Throughout history, inflation has been experienced by all countries, big and small, some countries experienced less inflation, while other countries have been devastated by it. Entire economies have been destroyed due to inflation, some countries experienced high inflation, others experiencing hyperinflation. Events of high inflation and hyperinflation have appeared many times throughout history, with some countries recovering and others do not. This post will examine examples of inflation.
Many countries after World War 1 (WW1) experienced high inflation rates, with some experienced hyperinflation and Hungary was no exception. The economy of Hungary was destroyed, with an estimated 35% – 45% of its capital stock being destroyed by the war. After the war had ended and the peace treaties signed with the allied in 1945, Hungary was forced to pay significant reparations to the Soviet Union, which amounted to about 40% of the country’s budget during the hyperinflation era.
Before the war and the peace signing of the peace treaty, the country was engaged in an uncontrolled, debt powered boost to its wartime production to support the German war effort, but in the end, Germany never did pay for the goods and services provided by Hungary. At its height, inflation reached about 13,600,000,000,000,000%, or 13.6 quadrillion percent each month. The hyperinflation reached a point that was so severe, the country released a 100 quintillion note and the prices of basic goods and services doubled every 15 hours. The hyperinflation of the country devastated the middle class at the time.
One of the most recent cases of hyperinflation happened in Zimbabwe in 2008. Robert Mugabe, the president of the country at the time, issued new land reforms that essentially confiscated private property around the country, particularly farms. Farming was an integral part of Zimbabwe’s economy at the time. After the reforms were issued, the economy suddenly and quickly took a turn for the worse, with investors of all sizes withdrawing their capital and moving to other countries. With the country being drained of capital, jobs, and companies, the currency entered an era of hyperinflation.
The citizens of the country who did not leave after the reforms were forced to abandon their own country’s currency due to its incredibly low value. The country shortly after adopted the South African Rand and the US dollar. In November of 2008, at the height of hyperinflation, the rate of inflation reached 79 billion percent, one of the highest rates of inflation in modern history. Despite the events taking place 13 years ago, the people of the country still do not trust the Zimbabwean dollar and continue to use the US dollar and the South African Rand to pay for goods and services.
The Greek economy is not a stranger to economic hardships, hyperinflation, and economic declines, having experienced many in the past 100 years. Similar to other countries exiting from WW2, Greece also experienced a period of hyperinflation from May 1941 to December 1945. This is mainly due to a significant decrease in foreign trade due to the war and then the situation was made worse when the axis later invaded the country.
Before the invasion happened, the country was experiencing a surplus of 271 million drachma in 1939 and just one year later, experiencing a deficit of 790 million drachma in 1940 due to the war. The invading and occupying army forced Greece to support about 400,000 soldiers in the country at their own cost, further increasing inflation. Another cause for the hyperinflation is the governments revenue income of the country was severely impacted by the war, decreasing from 67 billion drachma in 1938 to just 20 billion drachma by the year 1942. To make up for lost tax revenue, the country decided to increase the supply of drachma to pay the country’s expenditures and deficit. At its height, the inflation rate was 540% per month, essentially doubling the prices of goods and services every 4 days.
Yugoslavia was one of the countries to associate with the Soviet Union in the eastern bloc. Due to their association with the Soviet Union, the country adopted many communist and socialist policies after independence. After the fall of the Soviet Union, the country was severely impacted, especially its economy due to lack of economic output, geopolitics, and incredibly generous policies. As a result, the country spent too much capital, borrowed too much. Ultimately to keep the country afloat they printed too much money.
Yugoslavia fall apart in early 1992 and conflict arose in Croatia and Bosnia-Herzegovina, leading the path to a monthly inflation rate of 50%. Inflation started to rise during the beginning stages of the country’s break up, especially as trade between other regions declined, as did with countless of industries and sectors.
By the late 1980s, Peru had significant amounts of debt they were unable to manage by two administrations. The first administrations had implemented tax reforms that reduced taxes, removed tariffs and introducing Peru to the international economy. The second administration then introduced industry protections and combined with all Peruvian industries competing on the international open market, the small country’s economy was no match.
The shrinking economy, agriculture collapse, warfare policies, natural disasters, bad infrastructure, and bad government policies led to hyperinflation in the early 1990s. In 1991, the inflation rate was an estimated 7,000% and the GDP per capita decreased by 35% since 1987. The country’s economy remained relatively unchanged until the early 2000’s when drastic economic reforms were adopted by the government. Due to the stagnant growth experienced by the country, the 1990s were called the lost decades. The two decades spanning the 1980’s and the 1990’s have largely been put behind and the country is experiencing growth, with the current GDP per capita at about $6,000.
One of the earliest documented cases of hyperinflation occurred in France during the mid 1790s. From May 1795 to November 1796, France experienced hyperinflation. The main cause of hyperinflation during that area of France was mainly due to wars and the debt the followed. The French revolution was in effect and the bastille prison was stormed, along with the declaration of war against the Habsburg Monarchy of Austria on April 20, 1796. They were also fighting a war in the United States against Great Britain.
Due to the extensive and costly wars, the French National Assembly started to print more money to cover the costs of the war, deficits, and debt. The plan was briefly successful, but soon the country experienced hyperinflation as more currency was printed. The peak month for the inflation rate was in August of 1796, with a rate of more than 300%. The inflation rate averaged 5% throughout the era and the prices of goods and services doubled every 15 days. When compared to other hyperinflation events, the period in which France experienced hyperinflation is relatively short but was still devastating to the economy.
There are countries currently experiencing high rates of inflation that are not categorized as hyperinflation, such as Sudan, where the inflation rate for 2020 was 84.9% and about 160% in 2021. Zimbabwe is also back on track for hyperinflation, as the country is experiencing inflation rates over 550% for the 2020 year. Other counties experiencing higher than normal rates of inflation are Argentina at 42%, South Sudan at 38%, and Suriname at 34%.
In total, there has been a total of about 55 cases of hyperinflation occurring in various economies throughout history, many of which are related to war. Hyperinflation has seen a sharp decline in recent decades, as economists and financial experts can prevent such dangerous events from occurring due to extensive research understanding of economies and counter measures being developed.
This post was written with Fiverr, the author Financialquazar is a finance graduate and economist with an interest in history, economics and business. I hire writers to write about topics they excel at, allowing you and I to benefit from the knowledge they possess. Read another post Investing for Inflation by the same author. Subscribe for more business, sales and investing posts. Have a lovely day.
