Hyperinflation Case Studies


Hyperinflation is inflation that is very high or “out of control”. As defined by Phillip Cagan’s 1956 book “The Monetary Dynamics of Hyperinflation”, it is a monthly inflation rate of at least 50%. During a period of hyperinflation, bank runs, loans for 24-hour periods, switching to alternate currencies, the return to the use of gold or silver or even barter become common. Many of the people who hoard gold today expect hyperinflation, and are hedging against it by holding gold and silver. 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 the “too much money chasing too few goods” formulation is also reduced. This is also part of the vicious circle of hyperinflation. Hyperinflation has happened many times in world history in many countries, but has never before happened on a worldwide scale. The fact that our world now has a world reserve currency known as the US Dollar, does put the entire world at risk of a hyperinflationary situation for the first time in history.

Models of Hyperinflation:

The Confidence Model involves some event, or series of events, such as defeats in battle, or a run on stocks of the commodity which backs a currency, and 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. 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 Napoleonic 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.

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 spiraling costs, often from lax fiscal policy, or the mounting costs of warfare (sound familiar?). When businesspeople perceive that the issuer is committed to a policy of rapid currency expansion, they mark up prices to cover the expected decay in the currency’s value. The issuer must then accelerate its expansion to cover these prices- which pushes the value of the currency down even faster than before. 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.

Hyperinflation & Currency

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 bank notes, including those denominated in amounts of 1,000,000,000 or more.

Example: By late 1923, the Weimar Republic of Germany was issuing two-trillion Mark banknotes and postage stamps with a face value of fifty billion Mark. The highest value banknote issued by the Weimar government’s Reichsbank had a face value of 100 trillion Mark (100,000,000,000,000; 100 million million). At the height of the inflation, one US dollar was worth 4 trillion German marks. 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.

Governments will often try to disguise the true rate of inflation through a variety of techniques. None of these actions addresses the root causes of inflation and they, if discovered, tend to further undermine trust in the currency, causing further increases in inflation. Price Controls will generally result in shortages and hoarding and extremely high demand for the controlled goods, resulting in disruptions of supply chains. Products available to consumers may diminish or disappear as businesses no longer find it sufficiently profitable (or may be operating at a loss) to continue producing and/or distributing such goods at the legal prices, further exacerbating the shortages.



Angola experienced hyperinflation from 1991 to 1995. It was a result of exchange restrictions following the introduction of the novo kwanza (AON) to replace the original kwanza (AOK) in 1990. In the first months of 1991, the highest denomination was 50,000 AON. By 1994, the highest denomination was 500,000 kwanza. In the 1995 currency reform, the readjusted kwanza (AOR) replaced the novo kwanza at the ratio of 1,000 AON to 1 AOR, but hyperinflation continued as further denominations of up to 5,000,000 AOR were issued. In the 1999 currency reform, the kwanza (AOA) was reintroduced at the ratio of 1 million AOR to 1 AOA. Currently, the highest denomination banknote is 2,000 AOA and the overall impact of hyperinflation was 1 AOA = 1 billion AOK.


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, one Austral was exchanged for 1,000 Pesos Argentinos. In the 1992 currency reform, one new Peso was exchanged for 10,000 Australes. The overall impact of hyperinflation: 1 (1992) peso = 100,000,000,000 pre-1983 pesos.


In 1922, inflation in Austria reached 1,426%, and from 1914 to January 1923, the consumer price index rose by a factor of 11,836, with the highest banknote in denominations of 500,000 krones.


Belarus experienced 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 one new Ruble = 1,000 old Rublei. The highest denomination in 2008 was 100,000 Rublei, equal to 100,000,000 pre-2000 Rublei.


Bolivia experienced 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. In the 1987 currency reform, the Peso Boliviano was replaced by the Boliviano at a rate of 1,000,000:1.

Bosnia and Herzegovina

Bosnia and 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. Unbelievably, 50,000,000,000 Dinara notes were also printed in 1993 but never issued.


