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Most (all of them?) episodes of hyperinflation, including the infamous Weimar Republic and Zimbabwe, are not caused by "printing" too much money, but by a fall

Most (all of them?) episodes of hyperinflation, including the infamous Weimar Republic and Zimbabwe, are not caused by "printing" too much money, but by a fall in the productive capacity of the economy. Here, Zimbabwe for hyperventilators: http://bilbo.economicoutlook.net/blog/?p=3773 http://bilbo.economicoutlook.net/blog/?p=3773

Retric 7y ago
That’s misleading. Without creating an ever larger money supply hyper inflation can’t continue. Similarly, hyper inflation requires the state to continue to exist. For example various currency’s have dropped so their only value is as a novelty item or physical object. But once it hits that point it’s value can’t continue to fall.
- RobertoG 7y ago
  We are talking about causality here. In my opinion, it's misleading to insist that the cause of hyperinflation is "printing" money and, never mention, that the real cause is the falling in the productive capacity of the economy. For instance, the narrative about the Zimbabwe crisis is always the same: The government just went crazy and started to print money. In my opinion, that's a totally dishonest narrative (and politically motivated maybe?), when what really happened is that they destroyed their main productive activity (agriculture). >>"Similarly, hyper inflation requires the state to continue to exist." Well, yes, of course, are you saying that the state stopping to exist would be a better alternative?
  - chr1 7y ago
    The drop in productive capacity of the economy was much smaller than the drop in the value of their currency, so going crazy and destroying agriculture was responsible for the first part of inflation, but staying crazy and printing money was responsible for the most of it.
    - RobertoG 7y ago
      Can you support that with some data of citation? I would recommend you to read the below link. It doesn't seem to me that the problem was "printing too much money". From http://bilbo.economicoutlook.net/blog/?p=3773 http://bilbo.economicoutlook.net/blog/?p=3773 : -Unemployment rose to 80 per cent or more and many of those employed scratch around for a part-time living. -45 per cent of the food output capacity was destroyed. -In 2007, there was a 57 percent decline in export mineral shipments (see Financial Gazette for various reports etc). -Manufacturing output fell by 29 per cent in 2005, 18 per cent in 2006 and 28 per cent in 2007. In 2007, only 18.9 per cent of Zimbabwe’s industrial capacity was being used. This reflected a range of things including raw material shortages. But overall, the manufacturers blamed the central bank for stalling their access to foreign exchange which is needed to buy imported raw materials etc. The Reserve Bank of Zimbabwe is using foreign reserves to import food. So you see the causality chain – trash your domestic food supply and then have to rely on imported food, which in turn, squeezes importers of raw materials who cannot get access to foreign exchange. So not only has the agricultural capacity been destroyed, what manufacturing capacity the economy had is being barely utilised.
      - chr1 7y ago
        585.84% [1] inflation in 2005 would correspond to (1-100/585)*100~=83% fall in economic output. Besides the main part of inflation was in 2008 - 79,600,000,000%, which could be explained by shrinking economics only if everyone except two people out of 14mln completely stopped producing anything. [1] https://en.wikipedia.org/wiki/Hyperinflation_in_Zimbabwe#Inflation_rate https://en.wikipedia.org/wiki/Hyperinflation_in_Zimbabwe#Inf...
  - azernik 7y ago
    The drop in productive capacity is the motive, but not the means; the printing of the money is an action to prop up state finances with the direct effect of causing hyperinflation. i.e. the Zimbabwe narrative should be: the government tried to dig itself out of a hole by printing money. Similarly, the German government printed money in the 1920s to try to keep up with reparations payments which were larger than the economy could bear through taxation. (Though of course printing money is effectively a tax on savings, with the added effects of disruption to contracts.) And since the reparations were denominated in hard currency there were diminishing returns, as the government was printing ever-devaluing Papiermarks with which to buy Pounds Sterling and Francs.
    - RobertoG 7y ago
      >>"The drop in productive capacity is the motive, but not the means;" Ok, I though we were talking about the final cause of inflation, not the mechanism, maybe you had something else in mind. Now, if half of the productive economy disappear overnight, inflation is going to happen whatever the government do. You make it look like a government have an option in that situation. If tomorrow morning half the fields and factories in the USA have magically disappear you will have inflation. In those circumstances, what sense would make to say that the "government is guilty because they printed too much money"? Maybe you can tell me some example where something so catastrophic to the real productive economy happened like in Germany in the 20's or Zimbabwe and where inflation didn't happened.
      - Retric 7y ago
        Wars have destroyed huge swaths of a country’s infrastructure without creating hyper inflation. Also of note hyperinflation does not occur with when the physical currency has high intrinsic value. Such as with the gold or silver standard meaning that any physical cause is insufficient on it’s own. Though a currency can and generally will be moved off of these standards in though economic situations. So really the minimum requirements are fiat currency or a close equivalent allowing for significant money creation. Everything else is at best a trigger, but is not always repeated in every instance.

