Inflation (and not the balloon kind)

Imagine if the money in your pocket could suddenly, instantly, become valueless. If it could go from a thing with real value to a collection of pretty paper and metal. It’s happened before.

Inflation (balloons) is good because balloons are fun :D. Inflation(economic) is supposedly a good thing because it supposedly is good for the general economy and supposedly boosts economic growth. Hyperinflation (balloon and economic) is very, very, very, very, very, very, VERY BAD.

Pop!

Inflation and hyperinflation have got a lot of publicity, because they are so very, very, very (etc) bad. But I’ll explain what it is for sake of reasons.

Inflation is when the value of money goes down. This seems weird, but here’s what it actually means. If a loaf of bread is worth £1 (or $1, or €1 or ¥1) and your economy has 3% inflation every year (assuming the relative price of bread doesn’t change), by next year bread will cost £1.03 (or 1.03 of whatever currency you choose). Inflation is often shown relative to gold prices, as there is a finite supply of gold and most countries stockpile it.

The problem with money (I mean, the one that is relevant here) is that there is not a finite supply. Governments can (and do) print more money than is taken out of circulation – leading to inflation. There is apparently a UN guideline that states that countries should aim for 2.0% annual inflation annually (the UK is still trying to hit this target).

We are very good at economics. And drawing graphs.

But every now and then, a country goes bankrupt and tries to boost inflation a bit. And every now and then, it goes very, very badly wrong.

I’ve got 4 examples of where this inflation goes utterly, utterly out of control – what is called hyperinflation. Hyperinflation is technically when inflation exceeds 50% per month (UK current is 0.1%), but the examples here are much more than that. Much, much more.


1. Hungary, 1946. Currency: pengo

The Hungarian hyperinflation of 1946 is the worst in history. Categorically. I’ll start there. I couldn’t find a good graph to express this, so I’ll give you a chart of the Top 6 Hyperinflation cases of All Time.

Look at that. The monthly inflation rate can’t even be expressed as a normal number. It’s actually 41,900,000,000,000,000% inflation in 1 month. And that last column – that’s terrifying. If you got home at 6pm with 10 pengo(enough to buy 10 loaves of bread, say) in your pocket, by 9am the next morning you could only buy 5 loaves of bread. If at the start of the month you were earning £50,000 per year (equivalent) by the end of the month you would be earning about 0.00000000001p equivalent. Imagine that. Nothing is safe.

Also, here is a 1 Sextillion Pengo note.

That’s 1,000,000,000,000,000,000,000 pengos. The biggest banknote ever.

2. Zimbabwe, 2008. Currency: Zimbabwe Dollar

I have three pictures that show how bad Zimbabwean hyperinflation got. This is the most recent hyperinflation example I could find, and the second worst ever.

This shows the yearly (first 10 boxes) and monthly (last 4 boxes) inflation rates of Zimbabwean Dollar vs US Dollar.

This is a note that was in standard circulation in Zimbabwe, as it was needed to buy groceries.

Yep. That’s a 100 trillion dollar note.

That banknote was actually in regular use in 2008, not just as a thing to show the wealth of the country. And the last picture is just really, really sad.

3. Yugoslavia, 1994. Currency: Dinar

Yugoslavia’s hyperinflation is one of the more popularised hyperinflation events of the past 20 years or so. After the breakup of the Soviet Union, lots of Eastern European countries had new currencies, which then crashed. Here is some trivia about Yugoslavia’s economy during this period

For contrast, the UK government currently gets 65% of its income from taxes. The reason that can happen is that costs of things stay constant – people are always going to need the same amount of healthcare, regardless of the apparent cost of it. But taxes are a fixed amount of currency – and if your currency is decreasing in value by 313 million percent every month, you will not have very much money left. And when governments don’t have any money, they tend to do something about it – by printing more money. Well done, governments in general.

4.Germany, 1923. Currency: Mark

This is probably the most widely known hyperinflation event of all time, even though it’s only the 4th worst. This was (arguably) the event that allowed Hitler to come into power and begin doing evil things. So it’s a serious one. Here are some graphs.

Yes, that’s trillions of marks to the dollar.

All of this is just for an illustration of how bad hyperinflation is for everybody. But now, here’s what you need. The quick guide on how to survive hyperinflation.

How to survive Hyperinflation

  1. Preempt. If you can get the hell out of the economy when prices start to rise, you can get clear before the real heavy artillery starts firing on the economy (extended metaphor alert).
  2. Change. If you can invest your money in another currency as prices start to escalate, you shouldn’t be too badly affected. I couldn’t get any reliable data on how world currencies change (compared to gold, which is a good standard) when one country goes into hyperinflation, but the USD is probably a safe bet. But in this modern age, there is a better alternative – a currency which, by definition, can experience no inflation. Bitcoin! As there are only 21 million Bitcoins that can ever exist, it is impossible for the currency to ever inflate, deflate or anything-else-flate. So when the hyperinflation starts, convert all your monetary assets to another currency, ideally Bitcoins. (Although Bitcoin can change in value, just not through the normal ways.)
  3. Invest. In post-hyperinflation Germany there was a huge bread shortage, which contributed to the high bread price. If you could invest in wheat or flour, you could make millions actual money, and trillions in hyperinflated money.

And that, friends, is how you survive the total crash of your currency and utter ruination of your country’s economy. You’re welcome in advance.

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