Is Britain Sliding Towards Hyperinflation?

[Guest_ringledman_*]

A truely excellent article setting out our route to hyperinfltation if we don't stop non-productive, wealth destroying government spending now.

Also a good article to show to the non-believers how the curent crises has its 'ROOT CAUSE' firmly and squarely with big governments.

Governments are the root cause of all crises. The root cause of all our economic problems.

For all you public sector, big government lovers, if the free market had been allowed to correct itself, we would all now be sitting in large 5 bedroom houses and paying no more than £100k for the privilege.

http://www.moneyweek.com/news-and-charts/economics/britains-road-to-hyperinflation-00908.aspx

By Dominic Frisby Mar 03, 2010

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Beware the spectre of hyperinflation

Greece was upstaged yesterday afternoon as another nation stepped into the sovereign debt crisis spotlight. This time it's Ukraine grabbing the headlines.

Ukraine's economy shrunk by some 15% last year. The country was loaned $16.4bn by the International Monetary Fund (IMF), but the funds have effectively been frozen since November, due to political turmoil.

Last month's disputed election led to a court challenge, while the 2010 budget has been hindered by legislative fighting. Today, Prime Minister Yulia Tymoshenko and her cabinet were dismissed after a no-confidence vote by parliament, leaving newly-elected president Viktor Yanukovych with the tricky task of forming a new coalition government.

That's a shame for the Ukrainians, you might be thinking. But what's it got to do with us? Plenty. Ukraine's plight offers a grim warning for the UK – here's why...

It's no wonder forex markets have got the jitters

A political overhaul may bring some much-needed stability back to Ukraine. But for now, the country is struggling to raise enough money in financial markets to service its foreign and domestic debt. Yesterday's attempt to raise money by issuing three-year domestic bonds saw yields rise to 22.92%. That is a staggering number.

So it's no wonder that the foreign exchange (forex) markets have got the jitters about the impact of a hung parliament in the UK on sterling. Here's an updated version of the chart I posted a few weeks back of sterling vs the US dollar. We have broken down through that channel (the blue lines on the chart) with alarming violence.

For now we seem to be finding support at the $1.49 area. I would urge you, if you don't already have any foreign currency exposure or gold, to take advantage of any bounce we see in the coming weeks – and we should get one – to move some assets out of sterling and hedge yourselves.

Looking at a longer-term chart since 1991, there's a lot of support at $1.45 and at just below $1.40. But a re-test of last year's lows looks fairly inevitable at some stage this year.

A move below last year's lows around $1.35 would be very serious. Given the chart action of the past 20 years, it's most unlikely. But I would not rule it out. The speed and violence of this last month's move down suggests that Gordon Brown's chickens – the consequences of excess UK debt – may now be coming home to roost.

Britain's road to hyperinflation

This reminds me of a flow chart published by the trader Michael Hampton last year on his website globaledgeinvestors.com. You can see it below. It describes the US, but it also applies here in the UK.

A word of warning: when I first saw it my initial instinct was to jump on the first train out of Dodge, so to speak, and head for the hills. But don't panic. Yes, it predicts a depression, or severe recession at least. But it does not point to Armageddon. Despite the connotations of the word depression and the fears associated with it, it is in fact not an abnormal part of the business cycle. As long as you are prepared, you can protect your wealth. And there's no guarantee, of course, it will actually play out this way. Take a look at it, and I'll explain the steps in more detail below.

The chart makes many of the same arguments we've made in the past. After the dotcom bust, Alan Greenspan slashed US interest rates and other central banks followed. This led to reckless lending and malinvestment; we saw bubbles in numerous assets, particularly housing. That takes us from step one to step four.

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Special FREE report from MoneyWeek magazine: When will house prices bottom out - and how will you know?

Why UK property prices are going to fall 50%

When it will be time to get back in and buy up half price property

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As stages five to seven depict, the bursting credit bubble led to huge losses for the banks in 2007-8. The banks were bailed out, interest rates were slashed further, and central banks used quantitative easing, or money printing, to tackle collapsing credit availability. The banks' toxic assets have effectively been transferred onto the balance sheets of governments.

The UK now sits somewhere between steps eight, nine and ten. We are vulnerable to higher rates (step eight). Gilt yields are slowly rising as our creditors start to get the jitters (step nine). And we are starting to see a weaker pound (step ten).

If this process continues – and a break below $1.35 on the US dollar index will tell us the process is accelerating – then the next phase of much-weakened sterling will mean considerably higher costs on imported goods, particularly commodities. The resulting higher inflation rates will have to force interest rates up eventually. This leads to steps 12 and 13, another squeeze on borrowers, which results in further falls in consumer spending and in house prices.

Is a monetary crisis inevitable?