From 1986–1994, 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 2,075.8%. A new currency called “Real” was adopted in 1994, and hyperinflation was eventually brought under control. The Real was also the currency in use until 1942. One (current) real is the equivalent of 2,750,000,000,000,000,000 of Brazil’s first currency (called Réis in Portuguese).


In 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 the exchange rate to dollars reaching 3,000. 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 International Monetary Fund and the World Bank, and the economy began to stabilize.


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 a 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 went through its worst inflation in 1994. In 1993, the highest denomination was 100,000 Kuponi. By 1994, the highest denomination was 1,000,000 Kuponi. In the 1995 currency reform, a new currency, the Lari, was introduced with 1 Lari exchanged for 1,000,000 Kuponi.


This is the inflation of 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. In 1923, the rate of inflation hit 3,250,000% per month (prices doubled every two days). Beginning on November 20, 1923, 1,000,000,000,000 old Marks were exchanged for 1 Rentenmark so that 4.2 Rentenmarks were worth 1 US dollar, exactly the same rate the Mark had in 1914.


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 Drachmai. In the 1944 currency reform, one new Drachma was exchanged for 50,000,000,000 Drachmai. Another currency reform in 1953 replaced the drachma at an exchange rate of one new Drachma = 1,000 old Drachmai. The overall impact of hyperinflation: one (1953) Drachma = 50,000,000,000,000 pre 1944 Drachmai. The Greek monthly inflation rate reached 8.5 billion percent in October 1944.

Hungary, 1922–24

The Treaty of Trionon and political instability between 1919 and 1924 led to a major inflation of Hungary’s currency. Unable to tax adequately, the government resorted to printing money and by 1922 inflation in Hungary had reached 98% per month. 


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 most prices by law and enacted other measures as part of an economic stabilization plan. 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%.


The Republic of Serbian Krajina went through its 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 1995.


In spite of the Oil Crisis of the late 1970s (Mexico is a producer and exporter), and due to excessive social spending, Mexico defaulted on its external debt in 1982. As a result, the country suffered a severe case of capital flight and several years of hyperinflation and Peso devaluation. On January 1, 1993, Mexico created a new currency, the Nuevo Peso (“new peso”, or MXN), which chopped 3 zeros off the old Peso, an inflation rate of 10,000% over the several years of the crisis. (One new Peso was equal to 1,000 of the obsolete MXP Pesos).

North Korea, 1947–2009

Though the North Korean Won never technically failed, and is still the official currency of the reclusive communist nation, a 2009 revaluation showed the rest of the world rare cracks in the monolithic image Pyongyang presents. The government gave citizens seven days to turn in their old Won for new Won – with 1,000 of the old worth 10 of the new – but allowed a maximum exchange of 150,000 of the old Won, or about $40 worth. The revaluation and exchange cap wiped out the savings of many North Koreans, and reportedly caused unrest in parts of the country. According to a September 2009 BBC report, some department stores in Pyongyang even stopped accepting North Korean Won, instead insisting upon payment in U.S. dollars or Japanese Yen.


Nicaragua went through the worst inflation from 1987 to 1990. From 1943 to April 1971, one US dollar was equal to seven Cordobas. From April 1971-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, one 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, one new Córdoba was exchanged for 5,000,000 old Córdobas. The overall impact of hyperinflation: one (1991) Córdoba = 50,000,000,000 pre-1988 Córdobas.


Peru experienced its worst inflation from 1988–1990. In the 1985 currency reform, one 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 5,000,000 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.


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. In 1944, a box of matches cost more than 100 Mickey Mouse pesos. 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, 1921–1924

After Poland’s independence in 1918, the country soon began experiencing extreme inflation. By 1921, prices had already risen 251 times above those of 1914, but in the following three years they rose by 988,223%.

Poland, 1989–1991

Poland experienced a second hyperinflation 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 9,500 Zlotych for one US dollar in January 1990 and 19,600 Zlotych at the end of August 1992. In the 1994 currency reform, one new Zloty was exchanged for 10,000 old Zlotych. 