Retric 7y ago

That’s misleading. Without creating an ever larger money supply hyper inflation can’t continue. Similarly, hyper inflation requires the state to continue to exist. For example various currency’s have dropped so their only value is as a novelty item or physical object. But once it hits that point it’s value can’t continue to fall.

RobertoG 7y ago
We are talking about causality here. In my opinion, it's misleading to insist that the cause of hyperinflation is "printing" money and, never mention, that the real cause is the falling in the productive capacity of the economy. For instance, the narrative about the Zimbabwe crisis is always the same: The government just went crazy and started to print money. In my opinion, that's a totally dishonest narrative (and politically motivated maybe?), when what really happened is that they destroyed their main productive activity (agriculture). >>"Similarly, hyper inflation requires the state to continue to exist." Well, yes, of course, are you saying that the state stopping to exist would be a better alternative?
- chr1 7y ago
  The drop in productive capacity of the economy was much smaller than the drop in the value of their currency, so going crazy and destroying agriculture was responsible for the first part of inflation, but staying crazy and printing money was responsible for the most of it.
  - RobertoG 7y ago
    Can you support that with some data of citation? I would recommend you to read the below link. It doesn't seem to me that the problem was "printing too much money". From http://bilbo.economicoutlook.net/blog/?p=3773 http://bilbo.economicoutlook.net/blog/?p=3773 : -Unemployment rose to 80 per cent or more and many of those employed scratch around for a part-time living. -45 per cent of the food output capacity was destroyed. -In 2007, there was a 57 percent decline in export mineral shipments (see Financial Gazette for various reports etc). -Manufacturing output fell by 29 per cent in 2005, 18 per cent in 2006 and 28 per cent in 2007. In 2007, only 18.9 per cent of Zimbabwe’s industrial capacity was being used. This reflected a range of things including raw material shortages. But overall, the manufacturers blamed the central bank for stalling their access to foreign exchange which is needed to buy imported raw materials etc. The Reserve Bank of Zimbabwe is using foreign reserves to import food. So you see the causality chain – trash your domestic food supply and then have to rely on imported food, which in turn, squeezes importers of raw materials who cannot get access to foreign exchange. So not only has the agricultural capacity been destroyed, what manufacturing capacity the economy had is being barely utilised.
    - chr1 7y ago
      585.84% [1] inflation in 2005 would correspond to (1-100/585)*100~=83% fall in economic output. Besides the main part of inflation was in 2008 - 79,600,000,000%, which could be explained by shrinking economics only if everyone except two people out of 14mln completely stopped producing anything. [1] https://en.wikipedia.org/wiki/Hyperinflation_in_Zimbabwe#Inflation_rate https://en.wikipedia.org/wiki/Hyperinflation_in_Zimbabwe#Inf...
- azernik 7y ago
  The drop in productive capacity is the motive, but not the means; the printing of the money is an action to prop up state finances with the direct effect of causing hyperinflation. i.e. the Zimbabwe narrative should be: the government tried to dig itself out of a hole by printing money. Similarly, the German government printed money in the 1920s to try to keep up with reparations payments which were larger than the economy could bear through taxation. (Though of course printing money is effectively a tax on savings, with the added effects of disruption to contracts.) And since the reparations were denominated in hard currency there were diminishing returns, as the government was printing ever-devaluing Papiermarks with which to buy Pounds Sterling and Francs.
  - RobertoG 7y ago
    >>"The drop in productive capacity is the motive, but not the means;" Ok, I though we were talking about the final cause of inflation, not the mechanism, maybe you had something else in mind. Now, if half of the productive economy disappear overnight, inflation is going to happen whatever the government do. You make it look like a government have an option in that situation. If tomorrow morning half the fields and factories in the USA have magically disappear you will have inflation. In those circumstances, what sense would make to say that the "government is guilty because they printed too much money"? Maybe you can tell me some example where something so catastrophic to the real productive economy happened like in Germany in the 20's or Zimbabwe and where inflation didn't happened.
    - Retric 7y ago
      Wars have destroyed huge swaths of a country’s infrastructure without creating hyper inflation. Also of note hyperinflation does not occur with when the physical currency has high intrinsic value. Such as with the gold or silver standard meaning that any physical cause is insufficient on it’s own. Though a currency can and generally will be moved off of these standards in though economic situations. So really the minimum requirements are fiat currency or a close equivalent allowing for significant money creation. Everything else is at best a trigger, but is not always repeated in every instance.