At this point, the government may try to bail the economy out yet again – or simply repay its debts - using more QE or other forms of money printing (steps 14 and 15). But if we do that then some kind of currency or monetary crisis seems inevitable, even if hyperinflation (step 16), may be an extreme view. The end result is step 17, a collapse in the government.

Now as I noted above, it may not pan out this way. But governments have a history of following the path of least resistance. And so far that's exactly what they've done. Britain's politicians talk about cutting the deficit, but will whoever wins the next election actually have the strength to push through the level of cuts the economy needs?

With all this on the not-so-distant horizon, it's little wonder that gold has resumed its uptrend. An ounce of gold now costs some €834. Closer to home, an ounce of gold costs £758, a new high against sterling. It has risen – or sterling has fallen – by some 10% in the last five trading days. As my colleague John Stepek noted yesterday, it's the best currency trade you can make.

[Guest UK Debt Slave]

The answer is YES

The probable outcome will be that enough people realize our monetary system is a fantasy

The British ruling class think they can engineer a global fiat currency system.

The natural order of things will shatter the delusion because human behaviour and psychology is always more powerful than any artificially constructed economy.

The rulers THINK they are in control. The future will prove them wrong.

There's a little way further to go yet........but it'll happen

[Once in a lifetime]

Oh-Noes..!

[abharrisson]

A truely excellent article setting out our route to hyperinfltation if we don't stop non-productive, wealth destroying government spending now.

Also a good article to show to the non-believers how the curent crises has its 'ROOT CAUSE' firmly and squarely with big governments.

Governments are the root cause of all crises. The root cause of all our economic problems.

For all you public sector, big government lovers, if the free market had been allowed to correct itself, we would all now be sitting in large 5 bedroom houses and paying no more than £100k for the privilege.

http://www.moneyweek.com/news-and-charts/economics/britains-road-to-hyperinflation-00908.aspx

One things for sure if a clear political conclusion is not reached in the forthcoming UK election then we'll be in for a very rough ride... if we get a minoiryt govt or hung parliament we will be in huge amounts of difficulties until one party or the other convinces us we should give them a clear mandate... be in doubt whatsoever of the number of people who will vote for brown ( partly I suspect driven I suspect by those public sector workers hoping to cling on to jobs/salaries/benefits/pensions)... trouble is fo course while Brown and continued spending excess would be a disaster.. cameron has hardly set the world on fire with his plans.

[R K]

, if the free market had been allowed to correct itself, we would all now be sitting in large 5 bedroom houses and paying no more than £100k for the privilege.

Ignoring the not insignificant point that had the 'free market' () been allowed to correct itself you wouldn't have any banks left or any money to buy a 5 bedroom house. You wouldn't in fact be buying anything at all, you'd be in Zurich rubbing your precious..........the last thing anyone would be doing in the UK would be buying a house, you'd be too busy trying not to be killed and having your gold nicked.

The hyperinflationists are beyond the pale nutjobs.

Even Faber is looking to at least 5 to 10 years and even then he always qualifies what he says relating to the dollar with 'if they carry on with the present policies'. I listen very carefully to Faber and he is far more nuanced than these hyperinflationary nujobs comparing Britain to Ukraine and Icelend.

Edited March 5, 2010 by Red Kharma

[InternationalRockSuperstar]

For all you public sector, big government lovers, if the free market had been allowed to correct itself, we would all now be sitting in large 5 bedroom houses and paying no more than £100k for the privilege

in a free market, I doubt we'd be using queen-headed paper as currency.

[Mega]

"They" are trying to save their Fiat currancy, they are trying to invent SDR's.....................China/Russia etc will not allow them to swap one fiat currancy with another.............they want a large part of any SDR to be Gold/silver..........the rest of the World agrees........expect US & UK.

We will not hyper inflat at this point, but high inflation is on the cards.

Mike

[Guest_ringledman_*]

Ignoring the not insignificant point that had the 'free market' () been allowed to correct itself you wouldn't have any banks left or any money to buy a 5 bedroom house. You wouldn't in fact be buying anything at all, you'd be in Zurich rubbing your precious..........the last thing anyone would be doing in the UK would be buying a house, you'd be too busy trying not to be killed and having your gold nicked.

The hyperinflationists are beyond the pale nutjobs.

Even Faber is looking to at least 5 to 10 years and even then he always qualifies what he says relating to the dollar with 'if they carry on with the present policies'. I listen very carefully to Faber and he is far more nuanced than these hyperinflationary nujobs comparing Britain to Ukraine and Icelend.

BS.

The free market would have allowed a recession in 2001 to run its course. If you read Faber then read some Schiff. He says the free market over the past 200 years allowed for a mild recession to occur every 4-5 years where people paid down debt and asset prices corrected mildly.

