How 9 Countries Completely Lost Control Of Inflation

business insider ^ | Sep. 18, 2012, 7:23 PM | Matthew Boesler

[BenLurkin]

Hyperinflationary episodes have appeared several times over the past century – 55, to be exact – as the world's nations have experimented with fiat currencies backed by the full faith and credit of the governments that issue them.

At times, that full faith and credit has been misplaced – and holders of unstable currencies have been caught empty-handed in countries all over the world.

Even some of the largest economies in the world today, though – like China, Germany, and France – have suffered devastating hyperinflationary episodes.

A major historical precursor of hyperinflation is war that destroys the capital stock of an economy and dramatically reduces output – but the misplaced monetary and fiscal policies that ensue are almost always part of the story.

Hungary: August 1945 - July 1946 Daily inflation rate: 207 percent Prices doubled every: 15 hours

Zimbabwe: March 2007 - November 2008 Daily inflation rate: 98 percent Prices doubled every: 25 hours

Yugoslavia/Republika Srpska: April 1992 - January 1994 Daily inflation rate: 65 percent Prices doubled every: 34 hours

Weimar Germany: August 1922 - December 1923 Daily inflation rate: 21 percent Prices doubled every: 3 days, 17 hours

Greece: May 1941 - December 1945 Daily inflation rate: 18 percent Prices doubled every: 4 days, 6 hours

China: October 1947 - May 1949 Daily inflation rate: 14 percent Prices doubled every: 5 days, 8 hours

Peru: July 1990 - August 1990 Daily inflation rate: 5 percent Prices doubled every: 13 days, 2 hours

Nicaragua: June 1986 - March 1991 Daily inflation rate: 4 percent Prices doubled every: 16 days, 10 hours

France: May 1795 - November 1796 Daily inflation rate: 5 percent Prices doubled every: 15 days, 2 hours

[BenLurkin]

More details on each event at the link.

[Travis McGee]

Well, our leaders are MUCH to smart for that.

Hyperinflation could NEVER happen in America.

“It’s different this time.”

[bmwcyle]

The United States — 2012

[dalebert]

thats a joke

[Leaning Right]

I’m curious, does anyone know what happens to interest rates in hyperinflation times?

Suppose before the inflation the bank savings rate was 5% per year, and the borrowing rate was 6%. What happens to those numbers?

[Venturer]

with all this QE money printing it is coming as sure as the sun will rise.

[wtc911]

Buy gold now then buy silver when gold rises. The key is to know when to sell. Holding all the gold you can get doesn't mean much if you don't monetize it. Unless, of course, you don't need the cash and want to keep it to pass down.

Right now it's all a crap shoot, and the dice won't stop rolling until election day. If we get a disaster redux then the metals will soar. If we get a new team then they will drop. Tough call to make right now.

[Starboard]

A most excellent and informative post. Too bad stuff like this isn’t taught in our schools. An injection of reality like this would make for a better citizenry.

[BenLurkin]

[Starboard]

GLD (SPDR ETF Gold Trust) has risen about $20/share over the past three months. Probably just starting its ascent.

[Hoodat]

Traditionally, interest rates are always above the rate of inflation because the expected rate of return on any investment must account for inflation. If you ever find interest rates below the rate of inflation (like right now, for instance), then you know that something is seriously wrong and that someone (like the Fed, for instance) is manipulating interest rates to be artificially low by making money available to banks at near zero interest. The Fed is actually getting to a point where they will offer negative interest rates to banks just like Japan did back in the 90s.

The problem is that the banks don't want to lend money because they don't want to take on the risk of default since that risk is higher than normal in this economy, and the payoff (i.e. rates) so low. Fix the economy, and everything else will fall into place. And the only role the government can play in that is to remove the uncertainty, put a set of favorable rules firmly in place for the next 20 years, and then get their own financial house in order. Every dollar in deficit spending is a dollar of value that is stolen from the future of this country.

[Starboard]

I’m curious, does anyone know what happens to interest rates in hyperinflation times?
********
This wasn’t exactly a case of hyperinflation but back in the Carter era (or rather ‘error’) the daily interest rate on the money market that we had parked money in reached an astonishing 17%. As I recall that was abut the high water mark but for quite a while the rate of return was well into the teens.

[Travis McGee]

I didn’t think it needed a /sarc tag for the irony impaired.

[Travis McGee]

Gold ETFs are great, until folks realize that each gold bar is on the books many times over, and many of the bars taht do exist have tungsten cores.

The only gold that counts is physical gold in your possession.

[Starboard]

And the only role the government can play in that is to remove the uncertainty, put a set of favorable rules firmly in place for the next 20 years, and then get their own financial house in order.
*******
Very good post. I agree completely that’s what needs to be done but, barring a real economic calamity, one wonders if there’s sufficient political wisdom and will to do this. Taking away the “punch bowl” of government largesse is going to result in significant social unrest and political fallout. The necessary economic/structural adjustments may only be possible if we experience a significant recession/depression IMO (i.e., when we run out of other people’s money and there are no options left).

[Lurker]

I can’t afford gold. But for,years I was buying 4 or 5 ounces of silver a month. I stopped when it hit 22 bucks an ounce so my DCA on it is around 9 bucks or so.

Not that I’m down on gold, I just found silver more practical and affordable in my personal situation. So we have a few pounds of the stuff put back. We would never have been able to do that with gold.

And I figure something is always better than nothing. Lately tho we’ve been buying copper, brass, and lead.

[Travis McGee]

Gold is for people who already have no more room on their property for silver, ammunition, guns, stored food, etc.

IOW, not for many people.

(But it is more compact for escape purposes.)

[Starboard]

By “many of the bars” what kind of percentage out of the total are you talking about? How many is many? Is this somehow verifiable? Just curious to know.

Over the past five years GLD has returned over 100%. It has a large trading volume and may be a suitable component in some portfolios. As with all investments, do your due diligence, monitor carefully and diversify for protection.

[Paine in the Neck]

The only gold that counts is physical gold in your possession.

True dat. Also, you only own what you can protect.

[M-cubed]

If we get a disaster redux then the metals will soar. If we get a new team then they will drop. Tough call to make right now.<<

IMHO It's not a tough call at all......Any drop in prices will launch a buying binge.....INFLATION IS ALREADY BAKED IN THE PIE!

(the problem will be....any manipulated drop in PM prices will be met with an increased “premium” from sellers )