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Inflation has been all over the news in recent years. But what exactly is inflation? By definition, inflation is the gradual increase in the average price of goods and services over time. When a country experiences inflation, its currencies’ purchasing power gets reduced. People feel the pinch, and their money doesn’t go as far.
Inflation can adversely affect an economy, including reduced output and increased unemployment. Hyperinflation, or incredibly rapid, out-of-control price increases of more than 50% per month, does the same, only worse.
The U.S. inflation rate hit record highs in the years following the pandemic. In 2022, the average inflation rate was 8%, the highest since 1981. That said, if we look at other countries, we’ll see that there are far worse cases when it comes to inflation.
In this article, we’ll review 10 incidents of some of the worst hyperinflation in history and its consequences.
Key Points
• Hyperinflation leads to economic chaos, loss of savings, and destabilization, as seen in historical cases like Germany 1923.
• Countries may adopt foreign currencies during hyperinflation, exemplified by Yugoslavia’s switch to the German mark in 1994.
• Severe shortages and social unrest often accompany hyperinflation, highlighted by Zimbabwe’s 2008 crisis.
• Government interventions, such as currency reforms, are common responses to hyperinflation, demonstrated by Germany’s introduction of the Rentenmark.
• Recovery from hyperinflation is prolonged, with Greece’s post-WWII stabilization taking years.
Worst Hyperinflation in History
While some inflation can be good for the economy, high inflation can have negative effects on both consumers and businesses.
Inflation is typically considered high when it exceeds the rate of economic growth. For example, when prices rise faster than wages, then workers’ purchasing power declines. This can lead to a decrease in demand (such as less spending and travel), which can cause businesses to reduce production and result in a recession.
What follows are 9 examples of when inflation got really out of hand.
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1. Greece: October 1944
Greece faced a severe period of inflation that began when the Germans occupied the country during World War II and continued to get worse. In 1944, prices doubled every 4.3 days and the monthly inflation rate peaked at 13,800%. The government responded by introducing price controls and rationing. However, it took many years before they were able to bring inflation under control. At the beginning of 1947, prices finally began to stabilize and national incomes began to rise, lifting the country out of one of the worst hyperinflation periods in history.
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2. Yugoslavia: October 1994
In the early 1990s,Yugoslavia was hit by an inflation crisis that caused the value of their currency, the Dinar, to drop sharply. Prices doubled every 34 hours. As a result, it was difficult for citizens to purchase everyday items like food and clothing. Many resorted to smuggling goods to get by.
The government attempted to fix the problem by introducing new bills with higher denominations, but this caused more chaos and confusion. In the end, Yugoslavia abandoned its currency altogether and adopted the German mark as its official currency.
3. Germany: October 1923
In October 1923, Germany faced a period of extreme inflation. The government had printed too much money to finance war operations, and prices were skyrocketing. More than a wheelbarrow full of bills was needed just to buy a newspaper. People were losing their life savings, and the economy was in chaos.
To halt inflation, the government introduced a new currency called the Rentenmark. This stabilized the currency, and Germany began to recover from the crisis.
4. Zimbabwe: November 2008
Thanks to years of economic mismanagement by the government of Zimbabwe, in November 2008, inflation hit its peak. The country’s inflation rate was, month over month, 2,600%, or more than 231 million percent on a year-over-year basis. Those mind-boggling numbers meant that a loaf of bread cost what 12 new cars did a decade prior.
To mitigate the issue, the government printed large amounts of money without backing it with gold or other assets. This resulted in a rapid depreciation in the value of the currency. As prices increased, people started losing faith in the currency, leading to even more hyperinflation.
The situation became so desperate that most people could not afford necessities such as food and medicine. The high inflation rate also made it difficult for businesses to operate, and many companies went out of business.
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5. Hungary: 1946
Hungary experienced a high level of inflation after the end of World War II. The country’s currency, the Forint, was not pegged to the U.S. dollar or any other currency. As a result, it was vulnerable to sharp devaluations. In addition, Hungary was still recovering from World War II, and the government was trying to stabilize the economy by printing money, a factor that can cause inflation, to finance its reconstruction efforts.
As a result, prices doubled every 15.6 hours, and the average person’s standard of living declined sharply. In the second half of 1946, Hungary was home to the most worthless currency in the world, with a banknote carrying a denomination of 1,000,000,000,000,000,000.
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6. Argentina: 1975
Starting in 1975, Argentina’s inflation rate increased by an average of more than 300% per year until 1991. Several factors caused the situation, including an increase in the money supply without an equal increase in goods and services. This led to a spike in prices. Another trigger was the decline in agricultural production, which led to higher food prices. Political instability also contributed to high levels of inflation.
7. Sudan: 2021
Inflation in Sudan has been an ongoing problem for several years. The main drivers of Sudan’s hyperinflation are:
• The depreciation of the Sudanese pound
• The high rate of population growth
• The increase in government spending
To address these problems, the government has implemented several measures, including devaluing the currency and reducing spending. Unfortunately, though, these measures have not been fully effective, and inflation continues to be a major issue. As of October 2024, the annual inflation rate was 200.1%.
8. Iran: 2022
Inflation in Iran is a problem that has been going on for many years. The value of the Rial has decreased significantly, and the cost of living has increased dramatically. Undoubtedly, this has caused significant hardship for the people of Iran. In May 2022, inflation was impacting food and beverage prices at a rate of over 80%.
To combat the high levels of inflation, the Iranian government has put various price controls in place. Fortunately, the controls have had an impact: As of October 2024, the annual inflation rate was 31.7%.
9. United States: 1917
The worst inflation rates in U.S. history reflect how harsh life during wartime can be. The highest figure ever observed was in 1776, when the rate of inflation was 29.78%. But, that was more than 100 years before the CPI (consumer price index) was introduced. Since its inception, the highest inflation rate ever recorded in the United States was 20.49% in 1917. The country went to war and had to finance that effort by printing more money.
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What Is the Most Inflated Currency?
In the world of finance, there’s a variety of currencies that get used in different countries. While some currencies are more valuable than others, the Venezuelan bolívar is one of the most inflated currencies in the world. That’s due to Venezuela’s astounding inflation rate, which was 360% in 2023. That was the tenth consecutive year that Venezuela earned the distinction of having one of the highest inflation rates in the world. The rate in 2023, however, was a significant improvement over 2018, when it was 65,000%.
The Takeaway
Inflation affects everything from the cost of a loaf of bread to your kids’ college tuition. While Americans got hit with high inflation in years after the pandemic, it’s been far worse at other times in U.S. history, and throughout the world.
One of the best ways to beat inflation is to earn a competitive interest rate on your savings. If your bank pays less than the current rate of inflation, your money actually loses value over time. Generally, online banks offer yields on savings accounts that are many times higher than those offered by traditional banks.
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