If the governments had not iterfered with artificially low intererst rates then the property bubble would never have occured to its extent in the first place.

Secondly, Faber refers to the USA. THE OWNER OF THE WORLD'S RESERVE CURRENCY.

If the US has 5-10 year. We have 3-5 years or so.

Continuing as we are for 5 years will lead to hyperinflation.

We can reverse this but only if we change course soon. The markets won't wait forever.

Edited March 5, 2010 by ringledman

[Guest_ringledman_*]

And explain why the West went from 1991 to 2008 without a recession???

Government rates TOO LOW TOO LONG.

Governments EXPANDING TOO MUCH WITHOUT PRODUCING REAL WEALTH CREATING INDUSTRIES.

[lowrentyieldmakessense(honest!)]

And explain why the West went from 1991 to 2008 without a recession???

Government rates TOO LOW TOO LONG.

Governments EXPANDING TOO MUCH WITHOUT PRODUCING REAL WEALTH CREATING INDUSTRIES.

enough may start to get it soon

hopefully

[AteMoose]

not hyper but higher, zimbabwe had inflation of 15->20% per year for 10 or so years before it went hyper. I'm not sure the UK will reach hyper, as we will back off like we did in the late 70s/early 80s before things kick off.

[Guest_ringledman_*]

enough may start to get it soon

hopefully

Unfortunately the total collapse of the system will probably occur first and then people will get it.

Only then will we be able to realise the errors of our ways.

The errors of large governments that produces no 'real' income.

The errors of proping up unproductive capital sucking government zombie entities.

The errors of a 50% public sector GDP.

The errors of 28% corporation taxes sending the wealth creating industries East.

The errors of negative interest rates, stealing wealth from our income reliant retirees and creating the whole crises in the first place.

Only then can we start again and build a real economy and nation on real foundations of private enterprise, liberty, small government and real wealth...

Edited March 5, 2010 by ringledman

[fallingbuzzard]

Very wrong, we are the root, not governments, but most of the rest I would agree with

A truely excellent article setting out our route to hyperinfltation if we don't stop non-productive, wealth destroying government spending now.

Also a good article to show to the non-believers how the curent crises has its 'ROOT CAUSE' firmly and squarely with big governments.

Governments are the root cause of all crises. The root cause of all our economic problems.

For all you public sector, big government lovers, if the free market had been allowed to correct itself, we would all now be sitting in large 5 bedroom houses and paying no more than £100k for the privilege.

http://www.moneyweek.com/news-and-charts/economics/britains-road-to-hyperinflation-00908.aspx

[InternationalRockSuperstar]

Very wrong, we are the root, not governments, but most of the rest I would agree with

eh?

have you been printing vast quatities of £20 notes in your garden shed?

[Guest UK Debt Slave]

The answer is YES

The probable outcome will be that enough people realize our monetary system is a fantasy

The British ruling class think they can engineer a global fiat currency system.

The natural order of things will shatter the delusion because human behaviour and psychology is always more powerful than any artificially constructed economy.

The rulers THINK they are in control. The future will prove them wrong.

There's a little way further to go yet........but it'll happen

What a dreadful post

Did I write this piece of zhit?

Oh damn! I wrote 6700 posts of gibbering nonsense here.

MASSIVE DOH!!!!

(Red wine haze)

[fallingbuzzard]

People want wealth. Most people own houses. Thats why we, or they , are the root.

I have been convincing people to give me more of those £20 notes than I expected, but I do wonder where they got them from before I convert them back to dollars.

eh?

have you been printing vast quatities of £20 notes in your garden shed?

[InternationalRockSuperstar]

People want wealth. Most people own houses. Thats why we, or they , are the root.

wealth doesn't cause hyper-inflation tho.

you're not going to get hyper-inflation without massive amounts of printy printy, and it's the gov't that's doing that.

[laurejon]

Essentially it works like this.

You go to school and you are taught that money is everything, its what you will strive to earn when you leave school in order to support yourself.

Lets substitute the word Pounds Sterling, for the words Shower Curtain Rings.

You leave school and you get your first pay cheque that indicates you have earnt 1,000 shower curtain rings that month, and you have a choice on whether to spend your curtain rings, or save them up and earn interest on them, so the 1,000 curtain rings becomes 1,040 shower rings at the end of the year having earnt 4% interest, less two shower rings taken in tax.

Next month you exchange your curtain rings for a cheap car, then you get married and spend many hundreds of thousands of saved rings on a house, and borrow many hundreds of thousands in order to make the shortfall.

At the end of your working life you count all your shower rings up and deduce that you are rich, you have a million + shower curtain rings to your name after a lifetimes work, then someone overseas brings you down to earth.

You have been had, your shower rings are now worthless and you are a fool for working an entire lifetime collecting them.

