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The Worst Hyperinflations in History: Hungary in 1946 (2014) (globalfinancialdata.com)
66 points by jpelecanos on Feb 14, 2018 | hide | past | web | favorite | 89 comments

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

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.

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.

Brazil 1980-1994. The supply problem only started when the government decided to price control everything, before that you could easily buy all you needed, only you'd need spend all your wages the day they paid you, or you'd lose 30% of it every month. Inflation got to above 5000% a year, but there was never mass starvation like in other places. For a few months people couldn't buy any kind of meat or eggs, but things went back to "normal" when the government lifted price control. Source: I lived there, never skipped a meal. But I was quite shocked the first time I saw something costing the same as it had the previous week, it was in 1994.

The same happened in Venezuela, only they weren't able to control it. Inflation preceded the scarcity, and then scarcity made inflation even worse. And now they have mass starvation, no medicines etc.

That's fairly typical. Government prints money, there's hyper-inflation, government tries to fix things by banning marking prices up, people stop selling and manufacturing stuff; scarcity and having to go the black-market to get food makes inflation even worse.

Also note that in both cases (Venezuela and Brazil) there was no external force (war or commercial ban) that artificially reduced supply. At the time Brazil started experiencing hyper-inflation, it was already one of the world's top beef producers, still beef was up 5000% a year. Venezuela was selling it's oil at peak prices to the US when their hyper-inflation started. For a while gas was the only affordable product in the country, because the production kept pace with the money printing. There's just no explanation for inflation in Latin American countries that haven't seen a war or major natural disaster in 100 years, other than bad spending policies. The government themselves admitted that in most cases, and were able to get inflation back in track with massive cuts in spending.

Hyperinflation only kicked in in Venezuela after the plunge in oil prices, but up until that point industry in Venezuela had been dying.

In Brazil it followed and was mainly triggered by the 1970s energy crisis.

There was already super high inflation in both cases before the supply crises. It's just it got way worse because the government reacted to the threat by printing even more money to pay for its spending. Unless you think 100% a year is not hyper-inflation. And how the hell an energy crisis can get the price of beef to go up 5000% a year, in a country that's a leader in beef production?

50% monthly inflation is a common definition. It's around the point where inflation doesn't tend to ever come down again.

Iraq has had 300% a year at one point and it came down.

Unfortunately I can't discuss Brazil because I have not information, but thanks for pointing it, I will try to look into it.

Venezuela seems to me a similar case to Zimbabwe. Their only asset (oil, agriculture in the case of Zimbabwe) was taken from the hands of the people that was exploiting it (if that it's fair is another question) and the production plunged (1).

It didn't help that the price of oil dropped at the same time.

So, a supply problem also.

The consequences: they can't get foreign currency. As they don't produce almost anything else than oil they have to import everything. The value of their currency goes down, they have "to print" money to keep the government working. Hyperinflation. They try price control (that don't work very well).

If there is a "fairly typical" process for hyperinflation is that one.

(1). https://tradingeconomics.com/venezuela/crude-oil-production

Your graph shows a decline in production in the past year or so. The country has been experiencing major economical hardships for several years. The downturn in oil prices only made worse something that was already awful.

Take a look at: https://tradingeconomics.com/venezuela/inflation-cpi

Of course 800% is worse than 100%.

But how do you explain 30%-100% inflation at a time when oil was at peak price?

It's simply impossible not to have inflation when you're printing money and flooding the economy with it -- no matter the supply side.

Inflation seems to only kick in when it enters the money cycle (non-banking sectors). The US Fed built up massive amounts of securities holdings over the last 10 years which injected a lot of money into the economy. However, inflation mostly never materialized because banks held onto that money instead of lending it out.

Hyper-inflation started before the oil price dropped.

Venezuelan hyperinflation began in 2015 [0]. Crude prices were on their way down at that point [1]. And Venezuelan oil production has been dropping continuously since 2006 [2]. The average reduction in production since 2006 was 3.17%. The overall reduction was 27.8% in that time period. Since I only found production numbers through 2016, you can see that there was an 8.85% drop in production between 2015 and 2016. If prices had stayed high the reduced production capacity wouldn't have hit so hard. If production capacity had stayed high the price drop wouldn't have mattered as much. Unfortunately they hit at the same time.

The oil situation probably became the tipping point when compounded with their monetary policies and price control efforts.

[0] https://tradingeconomics.com/venezuela/inflation-cpi

[1] http://www.macrotrends.net/1369/crude-oil-price-history-char...

[2] https://ycharts.com/indicators/venezuela_oil_production (barrels per day, average across the year, goes through 2016)

So, 30% a year is just business as usual? Yes, oil hit then hard. But they already had pretty high inflation before. Not sure what counts as "hyper". Certainly having my salary go down 10% a year automatically is not a reasonable proposition.

