
The Worst Hyperinflations in History: Hungary in 1946 (2014) - jpelecanos
https://www.globalfinancialdata.com/gfdblog/?p=2382
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RobertoG
The article explain the real reason for almost all the cases of hyperinflation
in history (maybe all of them):

"half of Hungary’s industrial capacity was destroyed and 90% was damaged.
Transportation was difficult because most of the rail lines and locomotives
had been destroyed. What remained had either been taken by the Nazis back to
Germany or seized as reparations by the Russians."

How can you avoid inflation if your productive capacity is destroyed? You
can't.

How can you avoid "to print" more money if that destruction of real capacity
is making your money less and less valuable? You can't.

The exact same case happened in Germany (because the war and the war debt
'reparations') and Zimbabwe (because the agriculture capacity was destroyed by
a redistribution of the land) (1).

Obviously, it's the real economy what is important.

(1).-
[http://bilbo.economicoutlook.net/blog/?p=3773](http://bilbo.economicoutlook.net/blog/?p=3773)

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whatshisface
There's a big difference between supply problems leading to inflation (which
has an equilibrium,) and government problems leading to inflation (which has
no fundamental limit.) In one case it's best to imagine it as the price of
scarce goods rising, in the other it's best to picture it as the value of
notes falling. Then, it's clear that one has a bound that the other doesn't.

~~~
RobertoG
Maybe you can point me to an historical case of hyperinflation that was not
due to a supply problem?, because I can't think of one.

Zimbabwe and similar are used continuously, by some people, as an example of
the problem of running government deficits. That it's dishonest or ignorant.

~~~
whatshisface
Hyperinflation can't happen without a government problem, because if they were
to just do nothing the prices would reach equilibrium with the supply scarcity
and then stop rising. The _real_ question is, what happens to governments that
causes them to respond to supply problems with inflationary policy?

Edit: Nonexistent government is also a government problem - I didn't mean it
in _that_ way, I meant it in the sense of "problem related to government!"

As for "how can you keep things running when the supply-side collapses," you
could replace inflation with taxes. You could achieve the same re-assignment
of value explicitly instead of implicitly: people would end up just as robbed,
but the currency wouldn't have to end up devalued. (This might end up helping
the economy and making people less poor in the end, since it would mean that
you still get to think about your inflationary/deflationary policy decisions.
Essentially nobody would choose the regressiveness/progressiveness profile of
hyperinflation if given the option, and would instead probably prefer to
arrange the necessary pain in some other way.)

~~~
panarky
_> Hyperinflation can't happen without a government problem_

Somalia hasn't had a national government in 25 years, so there's no central
authority to regulate the money supply or print currency.

Consequently, 98% of the bank notes in circulation are now poor-quality
counterfeits, and buyers and sellers know they're fake.

The market has reached an equilibrium, with a single 1000-shilling
denomination that trades at approximately the cost to print it.

Hyperinflation ends when the value of the currency equals the cost to print
it, and when the population won't accept arbitrarily larger denominations.

You don't need a government to create a useful currency. Hyperinflation can
begin and end with or without a government.

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leejo
Somewhat related, the Forint still officially has minor units but practically
they're never used except in some cases where they're for display only.
Frustratingly some banks don't use them in transactional data, which can lead
to interesting bugs:
[https://leejo.github.io/2015/08/02/a_lot_of_huf/](https://leejo.github.io/2015/08/02/a_lot_of_huf/)

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mnyary
Misleading title! „ As devastating as the German inflation was, there were
three hyperinflations that made the German case look amateurish: _Hungary in
1946_, Yugoslavia in 1992-1993 and Zimbabwe from 2004 to 2009. Of these three,
Hungary’s was the worst of them all.”

~~~
milesvp
From what I know of Zimbabwe's inflation, anecdotally, I can't imagine worse
inflation. Makes me wonder if technology made it more manageable than the
earlier inflation of Hungary. I could imagine having bar code scanners and
comouter pricing would make it easier to update prices throughout the day.
This would mean merchants still wouldn't want to sell earlier in the day,
knowing they'd get more currency later, but at least the merchant knew they
hadn't forgotten to put a new price sticker on that can of beans from this
morning.

~~~
spooky_action
I lived through the entirety of Zimbabwe's hyperinflation era. I don't quite
recall how the updates of prices were done, whether you would pick the item
up, and it would just be updated by computer while you were waiting in line,
or if you'd only hear the price at checkout, or if you would just learn the
price at checkout. What I do recall is how utterly empty every store was, and
the massive queues that people would stand in to get a loaf of bread.

Also, a lot of money in the streets, in the literal sense. As greater and
greater denominations were printed, and earlier denominations became
worthless, people would toss the old bills out. It's somewhat amusing that
tourists actually buy this 'worthless' money for its novelty.

Realistically, by mid to late 2008, you would have had to purchase basic
necessities (and certainly petrol) in South African rands or USD.