Edited March 6, 2010 by laurejon

[Errol]

The hyperinflationists are beyond the pale nutjobs.

Oh really? I wonder if the people who predicted the hyperinflationary events below were also called 'nutjobs' at the time? Note the length of the list ...

EXAMPLES OF HYPERINFLATION

Angola

Angola went through its worst inflation from 1991 to 1995. In early 1991, the highest denomination was 50,000 kwanzas. By 1994, it was 500,000 kwanzas. In the 1995 currency reform, 1 readjusted kwanza was exchanged for 1,000 kwanzas. The highest denomination in 1995 was 5,000,000 readjusted kwanzas. In the 1999 currency reform, 1 new kwanza was exchanged for 1,000,000 readjusted kwanzas. The overall impact of hyperinflation: 1 new kwanza = 1,000,000,000 pre 1991 kwanzas.

Argentina

Argentina went through steady inflation from 1975 to 1991. At the beginning of 1975, the highest denomination was 1,000 pesos. In late 1976, the highest denomination was 5,000 pesos. In early 1979, the highest denomination was 10,000 pesos. By the end of 1981, the highest denomination was 1,000,000 pesos. In the 1983 currency reform, 1 Peso argentino was exchanged for 10,000 pesos. In the 1985 currency reform, 1 austral was exchanged for 1,000 pesos argentinos. In the 1992 currency reform, 1 new peso was exchanged for 10,000 australes. The overall impact of hyperinflation: 1 (1992) peso = 100,000,000,000 pre-1983 pesos.

Austria

In 1922, inflation in Austria reached 1426%. From 1914 to January 1923, the consumer price index rose by a factor of 11836. With the highest banknote in denominations of 500,000 Austro-Hungarian krones.[13]

Belarus

Belarus went through steady inflation from 1994 to 2002. In 1993, the highest denomination was 5,000 rublei. By 1999, it was 5,000,000 rublei. In the 2000 currency reform, the ruble was replaced by the new ruble at an exchange rate of 1 new ruble = 1,000 old rublei. The highest denomination in 2008 was 100,000 rublei, equal to 100,000,000 pre-2000 rublei.

Bolivia

Bolivia went through its worst inflation between 1984 and 1986. Before 1984, the highest denomination was 1,000 pesos bolivianos. By 1985, the highest denomination was 10 Million pesos bolivianos. In 1985, a Bolivian note for 1 million pesos was worth 55 cents in US dollars, one-thousandth of its exchange value of $5,000 less than three years previously.[14] In the 1987 currency reform, the Peso Boliviano was replaced by the Boliviano at a rate of 1,000,000 : 1.

Bosnia-Herzegovina

Bosnia-Herzegovina went through its worst inflation in 1993. In 1992, the highest denomination was 1,000 dinara. By 1993, the highest denomination was 100,000,000 dinara. In the Republika Srpska, the highest denomination was 10,000 dinara in 1992 and 10,000,000,000 dinara in 1993. 50,000,000,000 dinara notes were also printed in 1993 but never issued.

Brazil

From 1986 to 1994, the base currency unit was shifted three times to adjust for inflation in the final years of the Brazilian military dictatorship era. A 1967 cruzeiro was, in 1994, worth less than one trillionth of a US cent, after adjusting for multiple devaluations and note changes. In that same year, inflation reached a record 2075.8%. A new currency called real was adopted in 1994, and hyperinflation was eventually brought under control.[15] The real was also the currency in use until 1942; 1 (current) real is the equivalent of 2,750,000,000,000,000,000 of old reals (called réais in Portuguese).[dead link][16]

Bulgaria

During 1996 the Bulgarian economy collapsed due to the BSP's slow and mismanaged economic reforms, its disastrous agricultural policy, and an unstable and decentralized banking system, which led to an inflation rate of 311% and the collapse of the lev, with an exhange rate $1:Lev reaching 1:3000. When pro-reform forces came into power in the spring 1997, an ambitious economic reform package, including introduction of a currency board regime and pegging the Bulgarian Lev to the German Deutsche Mark (and consequently to the euro), was agreed to with the IMF and the World Bank, and the economy began to stabilize.

Chile

Beginning in 1971, during the presidency of Salvador Allende, Chilean inflation began to rise and reached peaks of 1,200% in 1973. As a result of the hyperinflation, food became scarce and overpriced. A 1973 coup d'état deposed Allende and installed a military government led by Augusto Pinochet. Pinochet's free-market economic policy ended the inflation and except for an economic depression in 1981 the economy has recovered. Overall impact of the inflation: 1 current Chilean Peso = 1,000 Escudos.

