Hyperinflation

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Certain figures in this article use scientific notation for readability.

In economics, hyperinflation is inflation which is "out of control", a condition in which prices increase rapidly as a currency loses its value. No precise definition of hyperinflation is universally accepted. One simple definition requires a monthly inflation rate of 50% or more. In informal usage the term is often applied to much lower rates. The definition used by most economists is "an inflationary cycle without any tendency toward equilibrium." A vicious circle is created in which more and more inflation is created with each iteration of the cycle. Although there is a great deal of debate about the root causes of hyperinflation, it becomes visible when there is an unchecked increase in the money supply or drastic debasement of coinage, and is often associated with wars (or their aftermath), economic depressions, and political or social upheavals.

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Characteristics

Image:Inflation-1923.jpg In 1956, Phillip Cagan wrote "Monetary Dynamics of Hyperinflation", generally regarded as the first serious study of hyperinflation and its effects. In it he defined hyperinflation as a monthly inflation rate of at least 50% (prices doubling every 51 days).

International Accounting Standard 29 describes four signs that an economy may be in hyperinflation:

  1. The general population prefers to keep its wealth in non-monetary assets or in a relatively stable foreign currency. Amounts of local currency held are immediately invested to maintain purchasing power.
  2. The general population regards monetary amounts not in terms of the local currency but in terms of a relatively stable foreign currency. Prices may be quoted in that currency. According to a Newsweek magazine article, in Turkey in the late 1990s, people used the United States dollar as a reference although that country suffered only chronic inflation.
  3. Sales and purchases on credit take place at prices that compensate for the expected loss of purchasing power during the credit period, even if the period is short.
  4. Interest rates, wages and prices are linked to a price index and the cumulative inflation rate over three years approaches, or exceeds, 100%.

Rates of inflation of several hundred percent per month are often seen. Extreme examples include Germany in the early 1920s when the rate of inflation hit 3.25 × 106 percent per month (prices double every 49 hours) and Greece during its occupation by German troops (1941-1944) with 8.55 × 109 percent per month (prices double every 28 hours). The most severe known incident of inflation was in Hungary after the end of World War II at 4.19 × 1016 percent per month (prices double every 15 hours). More recently, Yugoslavia between 1 October 1993 and 24 January 1994 with 5 × 1015 percent during this period. Other more moderate examples include other Eastern European countries such as Ukraine in the period of economic transition in the early 1990s, in Latin American countries such as Bolivia and Peru in 1985 and 1988-1990, in Mexico from 1982 to 1988, in Argentina in 1989, and in Brazil in the early 1990s. Hyperinflation in Mexico eventually forced prices so high that in 1993 Carlos Salinas de Gortari had to replace the peso ($) with the nuevo peso (N$). The parity was N$1 for $1000; In short, he stripped three zeroes from the peso.

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Root causes of hyperinflation

Hyperinflation is generally associated with paper money because the means to increasing the money supply with paper money is the simplest: add more zeroes to the plates and print, or even stamp old notes with new numbers. It also is the most dramatic. There have been numerous episodes of hyperinflation, followed by a return to "hard money". Older economies would revert to hard currency and barter when the circulating medium became excessively devalued, generally following a "run" on the store of value.

Unlike inflation, which is widely considered to be necessary to a healthy economy, hyperinflation is always regarded as destructive. It effectively wipes out the purchasing power of private and public savings, distorts the economy in favor of extreme consumption and hoarding of real assets, causes the monetary base whether specie or hard currency to flee the country, and makes the afflicted area anathema to investment. Hyperinflation is met with drastic remedies, whether by imposing a shock therapy of slashing government expenditures or by altering the currency basis. An example of the latter is placing the nation in question under a currency board as Bosnia-Herzegovina has now in 2005, which allows the central bank to print only as much money as it has in foreign reserves. Another example is dollarization as Ecuador officially initiated in September 2000 in response to a massive 75% loss of value of the Sucre currency in early January 2000. Dollarization is the use of a foreign currency (not necessarily the U.S. dollar) as a national unit of currency.