Republika Srpska

Republika Srpska was a 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 experienced hyperinflation in the 1990s. 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 Lei was replaced by the new Lei at 10,000 old Lei = one new Leu. Inflation in 2005 was 9%. In July 2005 the highest denomination became 500 Lei (= 5,000,000 old lei).

Soviet Union / Russian Federation

Between 1921 and 1922, inflation in the Soviet Union 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.


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


Ukraine experienced its worst inflation between 1993 and 1995. In 1992, the Ukrainian Karboyanets was introduced, which was exchanged with the defunct Soviet Ruble at a rate of one UAK = one 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 = one UAH. This translates to a hyperinflation rate of approximately 1,400% per month. By some estimates, inflation for the entire calendar year of 1993 was 10,000% or higher, with retail prices reaching over 100 times their pre-1993 level by the end of the year.

United States

During the Revolutionary War, when the Continental Congress authorized the printing of paper currency called Continental Currency, the monthly inflation rate reached a peak of 47% in November 1779 (Bernholz 2003: 48). These notes depreciated rapidly, giving rise to the expression “not worth a continental.” A second close encounter occurred during the U.S. Civil War, between January 1861 and April 1865, the Lerner Commodity Price Index of leading cities in the eastern Confederacy states increased from 100 to over 9,000. As the Civil War dragged on, the Confederate Dollar had less and less value, until it was almost worthless by the last few months of the war. The Union government also saw inflation peaking at a monthly rate of 40% in March 1864 (Bernholz 2003: 107).


Yugoslavia went through a period of hyperinflation and subsequent currency reforms from 1989–1994. The highest denomination in 1988 was 50,000 Dinars. By 1989 it was 2,000,000 dinars. In the 1990 currency reform, one new Dnar was exchanged for 10,000 old Dinars. In the 1992 currency reform, one 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, one new dinar was exchanged for 1,000,000 old Dinars. However, before the year was over, the highest denomination was 500,000,000,000 Dinars. In the 1994 currency reform, one 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: one Novi Dinar = 1,000,000,000,000,000,000,000,000 pre 1990 Dinars. Yugoslavia’s rate of inflation hit 5,000,000,000,000,000% cumulative inflation over the time period October 1, 1993 to January 24, 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, one 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. One Franc was exchanged for 100,000 Nouveaux Zaires. The overall impact of hyperinflation: One Franc = 300,000,000,000 pre 1989 Zaires.


Hyperinflation in Zimbabwe was one of the few instances that resulted in the abandonment of the local currency. At independence in 1980, the Zimbabwe Dollar (ZWD) was worth about USD 1.25. Afterwards, however, rampant inflation and the collapse of the economy severely devalued the currency. Inflation was steady before Robert Mugabe in 1998 began a program of land reforms that primarily focused on taking land from white farmers and redistributing those properties and assets to black farmers, which sent food production and revenues from export of food plummeting. The result was that to pay its expenditures Mugabe’s government and Gideon Gono’s Reserve Bank printed more and more notes with higher face values. Hyperinflation began early in the twenty-first century, reaching 624% in 2004. It fell back to low triple digits before surging to a new high of 1,730% in 2006. The Reserve Bank of Zimbabwe revalued on August 1, 2006 at a ratio of 1,000 ZWD to each second Dollar (ZWN), but year-to-year inflation rose by June 2007 to 11,000% (versus an earlier estimate of 9,000%). Larger denominations were progressively issued: Inflation by July 16 officially surged to 2,200,000% with some analysts estimating figures surpassing 9,000,000%. As of 22 July 2008 the value of the ZWN fell to approximately 688,000,000,000 per one USD, or 688 trillion pre-August 2006 Zimbabwean dollars.

  1. vincecate says:

    I have over 30 different explanations for hyperinflation. The amazing thing is they don’t contradict each other. They all seem to be true.

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