{"id":1717,"date":"2014-04-16T19:07:04","date_gmt":"2014-04-16T19:07:04","guid":{"rendered":"https:\/\/maxrezmedia.com\/website_131ddb8a\/?p=1717"},"modified":"2024-08-13T19:07:28","modified_gmt":"2024-08-13T19:07:28","slug":"the-worst-hyperinflations-in-history-hungary","status":"publish","type":"post","link":"https:\/\/maxrezmedia.com\/website_131ddb8a\/the-worst-hyperinflations-in-history-hungary\/","title":{"rendered":"The Worst Hyperinflations in History: Hungary"},"content":{"rendered":"

Bryan Taylor, Chief Economist, Finaeon<\/p>\n

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If you were to ask most people which country suffered the worst inflation in history, they would answer Germany, since Germany\u2019s hyperinflation after World War I is probably the most famous. By 1923 when Germany finally put an end to its hyperinflation, it took 1 trillion old Marks to get 1 new Rentenmark. 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\u2019s was the worst of them all. Hungary was no stranger to hyperinflation. The Austro-Hungarian Empire was on the losing side of World War I and was broken up after the war. The new nation of Hungary lacked the proper government structures, so it turned to printing money to fill the hole in its budget. Before World War I, there were 5 Kronen to the US Dollar, but by 1924 there were 70,000 Kronen to the US Dollar. So Hungary replaced the Kronen with Peng\u00f6 at the rate of 12,500 Peng\u00f6 to the Kronen in 1926.<\/p>\n

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Hungary was spared much of World War II\u2019s destruction until 1944 when it became a battleground between Russia and Germany, and half of Hungary\u2019s 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. Prices were already rising in Hungary after the war because production capacity fell due to the destruction. With no tax base to rely upon, the Hungarian government decided to stimulate the economy by printing money. It loaned money to banks at low rates who then loaned the money to companies. The government hired workers directly, they provided loans to consumers, and they gave money to people. The government literally flooded the country with money to get the economy going again. Money may not have grown on trees, but it certainly flowed off the printing presses.<\/p>\n

To see how quickly the money supply rose, consider the fact that the currency in circulation stood at 25 billion Peng\u00f6 in July 1945, rose to 1.646 trillion by January 1946, to 65 quadrillion (million billion) Peng\u00f6 by May 1946 and to 47 septillion (trillion trillion) Peng\u00f6 by July 1946. How bad was the inflation? Something that cost 379 Peng\u00f6 in September 1945, cost 72,330 Peng\u00f6 by January 1945, 453,886 Peng\u00f6 by February, 1,872,910 by March, 35,790,276 Peng\u00f6 by April, 11.267 billion Peng\u00f6 by May 31, 862 billion Peng\u00f6 by June 15, 954 trillion Peng\u00f6 by June 30, 3 billion billion Peng\u00f6 by July 7, 11 trillion billion Peng\u00f6 by July 15 and 1 trillion trillion Peng\u00f6 by July 22, 1946. Obviously, the inflation was devastating to the mathematically challenged. At the height of the inflation, prices were rising at the rate of 150,000% PER DAY. By then, the government had stopped collecting taxes altogether because even a single day\u2019s delay in collecting taxes wiped out the value of the money the government collected. Before the war, in March 1941, there were 5 Peng\u00f6 to the US Dollar, by June 1944, there were 33 Peng\u00f6 to the USD and in August 1945 when the real hyperinflation began, there were already 1320 Peng\u00f6 to the USD. Then, the Peng\u00f6 collapsed. There were 100,000 Peng\u00f6 to the USD by November 1945, 1.75 million by March 1946, 59 billion by April 1946, 42 quadrillion by May 1946 and 460 trillion trillion by July 1946. Of course, Hungary had taken some failed measures to reduce the inflation. In December 1945, the government imposed a 75% capital levy by making people turn in 400 Peng\u00f6 and receive 100 Peng\u00f6 back with a stamp on the banknotes to indicate they were legal tender. But they didn\u2019t stop printing money. The hyperinflation made it even more difficult for the government to collect taxes, so they introduced the Adopeng\u00f6 which supposedly was indexed to inflation, but even the indexed Adopeng\u00f6 succumbed to the inflation. By July 1946 there were 2 million trillion Adopeng\u00f6 to the Peng\u00f6. So how did people cope with this onslaught of money? How did the government that printed the money handle so many zeroes? The solution was simple: change the name of the currency. The Peng\u00f6 was replaced by the Milpeng\u00f6 (1,000,000 Peng\u00f6) which in turn was replaced by the Bilpeng\u00f6 (1,000,000,000,000 Peng\u00f6) which was replaced by the inflation-indexed Adopeng\u00f6.<\/p>\n

