11 ms·

The Worst Hyperinflations in History: Hungary in 1946 (2014)

66 points by jpelecanos 9y ago

mnyary 9y ago
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 9y ago
  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 9y ago
    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 9y ago
      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 9y ago
        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.
        simonh 9y ago
        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.
        nerfhammer 9y ago
        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.
  - Ma8ee 9y ago
    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.
leejo 9y ago
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/
RobertoG 9y ago
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
- bubbleRefuge 9y ago
  nice. upvote. hopefully Bernie runs again and Stefanie Kelton gets a platform to bring MMT ideas to the masses.
  - piyh 9y ago
    Nothing against Bernie, but the dude is 76. I'd prefer someone who will statistically be alive for more than 10 years.
    - tim333 9y ago
      Statistically he should be alive another 14 years or so https://www.johnhancockinsurance.com/life/life-expectancy-tool.aspx https://www.johnhancockinsurance.com/life/life-expectancy-to...
- whatshisface 9y ago
  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.
rootw0rm 9y ago
For such a short article it repeated a lot of things.
jacquesm 9y ago
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.
- alex_duf 9y ago
  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)
  - jacquesm 9y ago
    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.
    - osullivj 9y ago
      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.
- spooky_action 9y ago
  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.
  - matt_wulfeck 9y ago
pdq 9y ago
Misleading title. 2014 is the date of the article, not the time of inflation.
- sctb 9y ago
  Thanks, we've updated the headline to clarify.
kolbe 9y ago
>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"
- openasocket 9y ago
  That sounds like "post hoc ergo propter hoc" to me
  - kolbe 9y ago
    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.
    - openasocket 9y ago
      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).
      - andruby 9y ago
        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.
kragen 9y ago
Note that this isn't about Hungary in 2014, as I thought (and which shocked me). It's about Hungary in 1945–6.
deleted 9y ago
[deleted]
tim333 9y ago
> 150,000% PER DAY That's quite something - so you'd have to stick three zeros on daily

66 points by jpelecanos 9y ago

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 9y ago
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 9y ago
  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 9y ago
    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 9y ago
      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.
      - simonh 9y ago
        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.
      - nerfhammer 9y ago
        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.
- Ma8ee 9y ago
  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.

leejo 9y ago

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/

RobertoG 9y ago

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

bubbleRefuge 9y ago
nice. upvote. hopefully Bernie runs again and Stefanie Kelton gets a platform to bring MMT ideas to the masses.
- piyh 9y ago
  Nothing against Bernie, but the dude is 76. I'd prefer someone who will statistically be alive for more than 10 years.
  - tim333 9y ago
    Statistically he should be alive another 14 years or so https://www.johnhancockinsurance.com/life/life-expectancy-tool.aspx https://www.johnhancockinsurance.com/life/life-expectancy-to...
whatshisface 9y ago
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.

rootw0rm 9y ago

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

jacquesm 9y ago

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.

alex_duf 9y ago
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)
- jacquesm 9y ago
  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.
  - osullivj 9y ago
    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.
spooky_action 9y ago
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.
- matt_wulfeck 9y ago

pdq 9y ago

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

sctb 9y ago
Thanks, we've updated the headline to clarify.

kolbe 9y ago

>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"

openasocket 9y ago
That sounds like "post hoc ergo propter hoc" to me
- kolbe 9y ago
  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.
  - openasocket 9y ago
    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).
    - andruby 9y ago
      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.

kragen 9y ago

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

deleted 9y ago

[deleted]

tim333 9y ago

> 150,000% PER DAY That's quite something - so you'd have to stick three zeros on daily