In 1903, a lawyer in Germany took out an insurance policy and made payments on it faithfully. When the policy came due in twenty years, he cashed it in and bought a single loaf of bread with the proceeds. He was fortunate. If he had waited a few days longer, the money he received would have bought no more than a few crumbs. Germany had been on the usual fractional reserve gold standard prior to World War I, with the Reichsbank—its central bank—expanding the money supply at a “mild” 1–2 percent inflation rate. When war broke out in 1914, the government followed the standard policy of deficit spending rather than attempting to raise taxes. The Reichsbank’s role was to monetize the … [Read more...]
Hyperinflation: 5 Currencies that Self-Destructed
Over the years we have discussed Hyperinflation a number of times. We've explained that, "Hyperinflation is an extremely rapid period of inflation, usually caused by a rapid increase in the money supply. Usually due to unrestrained printing of fiat currency." Hyperinflation has been recorded as far back as Egypt 276 AD and is usually caused due to some sort of government mismanagement issue. Typically hyperinflation gets progressively worse until the curve goes hyperbolic and then something happens to end the progression. See What is Hyperinflation? for more information. Recently Commodity.com produced an Infographic of 5 currencies that were hit by hyperinflation so with their … [Read more...]