A Brief History of Hyperinflation
View PDF | Print View
by: David Martin
Total views: 18
Word Count: 526
It has been a tumultuous few weeks for the financial sector. But aside from the tax funded bailout proposed by the government, average folks - like myself - haven't really seen anything too dramatic; I mean, they haven't stopped building those houses across the street?
We hear phrases like 'recession' and 'the worst week in history' get bandied about by newscasters and alike, but in the past, instances of foreign exchange currency hyperinflation have been so absurd, there has literally been panic in the streets.
Perhaps a good example for a dramatic starting point is Germany during World War 1. As the war effort drained the country's metal resources, the government was forced to use different metals for coinage and inflation began to speed up. But the most important element of this hyperinflation was reparations costs that Germany owed after their defeat. During war-time, increasingly cheaper materials such as copper, nickel and aluminum began to represent currency until a form of paper money called Notgeld was also introduced and did little to stop the weakening mark. Famously, the lowest point came when it became more logical to burn cash to keep warm than to spend it on wood. After nine years (1914 - 1923), 1,000,000,000,000 marks were being swapped for 1 rentenmark; this was worth less than 25 US cents.
Undoubtedly one of the worst cases of hyperinflation in history occurred in Hungary during the years of 1945 and 1946, and was reported to have been started on purpose by Russian Marxists. Prices rose at an average 19 per cent per day meaning that in 1944 the highest denomination available was 1,000 Pengo but by 1946 this had risen to 100,000,000,000,000,000,000; and to keep up with how much their money was worth, Hungarians had to listen to a daily radio broadcast every morning.
More recently, in Zimbabwe, the country has had a quick inflation since its independence in 1980. Into the 21st century the trend is continuing at a much faster rate - in 2006, Zimbabwean customers would queue up for hours to withdraw money from the bank, only to be given a quarter of what they needed because there would not be enough cash in the vaults. Hyperinflation this severe means that as soon as one Zimbabwean is paid, they must spend their earnings as quickly as possible before it loses its worth; consequently all savings have been spent and pensions have been destroyed. In July a bottle of beer cost Z$100 billion and in August the government made a redenomination measure in which the Z$10 billion would lose 10 zeros and be worth just 1 dollar.
Yesterday, it was announced that Zimbabwe's inflation has reached a record breaking 231million per cent and is continuing to spiral upwards; and one can't help think about the desperation currently felt by the Zimbabweans. In comparison to the bailout and the sure frustration for taxpayers - and although forecasters predict a recession of great severity - at least they admit that unemployment will rise at just over 1% and our government appears to be able to commit to a plan that'll work.
About the Author
Check foreign exchange rates and order your foreign currency and travel money at competitive rates from Post Office®; a simply, easy way and available for you to collect from your nearest branch or delivered direct to your door.
Rating: Not yet rated
Related Articles about: Finance
1: Choosing Your Forex Trading Platform Carefully2: Getting Bonded for Financial Stability
3: Types of bonds
4: Getting a Mortgage During Times of Turmoil for the Housing Market.
5: In Debt? Speak to the CCCS.
6: Loans make a great investment
7: Can Government reduce repossessions?
8: Basics Of Mortgage Loans
9: Surety Bonds and the Construction Industry.
10: The Current Financial Market: Is the Credit Crunch a Credit Crisis?