China

As the first user of fiat currency, China has had an early history of troubles caused by hyperinflation. The Yuan Dynasty printed huge amounts of fiat paper money to fund their wars, and the resulting hyperinflation, coupled with other factors, led to its demise at the hands of a revolution. The Republic of China went through the worst inflation 1948-49. In 1947, the highest denomination was 50,000 yuan. By mid-1948, the highest denomination was 180,000,000 yuan. The 1948 currency reform replaced the yuan by the gold yuan at an exchange rate of 1 gold yuan = 3,000,000 yuan. In less than 1 year, the highest denomination was 10,000,000 gold yuan. In the final days of the civil war, the Silver Yuan was briefly introduced at the rate of 500,000,000 Gold Yuan. Meanwhile the highest denomination issued by a regional bank was 6,000,000,000 yuan (issued by Xinjiang Provincial Bank in 1949). After the renminbi was instituted by the new communist government, hyperinflation ceased with a revaluation of 1:10,000 old Renminbi in 1955.

Free City of Danzig

Danzig went through its worst inflation in 1923. In 1922, the highest denomination was 1,000 Mark. By 1923, the highest denomination was 10,000,000,000 Mark.

Georgia

Georgia went through its worst inflation in 1994. In 1993, the highest denomination was 100,000 coupons [kuponi]. By 1994, the highest denomination was 1,000,000 coupons. In the 1995 currency reform, a new currency lari was introduced with 1 lari exchanged for 1,000,000 coupons.

Germany

Main article: Inflation in the Weimar Republic

Germany went through its worst inflation in 1923. In 1922, the highest denomination was 50,000 Mark. By 1923, the highest denomination was 100,000,000,000,000 Mark. In December 1923 the exchange rate was 4,200,000,000,000 Marks to 1 US dollar.[17] In 1923, the rate of inflation hit 3.25 × 106 percent per month (prices double every two days). Beginning on 20 November 1923, 1,000,000,000,000 old Marks were exchanged for 1 Rentenmark[17] so that 4.2 Rentenmarks were worth 1 US dollar, exactly the same rate the Mark had in 1914.

Greece

Greece went through its worst inflation in 1944. In 1942, the highest denomination was 50,000 drachmai. By 1944, the highest denomination was 100,000,000,000,000 drachmai. In the 1944 currency reform, 1 new drachma was exchanged for 50,000,000,000 drachmai. Another currency reform in 1953 replaced the drachma at an exchange rate of 1 new drachma = 1,000 old drachmai. The overall impact of hyperinflation: 1 (1953) drachma = 50,000,000,000,000 pre 1944 drachmai. The Greek monthly inflation rate reached 8.5 billion percent in October 1944.

The 100 million b.-pengő note was the highest denomination of banknote ever issued, worth 1020 or 100 quintillion Hungarian pengő (1946).

Hungary

Hungary went through the worst inflation ever between the end of 1945 and July 1946. In 1944, the highest denomination was 1,000 pengő. By the end of 1945, it was 10,000,000 pengő. The highest denomination in mid-1946 was 100,000,000,000,000,000,000 pengő. A special currency the adópengő - or tax pengő - was created for tax and postal payments [1]. The value of the adópengő was adjusted each day, by radio announcement. On 1 January 1946 one adópengő equaled one pengő. By late July, one adópengő equaled 2,000,000,000,000,000,000,000 or 2×1021 pengő. When the pengő was replaced in August 1946 by the forint, the total value of all Hungarian banknotes in circulation amounted to one-thousandth of one US dollar.[18] It is the most severe known incident of inflation recorded, peaking at 1.3 × 1016 percent per month (prices double every 15 hours) [19] . The overall impact of hyperinflation: On 18 August, 1946 400,000,000,000,000,000,000,000,000,000 or 4 × 1029 (four hundred octillion (short scale)) pengő became 1 forint.

One source [2] states that this hyperinflation was purposely started by trained Russian Marxists in order to destroy the Hungarian middle and upper classes. The 1946 currency reform changed the currency to the forint. Earlier, between 1922 and 1924, inflation in Hungary had reached 98%.

Israel

Inflation accelerated in the 1970s, rising steadily from 13% in 1971 to 111% in 1979. From 133% in 1980, it leaped to 191% in 1983 and then to 445% in 1984, threatening to become a four-digit figure within a year or two. In 1985 Israel froze all prices by law. That same year, inflation more than halved, to 185%. Within a few months, the authorities began to lift the price freeze on some items; in other cases it took almost a year. By 1986, inflation was down to 19%.

Japan

After WW II, Japan went through the highest denomination at that time, which was a 75,000,000,000 Yen bank cheque. The Japan wholesale price index (relative to 1 as the average of 1930) shot up to 16.3 in 1943, 127.9 in 1948 and 342.5 in 1951. In the early 1950s, after achieving independence from USA, Japan controlled its own money. Through its rapidly growing export trade, Japan stabilized the Yen quickly.