The aftermath of hyperinflation is equally complex. As hyperinflation has always been a traumatic experience for the area which suffers it, the next policy regime almost always enacts policies to prevent its recurrence. Often this means making the central bank very aggressive about maintaining price stability as is the case with the German Bundesbank, or moving to some hard basis of currency such as a currency board. Many governments have enacted extremely stiff wage and price controls in the wake of hyperinflation, which is, in effect, a form of forced savings: goods become unavailable, and hence people hoard cash, as was the case in the People's Republic of China under "Great Leap Forward" and "Cultural Revolution".

Image:500000000000 dinars.jpg

For a variety of reasons, governments have occasionally resorted to printing money to meet their expenses. During hyperinflation, the monetary authority can't even do that as it becomes a net loss. Those holding government debt, directly or indirectly, have less buying power. Theories of hyperinflation generally look for a relationship between seignorage and the inflation tax. In both Cagan's model and the neo-classical models, a crucial point is when the increase in money supply or the drop in basic money stock makes it impossible for a government to improve its financial position. That is, when fiat money is printed government obligations that are not denominated in money increase in cost by more than the value of the money created.

From this, it might be wondered why any state would engage in actions that cause or continue hyperinflation. One reason is that often the alternative to hyperinflation is depression. In late 2001, the Argentine peso collapsed in value. Rather than printing sufficient cash for the public to carry, which they feared would start a run on the banks, the government took the peso off its dollar peg. Many international economists predicted that they would have to get a new loan from the IMF and impose shock therapy in order to avoid hyperinflation. Currency controls were imposed, tariffs were instituted, and the economy was allowed to fall into a severe recession during which unemployment hit 25%, homelessness and crime spiraled upwards, and the poverty rate peaked at over 50%.

The root cause is a matter of more dispute. In both classical economics and monetarism, it is always the result of the monetary authority irresponsibly borrowing money to pay all its expenses. These models focus on the unrestrained seignorage of the monetary authority, and the gains from the inflation tax. In Neoliberalism, hyperinflation is considered to be the result of a crisis of confidence. The monetary base of the country flees, producing widespread fear that individuals will not be able to convert local currency to some more transportable form, such as gold or an internationally recognized hard currency.

One common cause of hyperinflation is warfare, civil war, or intense internal conflict of other kinds: governments need to do whatever is necessary to continue fighting, since the alternative is defeat. Expenses cannot be cut significantly since the main outlay is armanments. Further, a civil war may make it difficult to raise taxes or to collect existing taxes. While in peacetime the deficit is financed by selling bonds, during a war it is typically difficult and expensive to borrow, especially if the war is going poorly for the government in question. The banking authorities, whether central or not, "monetize" the deficit, printing money to pay for the government's efforts to survive. The hyperinflation under the Chinese Nationalists from 1939-1945 is a classic example of a government printing money to pay civil war costs. By the end, currency was flown in over the Himalaya, and then old currency was flown out to be destroyed.

In the United States, hyperinflation was seen during the Revolutionary War and during the Civil War, especially on the Confederate side. Many other cases of extreme social conflict encouraging hyperinflation can be seen, as in Germany after World War I, Hungary at the end of World War II and in Yugoslavia after the death of Marshall Tito.

Less commonly, hyperinflation may occur when there is debasement of the coinage — wherein coins are consistently shaved of some of their silver and gold, increasing the circulating medium and reducing the value of the currency. The "shaved" specie is then often restruck into coins with lower weight of gold or silver. Historical examples include Ancient Rome and China during the Song Dynasty.

Hyperinflation can also occur in the absence of a central bank. One case is when there is "free banking" but banks are allowed suspend convertibility in violation of their contracts with their customers. These episodes often cause a panicked run on banks and a collapse in the money supply, leading to a depression and deflation.

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The Weimar Inflation in Germany

Image:Billionmarks.jpg The hyper-inflation episode in the Weimar Republic in the 1920's is, in many respects, the paradigmatic example, and the one which made economists and others aware of hyper-inflation as a phenomenon unto itself, it was not the first example of hyper-inflation, but it was the first one that was recognized as such.

Following the First World War, the Treaty of Versailles forced Germany to pay significant reparations (compensation) to the nations that won the war, starting in 1919. It is sometimes argued that Germany was forced into inflating its currency in order to pay these reparations, but a look at the data reveals that this is a myth. In fact, reparations only accounted for about one third of the German deficit from 1920 to 1923 (Costantino Bresciani-Turroni, The Economics of Inflation. London: George Allen & Unwin, 1937. p. 93). Reparations were simply a scapegoat used by the Weimar government. Other scapegoats included bankers and speculators (particularly foreign speculators). The inflation reached its peak by November 1923, but ended when a new currency (the Rentenmark) was introduced. The government stated this new currency had a fixed value, and this was accepted.

