Buzz
Venezuela recently launched a new currency to replace its severely devalued bolivar. The country has endured years of extreme hyperinflation, which has obliterated the value of its currency. In an attempt to address this crisis, the government introduced the sovereign bolivar, hoping it would alleviate the effects of inflation.
However, based on the information you will uncover in this list, it's doubtful that this will succeed. The sovereign bolivar is essentially just the old bolivar with five zeros removed, and unless the underlying economic issues driving inflation are resolved, it is likely to follow the same fate as its predecessor. Venezuela, however, is not alone in its struggle with hyperinflation. Throughout history, several other nations, including ancient Rome, have experienced even more catastrophic instances of inflation and hyperinflation.
10. Federal Republic of Yugoslavia
Between October 1993 and January 1995, the Yugoslav dinar experienced an astonishing inflation rate of five quadrillion percent (five followed by 15 zeros). Before the inflation, the financially struggling Yugoslavia had been printing additional money to cover its budget and borrowing from its citizens. However, the government did not explicitly ask for money; instead, it made it difficult for citizens to withdraw funds from state-run banks.
As the inflation deepened, the government tried to stabilize the situation by imposing price controls and operating businesses that sold at those fixed prices. These state-run enterprises collapsed, while private businesses struggled to comply with the price regulations. Citizens found it impossible to afford fuel for their cars, so they turned to public transportation. Unfortunately, the Belgrade Transit Authority (GSP) couldn't afford to fuel its buses either. The few buses that remained operational became overcrowded, and ticket collectors were unable to collect fares, further draining the agency's already limited resources.
In October 1993, the government issued a new dinar, worth one million old dinars, but it soon fell victim to the rampant inflation. In response, a second new dinar was introduced, worth one billion old dinars. This, too, succumbed to the inflation, prompting the introduction of the super dinar in January 1994. The super dinar was worth ten million of the new new dinars. Meanwhile, businesses and even the government began to adopt the German Deutsche Mark as their primary currency.
9. Ancient Rome
The fact that inflation is believed to have played a significant role in the fall of the Roman Empire shows that this issue is not a modern phenomenon. Inflation in Rome began around AD 200, following the Antonine Plague, which decimated a large portion of the Roman population. The resulting labor shortage led to a rapid rise in wages, which then triggered a surge in the prices of goods.
Meanwhile, the Roman military was growing at a rapid pace, and Rome was investing heavily in the development of infrastructure in newly acquired territories. To fund these efforts, the government chose to reduce the purity of its silver coins by adding impurities. This allowed them to mint a larger number of coins than would have been possible otherwise. Citizens soon realized the silver coins were no longer pure, leading them to raise the prices of their goods to compensate for the loss.
The practice of debasing the currency continued as new emperors took the throne, exacerbating the inflation. Between 200 and 300, the value of Roman coins dropped by 15,000 percent. At one point, the inflation became so severe that Emperor Diocletian (284–306) attempted to control it by instituting price controls, but this merely pushed merchants to the black market.
Subsequent emperors continued the policy of price controls, which only pushed more merchants into the black market. By the time the empire collapsed, inflation had become so rampant that the government could no longer afford to pay its army, despite taxes being at an all-time high. The discontented army ultimately turned against the empire, contributing to its downfall.
8. Germany
Between 1919 and 1923, Germany experienced the most severe hyperinflation in history. The Papiermark, its currency, became so devalued that workers would rush to the market to purchase essential items as soon as they received their wages. The government didn't even bother incorporating anti-counterfeiting measures into its new, extremely high-denomination notes, as the cost of counterfeiting was higher than the notes' face value.
At the peak of the inflation, Germans were faced with so many zeros that they developed a strange psychological condition called zero stroke. People would dream of zeros and count everything, including their ages and children, in terms of zeros. It wasn't uncommon for someone to claim they had three million children or that they were 40 billion years old.
