Last Updated on September 13, 2023
Hyperinflation is a rapid, out-of-control increase of 50% or more in the prices of goods and services over a specific time period.
There have been several cases of hyperinflation in different countries throughout history. They have resulted in an erosion of currencies’ value and economic instabilities.
In this article, we will explore the perils of hyperinflation in 6 countries: Venezuela, Hungary, Greece, Zimbabwe, Yugoslavia, and Germany.
1. Hungary: August 1945 to July 1946
Hyperinflation in Hungary was caused when policymakers tried to get the economy back on track after the war.
The great depression badly hit the agricultural sector, and the country’s colossal debt made the central bank devalue the currency to cover costs.
The economy was in pretty bad shape when World War II unfolded. The central bank was printing money to meet the government’s budgetary needs without any restraint.
The worst case of hyperinflation occurred in the first half of 1946.
By mid-year, the highest denomination bill was the 100,000,000,000,000,000,000 (One Hundred Quintillion) pengo.
The daily inflation rate was 207%, and prices doubled every 15.6 hours, amounting to a monthly inflation rate of 13.6 quadrillion percent.
At that time, it was estimated that Hungary’s pengo was worth one-tenth of a US penny.
The government decided to channel new money into the economy through entrepreneurial activities in the banking sector. The country’s industrial capacity was restored.
In August 1946, the pengo was replaced with the forint, and price stability returned.
2. Zimbabwe, November 2008
Caused by bad policies, economic instabilities, and excessive money printing, the hyperinflation in Zimbabwe collapsed the value of the local currency.
The severe economic challenges made the government start printing money, leading to an excessive money supply.
Prices skyrocketed by 79.6 billion percent in November 2008. The government even decreed that inflation was unlawful and arrested the leaders of companies that increased the costs of their goods and services.
But still, prices doubled every day. The daily inflation rate was about 98%.
The hyperinflation ended with the Reserve Bank of Zimbabwe’s intervention, which pegged the currency to the US dollar.
3. Yugoslavia, April 1992 to January 1994
Several factors, such as economic mismanagement, political instability, and regional conflicts, caused hyperinflation in Yugoslavia.
Prices jumped by 313 million percent monthly, while the daily inflation rate was 64.6%. This led to the loss of confidence in the dinar, the national currency.
As a result, businesses stopped accepting the currency, and the German Deutsche Mark became the currency people relied on. They revalued their currency 5 different times during the hyperinflation.
4. Germany, October 1923
Caused by war reparations and excessive borrowing, Germany’s hyperinflation was one of the worst in history. Prices rose by 29,500% in October 1923.
By November 1923, the exchange rate was 238 million Papiermark to 1 USD. This period was characterized by the term “Zero Shock” due to the countless number of zeroes seen in the transaction of basic goods.
Famous sights from this time include a wheelbarrow of money being used to buy bread and using money as wallpapers.
5. Greece, October 1944
The hyperinflation incident in Greece was largely caused by World War II debt. The prices of goods and services doubled every 4.3 days. They rose by a staggering 13,800% in October 1944 and 1600% in November.
The value of the drachma nosedived, and the biggest bill in Greece was no longer the 50,000 drachma note but a 100 trillion one.
6. Venezuela, 2017 – 2022
Hyperinflation in Venezuela was caused by excessive money printing by the government in a bid to meet obligations when the price of oil dropped.
This took place under the administration of President Nicolás Maduro.
The inflation rate went from 121.74% in 2015 to 254% in 2016 before topping more than 1,000% in 2017 and continuing to escalate further.
Hyperinflation in Venezuela led to severe economic perils and massively increased the poverty rate in the country.
However, in 2022, the country overcame the problem.
You may also like: The Inflation Conversation
Takeaway: The Worst Hyperinflation Cases Showcase the Dangers of Macroeconomic Mismanagement
The cases of hyperinflation in the countries mentioned above are a valuable lesson for policymakers to be careful when drafting macroeconomic strategies.
They also highlight the importance of engaging in more effective governance and implementing policies that help avoid the perils of economic mismanagement.