Hyperinflation did not directly bring about the Nazi takeover of Germany; the inflation ended with the introduction of the Rentenmark and the Weimar Republic continued for a decade afterward. The inflation did, however, call into question the competence of liberal institutions, especially amongst a middle class who had held cash savings and bonds. It also produced resentment of Germany's bankers and speculators (many of them Jewish) who were blamed for the inflation.

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Models of hyperinflation

Image:Millionlira.jpg Image:500kcruzeiros.jpg Since hyperinflation is visible as a monetary effect, models of hyperinflation center on the demand for money. Economists see both a rapid increase in the money supply and an increase in the velocity of money. Either one or both of these encourage inflation and hyperinflation. A dramatic increase in the velocity of money as the cause of hyperinflation is central to the "crisis of confidence" model of hyperinflation, where the risk premium that sellers demand for the paper currency over the nominal value grows rapidly. The second theory is that there is first a radical increase in the amount of circulating medium, which can be called the "monetary model" of hyperinflation. In either model, the second effect then follows from the first — either too little confidence forcing an increase in the money supply, or too much money destroying confidence.

In the confidence model, some event, or series of events, such as defeats in battle, or a run on stocks of the specie which back a currency, removes the belief that the authority issuing the money will remain solvent — whether a bank or a government. Because people do not want to hold notes which may become valueless, they want to spend them in preference to holding notes which will lose value. Sellers, realizing that there is a higher risk for the currency, demand a greater and greater premium over the original value. Under this model, the method of ending hyperinflation is to change the backing of the currency — often by issuing a completely new one. War is one commonly cited cause of crisis of confidence, particularly losing in a war, as occurred during Napoleanic Vienna, and capital flight, sometimes because of "contagion" is another. In this view, the increase in the circulating medium is the result of the government attempting to buy time without coming to terms with the root cause of the lack of confidence itself.

In the monetary model, hyperinflation is a positive feedback cycle of rapid monetary expansion. It has the same cause as all other inflation: money-issuing bodies, central or otherwise, produce currency to pay spiralling costs, often from lax fiscal policy, or the mounting costs of warfare. When businesspeople perceive that the issuer is committed to a policy of rapid currency expansion, they start factoring the decay of the currency's value into prices. The issuer must then accelerate its expansion to cover these prices, which pushes the currency value down even faster. According to this model the issuer cannot "win" and the only solution is to abruptly stop expanding the currency. Unfortunately, the end of expansion can cause a severe financial shock to those using the currency as expectations are suddenly adjusted. This policy, combined with reductions of pensions, wages, and government outlays, formed part of the Washington consensus of the 1990s.

Whatever the cause, hyperinflation involves both the supply and velocity of money. Which comes first is a matter of debate, and there may be no universal story that applies to all cases. But once the hyperinflation is established, the pattern of increasing the money stock, by which ever agencies are allowed to do so, is universal. Because this practice increases the supply of currency without any matching increase in demand for it, the price of the currency, that is the exchange rate, naturally falls relative to other currencies. Inflation becomes hyperinflation when the increase in money supply turns specific areas of pricing power into a general frenzy of spending quickly before money becomes worthless. The purchasing power of the currency drops so rapidly that holding cash for even a day is an unacceptable loss of purchasing power. As a result, no one holds currency, which increases the velocity of money, and worsens the crisis.

That is, rapidly rising prices undermine money's role as a store of value, so that people try to spend it on real goods or services as quickly as possible. Thus, the monetary model predicts that the velocity of money will rise endogenously as a result of the excessive increase in the money supply. At the point where ordinary purchases are affected by inflation pressures, hyperinflation is out of control, in the sense that ordinary policy mechanisms, such as increasing reserve requirements, raising interest rates or cutting government spending will all be responded to by shifting away from the rapidly dwindling currency and towards other means of exchange.

