Hyperinflation in the history of civilization

1.

Hyperinflation in
the history of
civilization
LEBEDEVA MARIA
KHOKHLOVA ANASTASIA

2.

Hyperinflation
(the price increase for the month is more than 50%)
it is very high and usually fast inflation. It quickly reduces the real
value of the local currency as prices for all goods rise. This forces
people to minimize their holdings in this currency, as they usually
switch to more stable foreign currencies. When measured in stable
foreign currencies, prices usually remain stable
As a rule, hyperinflation develops in conditions of crisis and war,
leading to a drop in public confidence in money. It begins to get rid
of them, and therefore money ceases to perform its key functions in
the economic system. Their equivalent is beginning to be freely
convertible currency, precious metals, luxury goods and other liquid
goods, the value of which does not depend on government policy

3.

Thus, the consequences of hyperinflation are that economic agents
switch to barter, lose the opportunity to save and accumulate at
the expense of financial products.A significant decrease in the
production of goods and services leads to a drop in the supply of
economic goods on the market, which, in turn, provokes an even
greater increase in prices, and this process begins to go in a circle.

4.

Zimbabwe
Unlike other African countries, Zimbabwe has been under the rule of
white people for much longer, descendants of those English colonists
who came to these lands back in the 19th century, and gained
independence only in 1980. Since the reign of the first African
president of Zimbabwe, Robert Mugabe, problems began in this
country, namely from the late 1990s to the early 2000s, when an
unsuccessful land reform was carried out in Zimbabwe. The fact is that
at that time a significant part of the white population remained in
Zimbabwe, they also owned a significant part of farms that produced
all the necessary agricultural products. Mugabe kicked out white
Africans, and in their place came black Zimbabweans, who turned
out to be bad business executives. As a result, production in the
country has plummeted, many enterprises have closed, and hundreds
of thousands of people have lost their jobs. The authorities were afraid
to fuel the economy by increasing taxes and reducing budget
expenditures, since Zimbabweans staged large-scale protests more
than once, and the authorities initially perceived the economic crisis
as a temporary phenomenon.

5.

In order to somehow cover government expenses, it was necessary to launch a printing press
and issue the Zimbabwean dollar more and more actively, which caused an unprecedented pric
e increase. For example, a can of beer on July 4,
2008 at 17:00 local time cost 100 billion Zimbabwean dollars, an hour later its price was 150 bill
ion. It came to the point of absurdity —
Zimbabwean dollars were cheaper than the paper they were printed on, so it was more profita
ble to go to the toilet with Zimbabwean dollars (using them somewhat for other purposes) than t
o buy real toilet paper with this money, the Zimbabwean authorities even officially banned the u
se of the national currency as toilet paper by a special law.
In
2009, Zimbabwe stopped issuing its own currency; currencies of other countries began to be us
ed[4]. In mid2015, Zimbabwe announced that it would switch completely to the US dollar by the end of 2015
. Banknotes with a colossal face value of 100 trillion Zimbabwean dollars now serve as souveni
rs for tourists[5].
In 2020,
a new Zimbabwean dollar was released into circulation, which at first practically did not devalue
, but over time inflation reached more than 400% per year, which can be called a new hyperinfl
ation.

6.

The causes of hyperinflation in
Zimbabwe may be as follows:
1. Unsuccessful land reform, which led to a reduction in agricultural
production and the closure of enterprises.
2. Printing a large amount of money to cover government expenses.
3. The use of foreign currencies instead of national ones, which
caused a shortage of domestic currency.
4. Economic crisis and inefficient management.

7.

The effects of hyperinflation in
Zimbabwe include:
1. A sharp rise in prices for goods and services, which led to a drop
in the standard of living of the population.
2. Devaluation of the national currency, loss of confidence in the
financial system.
3. Reduction of investments and economic downturn.
4. Increasing poverty and unemployment.
5. Deterioration of living conditions of the population and social
instability.

8.

Zimbabwe now
The significant weakening of the Zimbabwean dollar has spurred
inflation
In June 2023, the annual growth rate of food prices reached 256
percent. The monthly price growth rate in June was 104 percent,
compared with 26 percent in May. The main reasons for the price
increase over the past months have been the weakness of the
national currency, the expansion of the money supply and high
food prices on world markets. Despite the measures taken in 2023 to
curb prices, inflation continues to rise.