I agree with your general point, monetary policy was the cause of much of the inflation and had they not mismanaged their oil industry they may have been able to survive with the bad monetary policy much longer. And better monetary policy may have put them in a position to handle the issues in the oil industry. But the immediate need to print more money was the drop in production capacity and price, which is what led to the hyperinflation at the end of 2015 to present.

Hyperinflation is usually very, very high inflation. Original definition was 50% monthly inflation (this would be 600% annual, higher actually since it would be compounding). 30% annual inflation isn't hyperinflation (though it's certainly not good, and after several years could be catastrophic on its own).

But not the drop in oil production:



Please, for a better comparative, view it with the 5 years window for the graphs.

Take a look at other countries historical inflation too. I bet you'll see 50%-100% inflation rates before the supply problems started.

Only after the government realizes they can't indefinitely finance their spending by printing money, then they turn to seizing wealth production, or do stupid things like price control. Then things get really ugly.

Do you have proof?

It's difficult to tell if statements are true without hard evidence and data to back the claim.

The burden of proof is on the side making the nonsensical claim that hyper-inflation is always caused by supply problems, never ever by monetary policy. I've been nice enough to provide some first-hand reports and a few pointers. I'm not your google. If you'd rather remain believing in Keynesian fairy tales, so be it.

Argentina 1989-1990. I don't remember a supply problem. The Wikipedia in English doesn't have a detailed article.

Article in Spanish https://es.wikipedia.org/wiki/Hiperinflaci%C3%B3n_argentina_...

Autotransalation: https://translate.google.com/translate?sl=es&tl=en&js=y&prev...

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.)

> 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.

>"Hyperinflation can't happen without a government problem"

I suppose that what you mean is that hyperinflation will stop at some point, not that it "can't happen". If you destroy the 80% of the economy what follows is hyperinflation. Never mind if you are in the gold standard, a fiat system or whatever.

>"The real question is, what happens to governments that causes them to respond to supply problems with inflationary policy?"

What happens is, it seems to me, obvious. You have to keep the services running, so, you have to pay people, but the money is not valuable anymore, so, you have to give more.

What it seems that you are insinuating is that a country would be better off if the government would not try to keep the country running. I don't think this is the case. But I suppose that it is the real question.

As long as the government has the power to tax, it can shrink the supply of currency as much as it wants. There is no such "easy fix" for supply problems.

But why would it ever shrink the supply of money? Much easier to take from the working class and give to cronies, then blame it on greed and capitalism.

Normally, the cronies are rich people.

Even if inflation could be advantageous, sometimes, for some people, hyperinflation don't benefit anyone, but it benefit rich people the less.

If you have liquid or even financial assets, you don't want inflation.

If somebody owns you money you don't want inflation.

If you want to hire cheap you don't want government spending in the economy and making workers more expensive. So, you have an interest in scare people about become the next Zimbabwe and all that.

We can be sure that the cronies are already in charge when a little inflation is sold as worse than unemployment for instance.

Discriminatory tax policies are very effective at enriching the wealthy.

If you think about it, being rich or wealthy is really just having a disproportionate share of the economic output of a region. You increase this share by taking in more money from other people than you spend. Most of the time, this happens through returns on investments, but getting the government to tax someone else more than they do yourself achieves the same result (more relative assets).

This is part of the reason lobbying has such a great ROI for companies.

The supply of money = government debt + private bank credit. So if the government runs a budget surplus or private bank credit shrinks (more old debts are paid off than new debts are issued) then the supply of money shrinks. This happens in actual economies.

So that its currency has value? The government does not benefit from hyper inflation.

The whole point of hyperinflation is to devalue sovereign debt. The ONLY entity that benefits from hyperinflation is the government.

Causality is backward here, really. Government debt and money are effectively the same thing. Growing government debt is growth in the money supply, which can lead to inflation.

Governments don't try to devalue sovereign debt, they try to pay off their foreign debts. For that, they buy up all foreign currency in the market, sending the value of their currency plummeting.

The government doesn't benefit from hyperinflation, it benefits from wiping out its debt. Taxing away the excess money after it has finished doing that prevents hyperinflation while still reducing debts.

The government has the most to lose from hyperinflation, because without currency anyone will accepts, the government is severely reduced in power. With a healthy currency, the government has nearly unlimited ability to finance itself.

When the problem is too much money chasing too few goods, regardless of the cause you can drain the oversupply of money. If supply constricts, then you constrict the money supply. One way you can always do that is buy borrowing, taxing, or selling and extinguishing the money received. The fed does a version of this to target the overnight rate.

I understand how taxing reduce money in the economy but I don't understand your reference to the overnight rate.

My understanding is that the overnight rate gives the fed the power of making more expensive for banks to give credits, but only if there is a deficit of money, in the inter-bank market, respect the demand of credits by firms and families.