Krajina

Krajina went through the worst inflation in 1993. In 1992, the highest denomination was 50,000 dinara. By 1993, the highest denomination was 50,000,000,000 dinara. Note that this unrecognized country was reincorporated into Croatia in 1998.

Madagascar

The Malagasy franc had a turbulent time in 2004, losing nearly half its value and sparking rampant inflation. On 1 January 2005 the Malagasy ariary replaced the previous currency at a rate of one ariary for five Malagsy francs. In May 2005 there were riots over rising inflation, although falling prices have since calmed the situation.

Mozambique

Mozambique was one of the world's poorest countries when it became independent in 1975. Mismanagement and a brutal civil war from 1977-92 led to continued inflation. The highest denomination in 1976 was 100 meticals. By 2004, it was 500,000 meticals. In the 2006 currency reform, 1 new metical was exchanged for 1,000 old meticals.

Nicaragua

Nicaragua went through the worst inflation from 1987 to 1990. From 1943 to April 1971, one US dollar equalled 7 córdobas. From April 1971 to early 1978, one US dollar was worth 10 córdobas. In early 1986, the highest denomination was 10,000 córdobas. By 1987, it was 1,000,000 córdobas. In the 1988 currency reform, 1 new córdoba was exchanged for 10,000 old córdobas. The highest denomination in 1990 was 100,000,000 new córdobas. In the 1991 currency reform, 1 new córdoba was exchanged for 5,000,000 old córdobas. The overall impact of hyperinflation: 1 (1991) córdoba = 50,000,000,000 pre-1988 córdobas.

Peru

Peru went through its worst inflation from 1988 to 1990. In the 1985 currency reform, 1 inti was exchanged for 1,000 soles. In 1986, the highest denomination was 1,000 intis. But in September 1988, monthly inflation went to 132%. In August 1990, monthly inflation was 397%. The highest denomination was 10,000,000 intis by 1991. In the 1991 currency reform, 1 nuevo sol was exchanged for 1,000,000 intis. The overall impact of hyperinflation: 1 nuevo sol = 1,000,000,000 (old) soles.

Philippines

The Japanese government occupying the Philippines during the World War II issued fiat currencies for general circulation. The Japanese-sponsored Second Philippine Republic government led by Jose P. Laurel at the same time outlawed possession of other currencies, most especially "guerilla money." The fiat money was dubbed "Mickey Mouse Money" because it is similar to play money and is next to worthless. Survivors of the war often tell tales of bringing suitcase or bayong (native bags made of woven coconut or buri leaf strips) overflowing with Japanese-issued bills. In the early times, 75 Mickey Mouse pesos could buy one duck egg[20]. In 1944, a box of matches cost more than 100 Mickey Mouse pesos.[21].

In 1942, the highest denomination available was 10 pesos. Before the end of the war, because of inflation, the Japanese government was forced to issue 100, 500 and 1000 peso notes.

Poland

Poland went through inflation (second time) between 1989 and 1991. The highest denomination in 1989 was 200,000 zlotych. It was 1,000,000 zlotych in 1991 and 2,000,000 zlotych in 1992; the exchange rate was 9500 zlotych for 1 US dollar in January 1990 and 19600 zlotych at the end of August 1992. In the 1994 currency reform, 1 new zloty was exchanged for 10,000 old zlotych and 1 US$ exchange rate was ca. 2.5 zlotych (new).

Previously, between 1922 and 1924, Polish inflation reached 275% and exchange rate in 1923 was 6,375,000 Polish marka (mkp) for 1 US dollar (before the inflation there was only 9 mkp for 1US$ in 1918), and the highest denomination was 10,000,000 mkp. In the 1924 currency reform there was new currency introduced: 1 zloty = 1,800,000 mkp.

Republika Srpska

Republika Srpska was the breakaway region of Bosnia. As with Krajina, it pegged its currency, the Republika Srpska dinar, to that of Yugoslavia. Their bills were almost the same as Krajina's, but they issued fewer and did not issue currency after 1993.

Romania

Romania is still working through steady inflation. The highest denomination in 1990 was 100 lei and in 1998 was 100,000 lei. By 2000 it was 500,000 lei. In early 2005 it was 1,000,000 lei. In July 2005 the leu was replaced by the new leu at 10,000 old lei = 1 new leu. Inflation in 2005 was 9%. In 2006 the highest denomination is 500 lei (= 5,000,000 old lei).

Russian Federation

Between 1921 and 1922 inflation in Soviet Russia reached 213%.

