Chapter 19 - Hyperinflation is Common

Hyperinflation is Common

Egypt 276 AD – 334 AD. 1 million percent inflation in 58 years. In Roman Egypt in 276 AD, a measure of wheat sold for 200 drachmae. This increased to more than 2 000 000 drachmae by 334 AD. The price increased by a factor of 10 000 over the 58 years. [2]

France 1789-1803. Assignats were created as notes by the French government based on the value of confiscated church property. They were printed with no relation to the underlying value and eventually became totally worthless (no exchange value). [2]

United States 1779. 47% inflation per month [2]

United States 1861-1865. Total hyperinflation of 1 200 to 1.

Confederate Civil War Inflation Rates [2]

Austria 1914- 1923. Inflation in 1922 reached 1426% and overall the consumer price index rose by a factor of 11 836. [2]

Germany 1914-1923. Total hyperinflation 1 000 000 000 000 to 1. This was the hyperinflation of Weimar Germany [2] This German inflation had its origin in the Moses style ‘Eye for an Eye’ reparations for World War I. It was stopped by the Nazi party who introduced some innovative measures that enabled Germany to go from an impoverished nation to the strongest in Europe in only a few years.

Hungary 1919-1924. Inflation reached 98% per month in 1922 [2]

Poland 1918-1924. Hyperinflation 800 000 to 1 [2]

Philippines 1942-1944. The conquering Japanese army issued fiat currency which rapidly became worthless. [2]

Greece 1942-1953. Total hyperinflation 50 000 000 000 000 to 1 [2]

Hungary 1945-1946. Total hyperinflation 400 000 000 000 000 000 000 000 000 000 to 1. Some historians believe this hyperinflation was actually an act of war as Russian Marxists tried to destroy the Hungarian middle and upper classes. [2]

China 1947-1949. Total hyperinflation 15,000 000 000 000 000 000 to 1 [2]

Brazil 1967-1994. Total hyperinflation of 2 750 000 000 000 000 000 to 1. [2]

Mexico 1982-1993. Total hyperinflation of 10 000% [2]

Bolivia 1984-1987. New currency replaced the old currency at a rate of 1 000 000 to one. [2]

Iraq 1987-1995. Total hyperinflation of 10 000 to 1. [2]

Nicaragua 1988-1991. Total hyperinflation of 50 000 000 000 to 1. [2]

Argentina 1975-1993. By the end, the hyperinflation currency exchanged at 100 000 000 000 to one. [2]

Peru 1986-1991 Total hyperinflation of 1 000 000 000 to 1. [2]

Yugoslavia 1989-1994. By the end of the hyperinflation, the currency exchanged at 1027 to one. [2]

Poland 1989-1994. By the end of the hyperinflation, the currency exchanged at 10 000 to one. [2]

Zaire 1989-1996. By the end of the hyperinflation, the currency exchanged at 300 000 000 000 to one. [2]

Angola 1991-1999. By the end of the hyperinflation, the currency exchanged at 1 Billion to one. [2]

Bosnia and Herzegovina 1992-1993. Hyperinflation at the rate of 100 000 to 1. [2]

Belarus 1994-2002. The currency exchanged at 1 Million to one. [2]

Zimbabwe 1998-2008. The overall impact of hyperinflation was 1 = 1025 The final result was a total elimination of the currency and only foreign currencies were traded. Black market trade in US Dollars saved many from hunger. [2]

North Korea 2009 to 2011. [2]

Argentina

The economy of Argentina collapsed in 2001 after a decade of prosperity. Argentina defaulted on its USD$132 billion debt. The currency was devalued. Bank accounts were frozen. The president resigned and escaped the presidential building by helicopter. In 2001, foreign investors refused to repurchase government bonds as bonds became due. If one is forced to operate under usury, where is one to obtain credit if credit is the only money available? This has all the hallmarks of the object of complaint by numerous wise men in history. If a nation is encouraged to use foreign credit and that credit is denied, there is no option but default. I call this ‘Bond Blackmail’. How can a debt be paid with something that does not exist and has been denied to the nation? The default is the fault of the creditors. The creditors create the sovereign bond default. Only by extending more credit can the interest be paid in credit. The creditors recalled their loans mid flight and bankrupted Argentina. Much like a bank recalling a loan half way through a house mortgage. We want our money! No thought is given to where the money is to come from. Similarly with a farmer. We have cases in Western Australia where banks have revised farm loan status to a higher risk category with an increased interest rate. This bankrupts the farmer, causing a foreclosure and yet another farmer suicide. Yet the loan was not high risk until the interest rate was increased. Similarly, Argentina would have continued repayments until the creditors collectively classed the nation as too risky which then fulfilled their predictions and caused the default.