Are you talking about that?

The fed funds rate is basically banks borrowing from each other to meet nightly reserve requirements. The fed open market iterations steps in and buys/sells that overnight debt creating/destroying money in the process. After QE it now does a lot more of this on the long end too. The fed only really influences that rate, and it does go off script.

The link between the overnight rate and longer maturities has always been tenuous. Banks borrow I the short end, consumers on the longer end. Before QE, the Fed often had a difficult time pushing the long end around, but with QE it just did it direct.

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

Uh, what? economic contraction causes deflation, not inflation.

if no one has a job and weighs spending every cent very carefully, businesses have to cut prices in order to sell anything. Which means they have to cut what they pay everyone else, and so on. Or say if everyone loan out lots of money and now realizes that those loans are never going to be paid back, they realize that they have a lot less money than they thought they did, and that means they can't repay others, and so on.

"productive capacity" being lost doesn't mean your "money" is "less and less valuable". No, it means money is extremely valuable, because you don't expect to be able to get any more of it. Everyone has a lot less money than they expected to have. It's a shortage of money, which therefore becomes more valuable. That's deflation.

For example, during the Great Depression the US experienced 30% deflation.

Hyperinflation where the nominal value of currency decreases by thousandsfold is always caused by inflationary finance where a treasury resorts to fund operations by simply printing money. Though that could happen because they were militarily forced to and could not collect taxes or sell bonds. Everyone has too much nominal currency relative to real valued goods and is afraid the nominal currency won't be accepted for the same amount of real value tomorrow.

When production is gone, there are no goods produced. When there is a shortage of goods, you are willing to pay more for what there is, so does everyone else, and that leads to the spiral of money becoming worthless. What's the money worth when you can't buy anything with it?

So, in your world view, if tomorrow a catastrophe destroyed half of the productive capacity of the USA, the US Dollar would double its value?

Yea, the current US economy is debt-based with government bonds, which is the main way they are able to import more goods without hyperinflation.

nice. upvote. hopefully Bernie runs again and Stefanie Kelton gets a platform to bring MMT ideas to the masses.

Nothing against Bernie, but the dude is 76. I'd prefer someone who will statistically be alive for more than 10 years.

Statistically he should be alive another 14 years or so https://www.johnhancockinsurance.com/life/life-expectancy-to...

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/

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.”

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.

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.

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?

It was anything but equal. My mother was well connected to a manager of a major supermarket, so instead of waiting in line for hours for a loaf of bread, she could go in the back door of the store.

My family were also property owners, so their wealth was not diminished as rapidly as the rest of the economy (though it certainly was diminished).

Hyperinflation is not a route I recommend if greater equality is what you seek :)

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.

Not disagreeing with you, but if it had been handed over to specific people it might have worked, but what happened is anyone and anyone in the local area just went into the farms and took whatever they wanted. No production, no employment on the farms, no taxes or foreign exchange from the produce -> economic collapse.

I worked for a telecoms company back in 2006 and a Zimbabwean cellular network wanted to buy our software. They had the money in an escrow account, but pulled out of the deal before it could complete. It wasn't as bad back then, but that was the year inflation hit 1,000% so it was clear what was happening.

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.

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.

Sounds like equality only among the poor. The well-off probably had savings in foreign currency and other assets that kept their value.

Isn't it worse than that? People are disincentivized to anything beyond survival. Plus you need inputs (goods and services) from abroad, like fuel, medicines, technology, etc. But those places will not honor your local currency so you get none.

I lived in South Africa at the time. The inflation was 30% - per hour. The queues to the ATMs were very long and you could only withdraw a certain amount every day.

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.

I lived in Zimbabwe through the hyperinflation era. While true that going through hyperinflation means that your debts are essentially forgiven, there are so many negative knock-on effects in the economy and society as a whole, that you'd have to have a pretty massive debt for that kind of hyperinflation to have a net positive utility for you.

Would you mind sharing some stories about what it was like during that time?

Some stories:

A friend at school brought a giant stack of $500 Zimbabwean bills to use at our school tuckshop. This stack of bills was probably about 2 feet high. This was in 2007, and at that point a meat pie or coke must must have cost tens of thousands of dollars at minimum at the tuckshop. It had probably been a while since I'd seen someone actually try to use such a small denomination bill... I asked to hold his stack, but as I was holding it, some of the bills started falling out of the middle. This was during our recess/mid-morning break, and there were a lot of kids standing around. Someone saw this money fall on the ground, and naturally came over and started throwing it in the air ("making it rain", like Lil' Wayne) and soon more joined in. The school headmaster just happened to be walking by (a large, grim-faced white man) and demanded to know who was responsible for all of this. My peers pointed me out, and I got corporal punishment the next day.