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The banknotes would have the same picture on them, but be a different color. The Milliard Peng\u00f6 was lavender, the Milliard Milpeng\u00f6 was blue and the Milliard Bilpeng\u00f6 was green, but except for the color, the notes looked alike. Someone who lived through the hyperinflation said they gave up on looking at the denominations and when someone bought something the cashier would say that their bread cost them two blues and a green. The Milliard Bilpeng\u00f6, pictured here, is the highest denomination note ever printed since it was equal to a Billion Trillion Peng\u00f6. Unfortunately, at the end of the inflation, it was only worth about twelve cents USD.<\/p>\n

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The Forint replaced the Peng\u00f6 on August 1, 1946 at the rate of 400,000 Quadrillion Peng\u00f6 to the Forint; however, the stabilization worked, and prices remained relatively stable in Hungary into the 1960s. As for all the old Peng\u00f6, they were thrown away because they were worthless. So did the inflation achieve the goal of stimulating production? The hyperinflation did raise Hungary\u2019s industrial capacity, got the railroads moving again, and got much of the capital stock replaced. However, workers lost 80% of their wages and creditors were wiped out. Politically, however, Hungary\u2019s fate was sealed by the Communists, who eventually seized power and turned the Republic of Hungary into the People\u2019s Republic of Hungary in 1949 with a new constitution modelled on that of the Soviet Union.<\/p>\n","protected":false},"excerpt":{"rendered":"

Bryan Taylor, Chief Economist, Finaeon If you were to ask most people which country suffered the worst inflation in history, they would answer Germany,…<\/p>\n","protected":false},"author":3,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"footnotes":""},"categories":[89,1],"tags":[],"class_list":["post-1717","post","type-post","status-publish","format-standard","hentry","category-april-2014","category-insights"],"acf":[],"_links":{"self":[{"href":"https:\/\/maxrezmedia.com\/website_131ddb8a\/wp-json\/wp\/v2\/posts\/1717","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/maxrezmedia.com\/website_131ddb8a\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/maxrezmedia.com\/website_131ddb8a\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/maxrezmedia.com\/website_131ddb8a\/wp-json\/wp\/v2\/users\/3"}],"replies":[{"embeddable":true,"href":"https:\/\/maxrezmedia.com\/website_131ddb8a\/wp-json\/wp\/v2\/comments?post=1717"}],"version-history":[{"count":2,"href":"https:\/\/maxrezmedia.com\/website_131ddb8a\/wp-json\/wp\/v2\/posts\/1717\/revisions"}],"predecessor-version":[{"id":1726,"href":"https:\/\/maxrezmedia.com\/website_131ddb8a\/wp-json\/wp\/v2\/posts\/1717\/revisions\/1726"}],"wp:attachment":[{"href":"https:\/\/maxrezmedia.com\/website_131ddb8a\/wp-json\/wp\/v2\/media?parent=1717"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/maxrezmedia.com\/website_131ddb8a\/wp-json\/wp\/v2\/categories?post=1717"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/maxrezmedia.com\/website_131ddb8a\/wp-json\/wp\/v2\/tags?post=1717"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}