During a period of hyperinflation, bank runs, loans for 24 hour periods, switching to alternate currencies, the return to use of gold or silver or even barter becomes common. Many of the people who hoard gold today expect hyperinflation, and are hedging against it by holding specie. There is, also, extensive capital flight or flight to a "hard" currency such as the U.S. dollar. These are sometimes met with capital controls, an idea which has swung from standard, to anathema, and back into semi-respectability. All of this constitutes an economy which is operating in an "abnormal" way, which may lead to decreases in real production. If so, that intensifies the hyperinflation, since it means that the amount of goods in "too much money chasing too few goods" formulation is also reduced. This is also part of the vicious circle of hyperinflation.

Once the vicious circle of hyperinflation has been ignited, dramatic policy means are almost always required, simply raising interest rates is insufficient. Bolivia, for example, underwent a period of hyperinflation in 1985, where prices increased 12,000% in the space of less than a year. The government raised the price of gasoline, which it had been selling at a huge loss to quiet popular discontent, and the hyperinflation came to a halt almost immediately, since it was able to bring in hard currency by selling its oil abroad. The crisis of confidence ended, and people returned deposits to banks. The German hyperinflation of the 1920s was ended by producing a currency based on assets loaned against by banks, called the rentenmark. Hyperinflation often ends when a civil conflict ends with one side winning. Though sometimes used, wage and price controls to control or prevent inflation, no episode of hyperinflation has been ended by the use of price controls alone, though they have sometimes been part of the mix of policies used to halt hyperinflation.

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Hyperinflation and the currency

Image:Goldkey logo removed.jpg Image:3sovriegns.jpg As noted, in countries experiencing hyperinflation, the central bank often prints money in larger and larger denominations as the smaller denomination notes become worthless. This can result in the production of some interesting banknotes, including those denominated in amounts of 1,000,000,000 or more.

  • By late 1923, the Weimar Republic of Germany was issuing fifty-million-mark banknotes and postage stamps with a face value of fifty billion marks. The highest value banknote issued by the Weimar government's Reichsbank had a face value of 100 billion marks (100,000,000,000,000) {100 Trillion US/UK}. [1]. One of the firms printing these notes submitted an invoice for the work to the Reichsbank for 32,776,899,763,734,490,417.05 (3.28×1019, or 33 quintillion) marks.
  • The largest denomination banknote ever officially issued for circulation was in 1946 by the Hungarian National Bank for the amount of 100 quintillion pengő (100,000,000,000,000,000,000, or 1020). image (There was even a banknote worth 10 times more, i.e. 1021 pengő, printed, but not issued image.) The Post-WWII hyperinflation of Hungary holds the record for the most extreme monthly inflation rate ever — 41,900,000,000,000,000% (Template:Sn%) for July, 1946, amounting to prices doubling every fifteen hours.

One way to avoid the use of large numbers is by declaring a new unit of currency (so, instead of 10,000,000,000 Dollars, a bank might set 1 new dollar = 1,000,000,000 old dollars, so the new note would read "10 new dollars".) While this does not lessen actual value of a currency, it is called revaluation and also happens over time in countries with standard inflation levels. During hyperinflation, currency inflation happens so quickly that bills reach large numbers before revaluation.

Some banknotes were stamped to indicate changes of denomination. This is because it would take too long to print new notes. By time the new notes would be printed, they would be obsolete (that is, they would be of too low a denomination to be useful).

Metallic coins were rapid casualties of hyperinflation, as the scrap value of metal enormously exceeded the face value. Massive amounts of coinage were melted down, usually illictly, and exported for hard currency.

Governments will often try to disguise the true rate of inflation through a variety of techniques. These can include the following:

  • Outright lying as to official statistics such as money supply, inflation or reserves.
  • Suppression of publication of money supply statistics, or inflation indices.
  • Price and wage controls.
  • Forced savings schemes, designed to suck up excess liquidity. These savings schemes may be described as pensions schemes, emergency funds, war funds, or similar.
  • Adjusting the components of the Consumer Price Index, to remove those items whose prices are rising the fastest.
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Hyperinflation around the world