World Total Money and World Total Debt. Creative Commons Attribute - Andy Chalkley. www.andychalkley.com.au

In the graph above, the orange is the total of all Cash Currency created by all central banks. This is the only real money in the world. That Cash Currency is not backed by gold and neither does it need to be. The green is the total of all the credit created by banks. The red is the total owed to banks and lenders. So where did the money that was lent to Argentina come from? It certainly did not come from a central bank as central banks only create orange Cash Currency. No boatloads of currency arrived in Argentina. Argentina was required to pay back virtual currency that is only manufactured by banks and banks only create credit when they make loans. So the only way to pay back interest is to borrow money, because that is the only source of money. Almost all nations have constantly increasing debt, so why was Argentina singled out for such treatment? The investor panic created the world’s largest ever sovereign bond default leading to a collapsing currency, and hyperinflation.

In a situation where there is ‘more debt than money’, any person not granted further credit, is automatically bankrupted. The debt money system can only continue if further credit is granted.

The debt money system can only continue if further credit is granted.

If banks refuse to extend credit to a government, the game is over and past interest cannot be paid. Worldwide, if further credit is not granted, past interest cannot be paid. If further debt is not taken on, the game is over. This happened during the bankruptcy of the USA.

Creditors are in a position to bankrupt an nation in the world by simply denying further credit.

The Money Supply in Argentina before hyperinflation. Creative Commons Attribute - Andy Chalkley. www.andychalkley.com.au

Notice that, for Argentina, the volume of government issued Cash Currency is a large proportion of the Money Supply. The ratio of Bank Credit to Cash Currency is between 1 and 2. Argentina uses a lot of Cash Currency. In western countries it tends to be between fifteen and thirty.

I mentioned the ‘Bankruptcy of the United States’. I always find this expression a bit ironic. Who has the authority to create the money of the nation? I would assume that the government had the authority to create the money. Money is a freely created resource. How then can a nation become bankrupt? Notice the word ‘bank’ in the word bankrupt. Bankrupt means you cannot pay bank issued money to the bank. This becomes inevitable when the banks create a fixed quantity of money and add interest to the debt. There never will be enough money to repay the debt. The bank is trading insolvent because it is not capable of collecting on its debts because it created unpayable debt.

Banks are trading insolvent because they are not capable of collecting on their debts because they created unpayable debt.

Rome 301 A.D.

At about the year 300 A.D., the Roman Empire experienced a dramatic inflation. The government of Emperor Diocletian created an excessive quantity of a cheaply created copper coin that had a silver coating. The excessive issue of these ‘nummi’ cause prices to rise. Emperor Diocletian instituted price controls that ultimately did not work. Diocletian issued the ‘Edict of Maximal Prices’ in 301 A.D. He enforced a complex set of price ceilings backed with death penalties. His rules inflicted death without controlling prices. The effect was that goods could not be purchased with nummi, a black market developed and brought the economy to a standstill.

Lactantius writes in 315: “Because his various iniquities were causing huge inflation, he tried to decree a law about the price of market goods; then, much blood was spilled for small and cheap items, and amid the fear, nothing was put up for sale at all, and inflation flared up even worse until after many deaths, the law had to be repealed.”

And then he writes:

“Those receiving money began to outnumber those contributing to such an extent that when farmer’s resources had been eaten up by the size of cash levies, farmland was abandoned and cultivated fields degenerated into woodland . . . the provinces too were cut up into fragments, many governors and more officials encumbered individual regions and almost every city, and likewise, there were many accountants, directors and deputy prefects; . . . and they exacted countless tax payments, I won’t say frequently but always, and during these exactions the injustices were intolerable.”