Power cuts were constant (daily at their peek) and we didn't have a generator, so I did my homework by candlelight. The city of Harare stopped delivering water to our residence in 2007, and AFAIK haven't resumed...

Another memory that sticks out is when my dad said "hey, let's go get some petrol for the car". This was at 7 or 8 pm, so I got in my pajamas, and we drove to the neighborhood gas station, where we waited over night to pour a few litres of petrol in the car. I didn't even think _that much_ of it: I'd grown up in an era of shortages and economic decline, and the situation only became worse in my teenage years.

Thank you for sharing your stories. I hope you and your family was able to immigrate someplace more stable.

Except that no one is going to sell you anything for such toilet paper money, banks do not offer any credits, and everything is calculated in USD or EUR that become really, really scarce. Basically, all "official" commerce that uses worthless, hyperinflated, currency ceases, and commerce moves to unofficial grey/black market that does business in hard currency. Add to that the problem that the salary at your official job (if you have any) pays in funny money, so you have an additional problem of earning much needed USD/EUR elsewhere.

This is all from experience since I lived through Yugoslavia's 1992-93 hyperinflation (fortunately, as a teenager).

It is good for those who have current debt. But bad for that same class of people in the society who will want to borrow in the future. The forceful voiding of long term contracts is rarely good for the population as a whole.

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.

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...

> Aren't most mortgages effectively inflation-adjusted nowadays?

Not in the US. After the housing bubble popped, ARMs became much less common. Plus, with rates at historical lows, it does not make sense to get any adjustable products.

Not in the US, where majority of mortgages is 30 years fixed.

Only if your wage is compensating for the inflation, which according to that article wasn't always the case (-80% for the workers once adjusted to inflation)

Yes, it depends on other factors too. But for instance in Poland during the time of the hyperinflation of the Zloty plenty of people paid off their mortgage that way.

Banks got hip to that pretty quickly and later mortgages were in Euros while the salaries are still in Zloty, which should be illegal imo.

Strongly agree: banks should handle the risk management, not push it onto consumers, forcing them into mismatching hard currency obligations with soft currency revenues. But this isn't surprising as banks are engines for gouging customers and shareholders by channeling margin into management bonuses.

I we had better Job security. A dignified retirement system. Perhaps a job guarantee or transition job for the unemployed, there would be little need to save. Savings causes recessions.

> Savings causes recessions

If you save in traditional savings accounts, those become reserves against which banks can lend.

If you save in money market funds, those become available in the commercial paper market for businesses to fund daily operations.

If you save in sovereign debt, those become available for government programs.

If you save in equities or corporate debt, those become available to employees, new projects, other shareholders, etc.

The only scenario in which savings contributes to demand-driven recessions is if you literally withdraw cash and place it into your mattress.

No that is ignorance. Their is no such thing as a loanable funds market. I have studied this in depth and ad nauseum. Banks do not lend out savings. This was true in the era of the gold standard but is no longer the case with modern fiat money. Essentially, banks create money(deposits) out of thin air based upon rules and regulations they must follow. They have reserve requirements, however, these do not impede their ability to make loans/deposits because reserves may be borrowed.

Which is why governments bail out banks

No, they typically bail out banks because otherwise the government is on the hook for the shortfall anyway because of the federal insurance of the individual accountholders balances.

Savings are always important because it allows you to be opportunistic with your wealth. Using it when you lose your job is one opportunity. People also use savings to start a business, buy dips, help out family members.

> 150,000% PER DAY

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

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

Thanks, we've updated the headline to clarify.

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

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

>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"

Hyperinflation in 1923, Hitler in 1933, that is ten years later. In that ten years Hitler was imprisoned, wrote Mein Kampf, reorganized the party worked on building paramilitary forces and the party started its rise in 1929. On the other hand the Weimar republic did stabilize at least from 1924 to 1928. So there does not seem to be an obvious connection between the two events, aside from Weimar's general instability.

German Hyperinflation ended in 1923. The earliest dates put the Holocaust starting at 1933.

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

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.

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.

how does your salary fall during deflation?

You could at least provide some evidence and supporting examples. Your comment just said that one followed the other. I'm criticizing your argument, not your conclusion (though I do think your conclusion is a bit of a stretch, but that gets into a whole other argument about what it really means for one event to cause another, is the Arch Duke's driver getting lost REALLY the cause of WWI or would it have happened anyway due to some other reason a few months later because Europe was such a powder keg, yadda yadda yadda).

I didn't dive into this deeper, but that's at least how it was being thought at school here in Belgium (~year 2000).

Summarized from memory: At the end of the 1st world war, Germany was given a huge fine. The Deutsche Mark, deliberatly or not, devalued a lot. The large recession and poverty gave the opportunity for facism and the Nazi party to gain popularity. After the 2nd world war the allied forces realized that giving Germany a huge fine had been a mistake, and thus they didn't repeat that after the 2nd world war.

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