inflation reached 275%.

1993
Russia
Between 1921 and 1922, during the civil war, inflation in Russia reached 213%.
In 1992, the first year of post-Soviet economic reform, inflation was 2,520%, the major cause being the decontrol of most prices in January. In 1993 the annual rate was 840%, and in 1994, 224%. The ruble devalued from about 100 r/$ in 1991 to about 30,000 r/$ in 1999.

1994
Brazil
From 1986 to 1994, the base currency unit was shifted three times to adjust for inflation in the final years of the República Velha era. A 1960's cruzeiro was, in 1994, worth less than one trillionth of a US cent, after adjusting for multiple devaluations and note changes. A new currency called real was adopted in 1994, and hyperinflation was eventually brought under control.

1994
Yugoslavia
Yugoslavia went through a period of hyperinflation and subsequent currency reforms from 1989 to 1994. The highest denomination in 1988 was 50,000 dinara. By 1989 it was 2,000,000 dinara. In the 1990 currency reform, 1 new dinar was exchanged for 10,000 old dinara. In the 1992 currency reform, 1 new dinar was exchanged for 10 old dinara. The highest denomination in 1992 was 50,000 dinara. By 1993, it was 10,000,000,000 dinara. In the 1993 currency reform, 1 new dinar was exchanged for 1,000,000 old dinara. But before the year was over, the highest denomination was 500,000,000,000 dinara. In the 1994 currency reform, 1 new dinar was exchanged for 1,000,000,000 old dinara. In another currency reform a month later, 1 novi dinar was exchanged for 12,000,000 dinara. The overall impact of hyperinflation: 1 novi dinar = 1.2 × 1027 pre 1990 dinara.

1995
Georgia
Georgia went through the worst inflation in 1994. In 1993, the highest denomination was 100,000 laris. By 1994, the highest denomination was 1,000,000 laris. In the 1995 currency reform, 1 new lari was exchanged for 1,000,000 laris.

1995
Ukraine
Ukraine went through the worst inflation between 1993 and 1995. Before 1993, the highest denomination was 1,000 karbovantsiv. By 1995, it was 1,000,000 karbovantsiv.

1997
Zaire
Zaire went through a period of inflation between 1989 and 1996. In 1988, the highest denomination was 5,000 zaires. By 1992, it was 5,000,000 zaires. In the 1993 currency reform, 1 nouveau zaire was exchanged for 3,000,000 old zaires. The highest denomination in 1996 was 1,000,000 nouveaux zaires. In 1997, Zaire was renamed the Congo Democratic Republic and changed its currency to francs. 1 franc was exchanged for 100,000 nouveaux zaires. The overall impact of hyperinflation: 1 franc = 3 × 1011 pre 1989 zaires.

1999
Angola
Angola went through the worst inflation from 1991 to 1995. In early 1991, the highest denomination was 50,000 kwanzas. By 1994, it was 500,000 kwanzas. In the 1995 currency reform, 1 kwanza reajustado was exchanged for 1,000 kwanzas. The highest denomination in 1995 was 5,000,000 kwanzas reajustados. In the 1999 currency reform, 1 new kwanza was exchanged for 1,000,000 kwanzas reajustados. The overall impact of hyperinflation: 1 new kwanza = 1,000,000,000 pre 1991 kwanzas.

2000
Turkey
Throughout the 1990s Turkey dealt with severe inflation rates that finally crippled the economy into a recession in 2001. The highest denomination in 1995 was 1,000,000 lira. By 2000 it was 20,000,000 lira. Recently Turkey has achieved single digit inflation for the first time in decades, and in the 2005 currency reform, introduced the New Turkish Lira; 1 was exchanged for 1,000,000 old lira.

2002
Belarus
Belarus went through steady inflation from 1994 to 2002. In 1993, the highest denomination was 5,000 rublei. By 1999, it was 5,000,000 rublei. In the 2000 currency reform, the ruble was replaced by the new ruble at an exchange rate of 1 new ruble = 2,000 old rublei. The highest denomination in 2002 was 50,000 rublei, equal to 100,000,000 pre-2000 rublei.

2005
Madagascar
The Malagasy franc had a turbulent time in 2004, losing nearly half its value and sparking rampant inflation. On 1st January 2005 the Malagasy ariary replaced the previous currency at a rate of 0.2 ariary for one Malagasy franc. In May 2005 there were riots over rising inflation, although falling prices have since calmed the situation.

2005
Romania
Romania is still working through steady inflation. The highest denomination 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 leu was replaced by the new leu at 10,000 old lei = 1 new leu. Inflation in 2005 was about 10%. In 2006 the highest denomination is 500 lei (= 5,000,000 old lei).

2006
Zimbabwe
The Zimbabwean dollar was formerly known as the Rhodesian dollar (R$), which was adopted in 1970 following decimalisation and the replacement of the pound as the currency, at a rate of 2 Rhodesian dollars = 1 pound (R$ 0.71 = USD $1.00). At the time of independence in 1980, one Zimbabwean dollar (of 100 cents) was still worth more than the US dollar (Z$ 0.68 = USD $1.00), but rampant inflation and the collapse of the economy have severely devalued the currency, with many organisations using the US dollar instead. According to the Guinness Book of Records, Zimbabwe has the highest annual inflation rate in the world:[4]. (385% in 2003, 624% in January 2004, 360% (average) in 2004 and 585% in 2005. By April 2006 the rate had reached 900%.) By January 25, 2006, there were 100,000 Zimbabwe dollars per US dollar (official exchange rate). The highest denomination regular issue banknote is Z$1,000.00 (about 1c US) but the Reserve Bank of Zimbabwe has issued bearer cheques of Z$5,000; Z$10,000; and Z$20,000 to ease the money supply problem. Effective Feb. 1, 2006, new Z$50,000 bearer cheques were issued.

2007 ???