This hyperinflation was a direct result of Germany printing vast amounts of money to finance World War I and the reparations it was required to pay to the Allies after losing the war. The government continued printing more money until the situation escalated into hyperinflation. By November 1923, the value of one US dollar had soared to 4.2 trillion Papiermarks. The hyperinflation finally came to an end when a new government struck a repayment deal with the Allies and introduced the Rentermark to replace the worthless Papiermark.
7. United States
The 13 colonies that later formed the United States introduced the Continental currency to finance the Revolutionary War against Britain. The currency was backed only by the promise of future repayment, which led to inflation as many citizens lacked faith in the government's ability to repay. The inflation became so severe that American citizens preferred selling supplies to the British, who paid in gold and silver, rather than to Congress, which paid with money they considered worthless.
The inflation was further exacerbated by the British government, which began printing counterfeit Continentals and circulating them in the colonies. The official Continentals issued by the colonies were of very poor quality, with handwritten signatures and serial numbers, and little to no anti-counterfeiting features. The British counterfeits, however, were of higher quality and more recognizable as authentic. Ironically, the fake notes were often better than the original currency.
The British even provided counterfeit notes to captured or deserter American soldiers before sending them back to areas under colonial control. They also placed ads in newspapers asking for volunteers to carry counterfeit currency into the colonies. Meanwhile, Congress continued to print more money to finance the war. The rampant inflation left many in severe debt long after the war had ended. These financial struggles eventually led to Shay's Rebellion and the drafting of the US Constitution.
6. Hungary
Hungary has endured two catastrophic episodes of inflation in its history. The first occurred after the collapse of the Austro-Hungarian Empire following World War I, and the second began toward the end of World War II. After World War I, the newly formed government began printing money to cover its expenses, which led to runaway inflation. This period of inflation ended in 1926, when the country replaced the kronen (also known as korona) with the pengo.
A second wave of inflation started in 1944 when much of Hungary’s infrastructure was destroyed by Germany and Russia. Russia also forced Hungary to pay reparations. In response, the financially strained government printed more money. The result was staggering inflation, which increased by 150,000 percent daily.
To cope with the multiplying zeros, the government introduced notes in denominations of the milpengo (one million pengos) and bilpengo (one billion pengos). However, these notes were almost useless because they, too, quickly accumulated zeros. By July 1946, one US dollar was worth 460 trillion trillion pengos, compared to only five pengos in 1941. On August 1, 1946, the government abandoned the pengo and replaced it with the forint.
5. Zimbabwe
Zimbabwe’s hyperinflation in 2008 stands as one of the most extreme ever recorded. At its peak, prices were doubling every single day, and unemployment reached an unprecedented 80 percent. The currency devalued so drastically that the government had to issue a Z$100 trillion note.
During the 1990s, President Robert Mugabe took land from experienced white farmers and redistributed it to less-experienced black farmers. This led to a collapse in agricultural output, causing farms and factories to default on their loans and shut down. Meanwhile, the government, already in debt, lacked any viable sources of income and resorted to printing more money.
The combination of excessive money circulation, failed debts, factory closures, rising unemployment, and declining exports created a perfect storm for inflation. Instead of addressing the root causes, the government continued to print more money and set price controls, which only exacerbated the situation. The rapid rise in production costs led businesses to sell at a loss.
Inflation continued to soar, reaching 1,281.1 percent in 2006, 66,212.3 percent in 2007, 2.3 million percent in July 2008, and an astronomical 79.6 billion percent in July 2009. By then, basic goods like bread were priced in the billions. Merchants even began refusing Zimbabwean notes in favor of foreign currencies, including the US dollar. The government eventually followed suit, abandoning its own currency for the US dollar, which remains the country's official currency to this day.
4. Austria
Following the dissolution of the Austro-Hungarian Empire, Austria regained its independence. However, its neighbors, Czechoslovakia and Yugoslavia, which were also part of the former empire, quickly imposed trade restrictions on Austria. Within Austria itself, different regions enacted similar anti-trade measures against each other.