In 1992, the first year of post-Soviet economic reform, inflation was 2,520%. In 1993 the annual rate was 840%, and in 1994, 224%. The ruble devalued from about 40 r/$ in 1991 to about 5,000 r/$ in late 1997. In 1998, a denominated ruble was introduced at the exchange rate of 1 new ruble = 1,000 pre-1998 rubles. In the second half of the same year ruble fell to about 30 r/$ as a result of financial crisis.

Taiwan

As the Chinese Civil War reached its peak. Taiwan also suffered from the hyperinflation that has ravaged China in late 1940's. Highest denomination issued was 1,000,000 Dollar Bearer's Cheque. Inflation was finally brought under control at introduction of New Taiwan Dollar in 15 June 1949 at rate of 40,000 old Dollar = 1 New Dollar

Turkey

Throughout the 1990s Turkey dealt with severe inflation rates that finally crippled the economy into a recession in 2001. The highest denomination in 1995 was 1,000,000 lira. By 2005 it was 20,000,000 lira. Recently Turkey has achieved single digit inflation for the first time in decades, and in the 2005 currency reform, introduced the New Turkish Lira; 1 was exchanged for 1,000,000 old lira.

A 100,000 Ukrainian karbovantsi (used between 1992 and 1996). In 1996, it was taken out of circulation, and was replaced by the Hryvnya at an exchange rate of 100,000 karbovantsi = 1 Hryvnya (approx. USD 0.50 at that time, about USD 0.20 as of 2007). This translates to an average inflation rate of approximately 1400% per month between 1992 and 1996

Ukraine

Ukraine went through its worst inflation between 1993 and 1995. In 1992, the Ukrainian karbovanets was introduced, which was exchanged with the defunct Soviet ruble at a rate of 1 UAK = 1 SUR. Before 1993, the highest denomination was 1,000 karbovantsiv. By 1995, it was 1,000,000 karbovantsiv. In 1996, during the transition to the Hryvnya and the subsequent phase out of the karbovanets, the exchange rate was 100,000 UAK = 1 UAH. This translates to a hyperinflation rate of approximately 1,400% per month. And to this day Ukraine holds the world record for most inflation in one calendar year, which was set in 1993.[22]

United States

During the Revolutionary War, the Continental Congress authorized the printing of paper currency called continental currency. The easily counterfeited notes depreciated rapidly, giving rise to the expression "not worth a continental."

Between January 1861 and April 1865, the Lerner Commodity Price Index of leading cities in the eastern Confederacy states increased from 100 to over 9000.[23] As the U.S. Civil War dragged on the Confederate States of America dollar had less and less value, until it was almost worthless by the last few months of the war.

A 500 billion Yugoslav dinar banknote circa 1993, the largest nominal value ever officially printed in Yugoslavia, the final result of hyperinflation.

Yugoslavia

Yugoslavia went through a period of hyperinflation and subsequent currency reforms from 1989 to 1994. The highest denomination in 1988 was 50,000 dinars. By 1989 it was 2,000,000 dinars. In the 1990 currency reform, 1 new dinar was exchanged for 10,000 old dinars. In the 1992 currency reform, 1 new dinar was exchanged for 10 old dinars. The highest denomination in 1992 was 50,000 dinars. By 1993, it was 10,000,000,000 dinars. In the 1993 currency reform, 1 new dinar was exchanged for 1,000,000 old dinars. But before the year was over, the highest denomination was 500,000,000,000 dinars. In the 1994 currency reform, 1 new dinar was exchanged for 1,000,000,000 old dinars. In another currency reform a month later, 1 novi dinar was exchanged for 13 million dinars (1 novi dinar = 1 German mark at the time of exchange). The overall impact of hyperinflation: 1 novi dinar = 1 × 1027~1.3 × 1027 pre 1990 dinars. Yugoslavia's rate of inflation hit 5 × 1015 percent cumulative inflation over the time period 1 October 1993 and 24 January 1994.

Zaire (now the Democratic Republic of the Congo)

Zaire went through a period of inflation between 1989 and 1996. In 1988, the highest denomination was 5,000 zaires. By 1992, it was 5,000,000 zaires. In the 1993 currency reform, 1 nouveau zaire was exchanged for 3,000,000 old zaires. The highest denomination in 1996 was 1,000,000 nouveaux zaires. In 1997, Zaire was renamed the Congo Democratic Republic and changed its currency to francs. 1 franc was exchanged for 100,000 nouveaux zaires. The overall impact of hyperinflation: 1 franc = 3 × 1011 pre 1989 zaires.

Zimbabwe

Main article: Hyperinflation in Zimbabwe

The 100 trillion Zimbabwean dollar banknote (1014 dollars), equal to 1027 pre-2006 dollars

At Independence in 1980, the Zimbabwe dollar was worth about USD 1.25. Since then, rampant inflation and the collapse of the economy have severely devalued the currency, causing many organisations to favour using the US dollar or South African rand instead. Inflation was stable until Robert Mugabe began a program of land reforms that primarily focused on taking land from white farmers and redistributing those properties and assets to black farmers; this in turn sent food production and revenues from export of food plummeting.[24][25][26] Though inflation in Zimbabwe was a monetary phenomena (the result of Mugabe's government printing money) as can be seen by the appearance of ever higher face value printed notes (whose face value exceeded the sum of all previously existing notes).