~~~
phkahler
The whole thing sounds to me like a method of forced equality. Everyone had
nothing, and everyone had to try their best to participate in the economy in
order to get any of the limited supplies that were available. If you didn't
work today, you wouldn't have anything of value to buy food today. Only after
rebuilding a foundation for a more normal economy could the pressure be
decrease. Is this a reasonable way to view it?

~~~
RobertoG
From what I've read, it seems that the reason for Zimbabwe hyperinflation was
an attempt of "forced equality" but in a different way.

As an heritage of colonialism, 1% of the white people owned the 70% of the
land, and agriculture was the main product of the economy and the main source
of employment.

Mugabe decided to take the land from the whites and give it to their soldiers
and mates who had not idea what to do with it. The production fell
spectacularly. The following supply shock created the hyperinflation. The
"printing" of money was just a consequence.

Edit: just to be clear, I'm not saying that a minority owning most of the land
was a good thing. Just trying to explain my understanding of what happened.

~~~
nerfhammer
Supply shocks can't cause general or sustained inflation. If farms stop
producing anything, that should cause a shortage of farm-originated goods, and
the prices of those things should increase. But the prices of other things
should not change much; some prices will actually go down as people aren't as
willing to pay as much as before.

If the farm workers all aren't getting paid anymore or a lot of loans are
cancelled, that should cause deflation, not inflation.

Hyperinflation is always caused by inflationary treasury finance.

~~~
RobertoG
Well, following your theory, a dollar in the desert have infinite value ;-)

If your only export is farm-originated goods (as it's basically the case of
Zimbabwe), that means that you have to import everything else.

That means that you need foreign currency for getting everything that it's not
farm-originated goods.

If you stop producing farm-originated goods, the value of your money will drop
respect the other currencies and you will need more and more or your currency
to buy imports.

But even in a closed economy, less production and the same quantity of money,
means, obviously, more expensive prices.

How could be otherwise? After all, you agree that the same production and more
money means more expensive prices.

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jacquesm
Hyperinflation can have positive effects too for the population: borrow money
from a bank to buy a house, see the currency hyperinflate, pay off the debt
with a week's worth of work. It's obviously terrible if you have savings, but
for those in debt it is pretty good.

~~~
icebraining
Aren't most mortgages effectively inflation-adjusted nowadays? I know that my
parent's monthly payments have been pretty low, thanks to the low levels of
the Euribor rates.

~~~
milesvp
You'd think so. When I looked at my mortgage paperwork a few years back in the
US I looked for what I thought was standard "3 consecutive quarters of high
interest rates" and couldn't find anything to imply my rates will ever change.
I'm still not convinced I have a truly fixed rate mortgage, but it seems
inflation has been so low for so long in the US, it's fallen out of standard
mortgages here...

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tim333
> 150,000% PER DAY

That's quite something - so you'd have to stick three zeros on daily

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pdq
Misleading title. 2014 is the date of the article, not the time of inflation.

~~~
sctb
Thanks, we've updated the headline to clarify.

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kragen
Note that this isn't about Hungary in 2014, as I thought (and which shocked
me). It's about Hungary in 1945–6.

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rootw0rm
For such a short article it repeated a lot of things.

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kolbe
>As devastating as the German inflation was, there were three hyperinflations
that made the German case look amateurish

Well, even though Hungary and Zimbabwe had larger currency depreciation, I
think the fact that neither ended with the Holocaust makes Germany's "worse"

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openasocket
That sounds like "post hoc ergo propter hoc" to me

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kolbe
And you have a perfect method of attributing causality in the social sciences?
If this monetary crisis wasn't used as a tool to fuel antisemitism in Germany,
I will eat my shoe.

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mdemare
During the period Hitler came to power, there was deflation, not inflation.

Inflation means your saving go to zero. Deflation means your mortgage and
mortgage payments stay constant, while your salary and the price of your home
falls by X% per year.

~~~
dnautics
how does your salary fall during deflation?