Austria soon found itself at war with Czechoslovakia and Yugoslavia over its borders. To finance the conflict, the government resorted to printing more money, causing the money supply to increase by an astronomical 14,250 percent between 1919 and 1923. Inflation quickly followed. In 1919, the value of the US dollar was 16.1 crowns, but by 1923, it had skyrocketed to 70,800 crowns.
The government's presses worked non-stop throughout the inflation, pumping out new banknotes day and night, even though most of the country’s industries had ceased operation. The inflation eventually came to an end in late 1922 and early 1923 when Austria secured a loan from the League of Nations. The crown was replaced with the schilling, but Austria never fully recovered from the effects of the inflation before being occupied by Germany during World War II.
3. Poland
In 1918, Poland regained its independence but remained politically unstable, especially when it found itself at war with Russia. Lacking other significant sources of revenue, the government resorted to printing more money to fund the war efforts. However, the excessive money printing led to severe inflation, causing the currency to lose value rapidly. By May 31, 1923, one dollar was equivalent to 52,875 Polish marks, and by the end of the year, it was worth 6.4 million marks. By January 10, 1924, the value surged to 10.3 million marks.
As inflation spiraled out of control, many industries were forced to shut down because consumers couldn’t afford their products. Those businesses that managed to stay open drastically reduced working hours for their employees. During the peak of the crisis, the government issued a note with a value of 50 million marks, and though plans were made for a 100-million-mark note, it was never released.
2. China
From 1937 to 1949, China experienced a devastating period of hyperinflation triggered by the government printing money to fund ongoing wars. The first was the Second Sino-Japanese War, followed by the Chinese Civil War. In 1937, one US dollar was worth 3.41 yuan, but by 1945, the value had plunged to 1,222 yuan, and by 1949, it had skyrocketed to 23.3 million yuan.
Before inflation became an issue, individual banks in China were responsible for creating their own currency. In 1927, the Nationalist government came to power and began financing its operations by borrowing from these banks. However, when these banks grew concerned about the government's ability to repay, they refused further loans. In response, the government created the Central Bank of China to issue bonds, which were exchanged with the banks for money.
In 1931, the value of these bonds plummeted by 50% after Japan's annexation of Manchuria. The banks, unwilling to buy more bonds, led to the government passing a law that mandated they purchase bonds with 25% of their deposits. Despite this, the banks refused, and even the Bank of China sold the bonds at a loss. This situation ultimately led to the government taking control of the Bank of China, the Bank of Communications, and all other major banks.
China's economic troubles worsened when the US Treasury began buying up silver, causing a large portion of China's silver to be smuggled and sold to the US. This caused the yuan to depreciate, which eventually led to the government abandoning the silver standard in 1935. With complete control over the banking system, the government began printing money in such large quantities that their printing presses couldn't keep up, and some of the work was outsourced to England.
The extreme hyperinflation was a key factor in Chairman Mao Tse-tung's rise to popularity during the Chinese Civil War. The Nationalists eventually retreated to Taiwan, while the Communists took control of mainland China. Mao's government then replaced the old yuan with a new version, pegging the exchange rate at three million old yuan to one new yuan.
1. Greece
The inflation that struck Greece between 1941 and 1944 was caused by the German and Italian occupation during World War II. The Greek drachma began to lose value when Germany invaded in April 1941. Traders, fearing occupation, started hoarding goods, and those who did sell required payment in gold. These fears were realized when Germany successfully occupied Greece, leading to the continued devaluation of the drachma.
Germany and Italy used Greek money to purchase goods from local merchants and to fund their North African campaign. When the money ran out, they simply instructed the Bank of Greece to print more. As a result, the drachma quickly became worthless due to excessive circulation, triggering inflation. Both Germany and Italy were unaffected by this and continued to demand more money from the Bank of Greece.
