5 of the Worst Cases of Hyperinflation in History

For almost as long as money has existed, so has inflation. Currency fluctuates and prices rise and fall for a variety of reasons, and most of the time this is kept in check. But when the wrong economic conditions occur, things can spiral out of control very quickly.

Hyperinflation is the term given to very high and often rapidly accelerating inflation. It normally comes from an increase in the supply of currency (i.e. printing of more banknotes) and the cost of basic goods rising fast. As money becomes worth less and less, goods cost more and more.

Thankfully, hyperinflation is relatively rare: the most stable currencies, such as the pound sterling, the American dollar and the Japanese yen, are seen as the most desirable for many as they have historically retained a relatively standard value. Other currencies, however, have not been so fortunate.

Here are 5 of history’s worst examples of hyperinflation.

1. Ancient China

Whilst not deemed by some to be an example of hyperinflation, China was one of the first countries in the world to start using paper currency. Known as fiat currency, paper currency has no intrinsic value: its value is maintained by the government.

Michael Wood joined Dan on the podcast to talk about his new history of China. He takes a fresh look at Chinese history in the light of massive changes inside the country, and how its people and leaders see their place in the world, and its place on the world stage.

Listen Now

Paper currency proved to be a huge success in China, and as word spread, there was a growing demand for it. As soon as the government relaxed controls on its issuance, inflation began to run rampant.

The Yuan Dynasty (1278-1368) was the first to experience the effects of extremely high inflation as it began to print huge amounts of paper money to fund military campaigns. As currency devalued, people were unable to afford basic goods, and the government’s inability to handle the crisis and subsequent lack of popular support led to the dynasty’s decline in the mid-14th century.

2. The Weimar Republic

Arguably one of the most famous examples of hyperinflation, Weimar Germany suffered a major crisis in 1923. Bound by the Treaty of Versailles to make reparation payments to Allied powers, they missed a payment in 1922, saying they could not afford the amount required.

The French did not believe Germany, arguing they were choosing not to pay rather than unable to. They occupied the Ruhr Valley, a key area for German industry. The Weimar government ordered workers to engage in ‘passive resistance’. They stopped work but the government continued to pay their wages. In order to do so, the government had to print more money, effectively devaluing the currency.

Queues outside shops during the hyperinflation crisis in 1923 as people tried to purchase basic foodstuffs before prices rose once again.

Image Credit: Bundesarchiv Bild / CC

The crisis quickly spiralled out of control: life savings were worth less than a loaf of bread within weeks. Those hit hardest were the middle classes, who were paid monthly and had saved their entire lives. Their savings devalued completely, and prices were rising so rapidly that their monthly wages could not keep up.

Food and basic goods were most affected: in Berlin, a loaf of bread cost around 160 marks in late 1922. A year later, the same loaf of bread would have cost around 2 billion marks. The crisis was resolved by the government by 1925, but it brought millions of people untold misery. Many credit the hyperinflation crisis with a rising sense of discontent in Germany that would go on to fuel the nationalism of the 1930s.

3. Greece

Germany invaded Greece in 1941, causing prices to shoot up as people began to hoard food and other commodities, fearing shortages or not being able to access them. The occupying Axis powers also seized control of Greek industry and began to export key items at artificially low prices, reducing the worth of the Greek drachma in relation to other European commodities.

Understanding the history and meaning of money.

Listen Now

As hoarding and the feared shortages began in earnest after naval blockades, the price of basic commodities shot up. The Axis powers began to get the Bank of Greece to produce more and more drachma notes, further devaluing currency until hyperinflation took hold.

As soon as the Germans left Greece hyperinflation fell dramatically, but it took several years for prices to get back under control and for inflation rates to fall under 50%.

4. Hungary

The final year of World War Two proved disastrous for the Hungarian economy. The government took over control of banknote printing, and the newly arrived Soviet army began to issue its own military money, further confusing matters.

Soviet soldiers arriving in Budapest in 1945.

Image Credit: CC

In the 9 months between the end of 1945 and July 1946, Hungary had the highest inflation ever recorded. The nation’s currency, the pengő, was supplemented by the addition of a new currency, specifically for tax and postal payments, the adópengő.

The values of the two currencies were announced every day by radio, so great and rapid was inflation. When inflation peaked, prices were doubling every 15.6 hours.

To solve the issue, the currency had to be replaced completely, and in August 1946, the Hungarian forint was introduced.

5. Zimbabwe

Zimbabwe became a recognised independent state in April 1980, emerging from the former British colony of Rhodesia. The new country initially experienced strong growth and development, increasing wheat and tobacco production. However, this did not last long.

During the new President Robert Mugabe’s reforms, Zimbabwe’s economy crashed as land reforms saw the eviction of farmers and land given to loyalists or falling into disrepair. Food production fell dramatically and the banking sector nearly collapsed as wealthy white businessmen and farmers fled the country.

Zimbabwe began to create more money in order to finance military involvement and because of institutionalised corruption. As they did so, the already poor economic conditions led to further devaluement of currency and a lack of trust in the value of money and governments, which combined, toxically, to create hyperinflation.

Rampant hyperinflation and corruption really escalated in the early 2000s, peaking between 2007 and 2009. Infrastructure crumbled as key workers could no longer afford their bus fares to work, much of Harare, Zimbabwe’s capital, was without water, and foreign currency was the only thing keeping the economy functioning.

At its peak, hyperinflation meant that prices were doubling roughly every 24 hours. The crisis was solved, in part at least, by the introduction of a new currency, but inflation remains a major issue in the country.

Rutger Bregman, the Dutch historian who has been making waves at Davos, as well as irking the likes of Tucker Carlson in the states, chats to Dan about the economic ideas that he hopes will change the way we think about work.

Listen Now