Chapter 20 - Hyperinflation Cure

When an outbreak of hyperinflation occurs this intervention should occur.

In the latter stages of hyperinflation, excessive usage of cash currency occurs. This occurs because the government begins to pay bills using cash currency rather than bank transfers and there is no method to remove excess money tokens. There is no method to tax Cash Currency.

At the beginning of an outbreak of hyperinflation, a level of public panic occurs mostly over the provision of food. To this end, it is necessary to:

Although it is called hyperinflation, in reality, it becomes selective inflation of life’s essentials such as food.

Ensure that no-one takes advantage of the situation for unreasonable gain:

Many of these will need to be organized in advance. Partway through the ordeal, it is likely that the banks have closed their doors or restricted their client’s activities.

Taxation of Cash Currency

When the Bank Credit System collapses, the government tries to continue operating using cash. However, the ability to collect tax has been destroyed because tax is usually paid into the banking system. There is no established way to reduce the cash in circulation. The solution is for the government to demand stamps on the cash notes each month. A one percent stamp duty should be the starting figure although it may need to be as high as five percent each month.

Food Supply

To stop the excessive inflation of food, the government needs to prevent excessive demand for food. Ration cards should be discussed and prepared even if they are not implemented. Local Councils should be responsible for this.

The government will need to ensure that food is brought in from the countryside. If the existing system can be protected by the army, this is preferable, with a promise to pay farmers at a fixed amount in the future which may be based on silver. The local councils would run soup kitchens. It would supply eggs to persons at the time of surrender of cash. By this means the government can draw the excess cash out of society. All cash without stamps would be seized and would be the major task of the police at road checks and public spaces but not at homes, although the police should issue chocolate bars whilst doing so to maintain a sense of decency.

The army needs to be prepared to feed the nation at the time of currency collapse. The army would be authorized to compulsorily purchase farm produce at generous future product value measured in silver, but in a very decent and generous manner. It would be along the lines of “we are buying your production at your last year’s sale price as measured in silver. You will get the full protection of the army and you will receive everything you need to operate your farm. You will have first priority on fuel stocks. You will receive an army hotline telephone and anyone interfering with your business will be immediately locked up.”

The system of the stamping of the notes would be very similar to the Wörgl system of Austria in 1932. It is a form of demurrage. Demurrage ensures that money is spent quickly and avoids hoarding. It was very successful.

Local Councils

Local councils shall be authorized to take whatever measures are necessary to maintain the population. This includes the creation of alternative currencies.