Early in the 21st century Zimbabwe started to experience chronic inflation. Inflation reached 624% in 2004, then fell back to low triple digits before surging to a new high of 1,730% in 2006. During that time, the Reserve Bank of Zimbabwe revalued its currency on 1 August 2006 at a rate of 1,000 old Zimbabwean dollars to 1 revalued Zimbabwean dollar. In June 2007 inflation in Zimbabwe had risen to 11,000% year-to-year from an earlier estimate of 9,000%. On 5 May 2008 the Reserve Bank of Zimbabwe issued bank notes or "bearer cheques" for the value of ZWD 100 million and ZWD 250 million.[27]. Ten days later on 15 May, new bearer cheques with a value of ZWD 500 million (then equivalent to about USD 2.5) were issued.[28] Five days later on 20 May a new series of notes in the form of "agro cheques" were issued in denominations of ZWD 5 billion, ZWD 25 billion and ZWD 50 billion. An additional agro cheque was issued for ZWD 100 billion on 21 July.[29] Meanwhile inflation has officially surged to 2,200,000%[30] with some analysts estimating figures surpassing 9,000,000 percent.[31] As of 22 July 2008 the value of the ZWD had fallen to approximately 688 billion per 1 USD, or 688 trillion pre-August 2006 Zimbabwean dollars.[32] On 1 August 2008, the Zimbabwe dollar was redenominated by removing 10 zeroes. ZWD 10 billion became 1 dollar after the redenomination.[33]. On 19 August 2008, official figures announced for June estimated the inflation over 11,250,000 percent.[34] Zimbabwe's annual inflation was 231,000,000% in July[35] (prices doubling every 17.3 days). For periods after July 2008, no official inflation statistics were released. Prof. Steve H. Hanke overcame the problem by estimating inflation rates after July 2008 and publishing the Hanke Hyperinflation Index for Zimbabwe.[36] Prof. Hanke’s HHIZ measure indicates that the inflation peaked at an annual rate of 89.7 sextillion percent (89,700,000,000,000,000,000,000%) in mid-November 2008. The peak monthly rate was 79.6 billion percent, which is equivalent to a 98% daily rate, or around 7× 10^108 percent yearly rate. At that rate, prices were doubling every 24.7 hours. Note that the last figure is mostly theoretic, since the hyperinflation did not proceed at that rate a whole year. [37]

At its November 2008 peak, Zimbabwe’s rate of inflation approached, but failed to surpass, Hungary’s July 1946 world record.[37] On 16 January 2009, Zimbabwe issued a ZWD100 trillion bill.[38] The hyperinflation officially ended in January 2009 when official inflation rates in USD were announced.[37]

Edited March 6, 2010 by Errol

[Ash4781]

No. Growth in average earnings is quite low (even lower than price inflation) so your standard of living takes a hit . In addition it reduces ones ability to service current debts and take out new loans.Probably influences pensions based on earnings link (final sal?).

Wouldn't a better article be Is China sliding towards hyperinflation?

[scottbeard]

You go to school and you are taught that money is everything, its what you will strive to earn when you leave school in order to support yourself.

When are you taught that?

All I seem to remember from school is things like earthquakes forming due to tectonic plates getting stuck, and "Wie komme ich am Besten zum Bahnhof bitte?"

I do remember being encouraged to get good grades so I could go to University, but money never seemed to be the ultimate goal.

[Justice]

Yes but you all forget we have an independant bank or england and they are doing a fantastic job with inflation at 3.5% and IR's at 0.5% and thats if you belive the 3.5% has not been tweaked down.

Yep true independance will save the £ and i love sterling................................ silver

it could go down to $6 oz but if a call is ever made for the real stuff then it will hit $100oz or more and gives a better return than playing Bingo or scratch cards if you look at the odds.

[lowrentyieldmakessense(honest!)]

Unfortunately the total collapse of the system will probably occur first and then people will get it.

hopefully

although there is a good chance people will go for a strong man to come in and take over and more seem to be believing Marx was right

[Alan B'Stard MP]

There will be no hyperinflation in the developed world.

At the very least expect a global redistribution and book revaluation of gold.

[Once in a lifetime]

There will be no hyperinflation in the developed world.

At the very least expect a global redistribution and book revaluation of gold.

You said you have 100% in gold asset, how much are you gambling on this revaluation of gold.

at what price will you sell ?