Angola
Angola went through the 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 kwanza reajustado was exchanged for 1,000 kwanzas. The highest denomination in 1995 was 5,000,000 kwanzas reajustados. In the 1999 currency reform, 1 new kwanza was exchanged for 1,000,000 kwanzas reajustados. 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 argentino. In the 1992 currency reform, 1 new peso was exchanged for 10,000 australes. The overall impact of hyperinflation: 1 new peso = 100,000,000,000 pre-1983 pesos.
Austria
Between 1921 and 1922, inflation in Austria reached 134%.
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 = 2,000 old rublei. The highest denomination in 2002 was 50,000 rublei, equal to 100,000,000 pre-2000 rublei.
Bolivia
Bolivia went through the 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 the 1987 currency reform, peso boliviano was replaced by boliviano which was pegged to U. S. dollar.
Bosnia-Herzegovina
Bosnia-Hezegovina 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 República Velha era. A 1960's cruzeiro was, in 1994, worth less than one trillionth of a US cent, after adjusting for multiple devaluations and note changes. A new currency called real was adopted in 1994, and hyperinflation was eventually brought under control.
China
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. The highest denomination by a regional bank was 6,000,000,000 yuan issued by Sinkiang Provincial Bank in 1949
Free City of Danzig
Danzig went through the 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 the worst inflation in 1994. In 1993, the highest denomination was 100,000 laris. By 1994, the highest denomination was 1,000,000 laris. In the 1995 currency reform, 1 new lari was exchanged for 1,000,000 laris.
Germany
Germany went through the worst inflation in 1923-24. In 1922, the highest denomination was 50,000 mark. By 1923, the highest denomination was 100,000,000,000,000 mark. During the worst times, one U.S. dollar was equal to 80 billion marks.
Greece
Greece went through its worst inflation in 1944. In 1943, the highest denomination was 25,000 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 drachma. The overall impact of hyperinflation: 1 (1953) drachma = 50,000,000,000,000 pre 1944 drachmai. The Greek inflation rate reached 8.5 billion percent.
Hungary
Hungary went through the worst inflation in modern history in 1945-46. Before 1945, the highest denomination was 1,000 pengo. By the end of 1945, it was 10,000,000 pengo. The highest denomination in mid-1946 was 100,000,000,000,000,000,000 pengo. Banknotes The rate of inflation was 4.19 quintillion percent. A special currency the adopengo - or tax pengo - was created for tax and postal payments [2]. The value of the adopengo was adjusted each day, by radio announcement. On January 1, 1946 one adopengo equaled one pengo. By late July, one adopengo equaled 2,000,000,000,000,000,000,000 or 2×1021pengo.
One source [3] 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 forint. Previously, between 1922 and 1924 inflation in Hungary 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. In 1985, inflation fell to 185% (less than half the rate in 1984). Within a few months, the authorities began to lift the price freeze on some items; in other cases it took almost a year. In 1986, inflation was down to just 19%.
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 1st January 2005 the Malagasy ariary replaced the previous currency at a rate of 0.2 ariary for one Malagasy franc. In May 2005 there were riots over rising inflation, although falling prices have since calmed the situation.
Nicaragua
Nicaragua went through the worst inflation from 1987 to 1990. Before 1987, the highest denomination was 1,000 cordobas. By 1987, it was 500,000 cordobas. In the 1988 currency reform, 1 new cordoba was exchanged for 1,000 old cordobas. The highest denomination in 1990 was 10,000,000 new cordobas. In the mid-1990 currency reform, 1 gold cordoba was exchanged for 5,000,000 new cordobas. The overall impact of hyperinflation: 1 gold cordoba = 5,000,000,000 pre 1988 cordobas.
Peru
Peru went through the worst inflation from 1984 to 1990. The highest denomination in 1984 was 50,000 soles de oro. By 1985, it was 500,000 soles de oro. In the 1985 currency reform, 1 intis was exchanged for 1000 soles de oro. In 1986, the highest denomination was 1,000 intis. It was 5,000,000 intis by 1990. 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 pre 1985 soles de oro.
Poland
Poland went through the worst inflation between 1990 and 1993. The highest denomination in 1989 was 200,000 zlotych. It was 1,000,000 zlotych in 1991 and 2,000,000 zlotych in 1992. In the 1994 currency reform, 1 new zloty was exchanged for 10,000 old zlotych. Previously between 1922 and 1924, Polish inflation reached 275%.
Romania
Romania is still working through steady inflation. The highest denomination 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 about 10%. In 2006 the highest denomination is 500 lei (= 5,000,000 old lei).
Russia
Between 1921 and 1922, during the civil war, inflation in Russia reached 213%.
In 1992, the first year of post-Soviet economic reform, inflation was 2,520%, the major cause being the decontrol of most prices in January. In 1993 the annual rate was 840%, and in 1994, 224%. The ruble devalued from about 100 r/$ in 1991 to about 30,000 r/$ in 1999.
Taiwan
Severe inflation existed in the late 1940s due to factors such as corruption and the 228 Incident. Increasingly higher denominations were issued on the island, up to one million yuan. Inflation was eventually controlled after the new Taiwan dollar was issued in 1949 at a ratio of 40,000-to-1 against the old Taiwan nationalist yuan.
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 2000 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.
Ukraine
Ukraine went through the worst inflation between 1993 and 1995. Before 1993, the highest denomination was 1,000 karbovantsiv. By 1995, it was 1,000,000 karbovantsiv.
United States
During The Revolutionary War, the Continental Congress authorized the printing of paper "money" called "continentals", which depreciated in perceived value [inflated] so quickly and so badly that, soon, they were "not worth a continental". Between January 1861 and April 1865, the Lerner Commodity Price Index of leading cities in the eastern Confederacy increased from 100 to over 9000.