9.

Hungary
Hungary was economically devastated by World War II. Due to its illfated status as a war zone, approximately 40% of the country's fixed
capital was destroyed during the conflict. Before that, Hungary had
been involved in a wild, debt-raising production build-up in support
of the German war effort, but Germany had never paid for the
goods.
When Hungary signed a peace treaty with the countries of the antiHitler coalition in 1945, it had to pay huge reparations, which
amounted to 20-25% of Hungary's budget during the period of
hyperinflation.

10.

By the end of 1945, the issue of military penges was completed and
Hungary returned to printing its pre-war currency, the ordinary
penge. The government of the country conducted uncontrolled
emissions, trying to close all the gaps in the Hungarian economy,
without thinking about the consequences. As a result, the
purchasing power of the currency was rapidly falling. The penge
rate steadily declined.

11.

Why?
In the spring of 1944, the Third Reich occupied Hungary and later
that year fighting between the Red Army and the Wehrmacht
began in the country. The consequences were devastating - 40% of
the country's fixed capital was destroyed. In early April 1945, the Red
Army drove the Nazis out of Hungary, but the country's financial and
banking system was in a deplorable state. Back in January 1945, the
Allied Control Commission for Hungary proposed to the Soviet
government to start issuing special military banknotes. The
temporary currency was called the penge of the Red Army
command.New money was printed in the USSR and from there it
was already delivered to Hungary.

12.

Meanwhile, the Hungarian gold reserve, worth more than $ 32
million, taken out of the country by the Nazis in 1944, ended up in
the hands of the Allies after the end of the war.However, the
country's authorities could not do anything - everything was
decided in Moscow. The number of the Hungarian Red Army
exceeded one million people and a substantial part of the expenses
of the Hungarian state was spent on its maintenance. In addition,
reparations had to be paid to the USSR, Yugoslavia and
Czechoslovakia. More than a third of Hungary's budget was spent
on this.

13.

There was a massive shortage of goods needed by the population
throughout the country. A psychological factor also played an
important role: the expectation of price growth is one of the reasons
for this growth. Everyone - from manufacturers to retailers - was
preparing for the fact that prices for everything were about to soar,
and workers demanded that their salaries be increased. All these
features of the Hungarian economy and politics overlapped in 1945
and provoked unprecedented inflation.

14.

So in early April 1945, 250 penges were given for one dollar, at the
end of July - 1320, and at the end of December - 142800 penges. At
the end of January 1946, a dollar was already worth 795,000 penges
on the black market. On May 2, it was 300 million, and on the 14th it
exceeded 1 billion pengo. Coins quickly disappeared from
circulation. The metal for their production was much more
expensive than they were. Instead, the Hungarian government
continued to issue new banknotes. On February 28, a bill of 1 million
penges appeared, in early April - 10 million, at the end of April - 100
million, in mid-May - a billion.
The largest bill was the 100 million adopenge banknote.

15.

Those Hungarians who still had
jobs first came to collect their
salaries with bags and
suitcases, then they had to be
replaced with large boxes, but
soon they turned out to be too
small. People gradually began
to abandon money altogether
and switched to barter
exchange, starting to pay with
products.

16.

The salary received in the
morning could devalue by
2 times in the evening.
Therefore, people began to
switch to the calculation of
products. In the theater,
cinema, circus, visitors were
asked to bring food instead
of money. in the photo, the
ticket office of the circus
with the announcement
that tickets can also be
bought for bread, sausage
and fruit

17.

Surprisingly, the worst inflation in history was managed in just a year.
Already on August 1, 1946, a new monetary unit was introduced in
Hungary - the forint, which was provided not only with guarantees,
but also with gold. The exchange rate was 1 in 400 octillion penges.
For 1 forint, they gave an amount with 29 zeros. This has become an
absolute world record for denomination, which even the poorest
African countries have not yet managed to break.

18.

Hungary now
By the end of May 2023, the inflation rate in
Hungary decreased to 21.5% compared
with the April figure of 24%. But now the
inflation rate has returned to normal. As for
salary levels, Hungarians have been among
the three poorest EU countries in terms of
net income for several years. 10016.95
euros per year goes net into the purse of a
Hungarian working for the national
average salary. It is 835 euros per month or
46.8 thousand rubles.

19.

Thank you for listening