Image:Yap Stone Money.jpg

Yap
The island of Yap in the Pacific ocean used varying sized stones as money, of which the largest weighing several tons were the most valuable. The stones had been brought by sea from the Island of Palau 210km away. The journey was very perilous given the length of the voyage and the rough seas between the islands of Palau and Yap. Many of the stones were lost at sea. The risk associated with procurement of the "money stones" initially made them highly valuable. The Yapese valued them because large stones were quite difficult to steal and were in relatively short supply. However, in 1874, an enterprising Irishman called David O’Keefe hit upon the idea of employing the Yapese to import more "money" in the form of shiploads of large stones, also from Palau. O'Keefe then traded these stones with the Yapese for other commodities such as sea cucumbers and copra. Over time, the Yapese brought thousands of new stones to the island, debasing the value of the old ones. Today they are almost worthless, except as a tourist curiosity.
Yugoslavia
Yugoslavia went through a period of hyperinflation and subsequent currency reforms from 1989 to 1994. The highest denomination in 1988 was 50,000 dinara. By 1989 it was 2,000,000 dinara. In the 1990 currency reform, 1 new dinar was exchanged for 10,000 old dinara. In the 1992 currency reform, 1 new dinar was exchanged for 10 old dinara. The highest denomination in 1992 was 50,000 dinara. By 1993, it was 10,000,000,000 dinara. In the 1993 currency reform, 1 new dinar was exchanged for 1,000,000 old dinara. But before the year was over, the highest denomination was 500,000,000,000 dinara. In the 1994 currency reform, 1 new dinar was exchanged for 1,000,000,000 old dinara. In another currency reform a month later, 1 novi dinar was exchanged for 12,000,000 dinara. The overall impact of hyperinflation: 1 novi dinar = Template:Sn pre 1990 dinara.
Zaire
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 = Template:Sn pre 1989 zaires.
Zimbabwe
The Zimbabwean dollar was formerly known as the Rhodesian dollar (R$), which was adopted in 1970 following decimalisation and the replacement of the pound as the currency, at a rate of 2 Rhodesian dollars = 1 pound (R$ 0.71 = USD $1.00). At the time of independence in 1980, one Zimbabwean dollar (of 100 cents) was still worth more than the US dollar (Z$ 0.68 = USD $1.00), but rampant inflation and the collapse of the economy have severely devalued the currency, with many organisations using the US dollar instead. According to the Guinness Book of Records, Zimbabwe has the highest annual inflation rate in the world:[4]. (385% in 2003, 624% in January 2004, 360% (average) in 2004 and 585% in 2005. Zimbabwe's annual rate of inflation is expected to reach a peak of between 700 and 800 percent in the first quarter of 2006.) By January 25, 2006, there were 100,000 Zimbabwe dollars per US dollar (official exchange rate). The highest denomination regular issue banknote is Z$1,000.00 (about 1c US) but the Reserve Bank of Zimbabwe has issued bearer cheques of Z$5,000; Z$10,000; and Z$20,000 to ease the money supply problem. Effective Feb. 1, 2006, new Z$50,000 bearer cheques were issued.
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See also

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External links

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