# Hyperinflation - A World History Author: [[He Liping]] ## Review I am fascinated by the function of money and it's role in society. Hyperinflation is one of the the more contentious and confusing aspects of money. This book gave a great overview of the historical episodes, along with some commentary about what happened in each country at the time. This was a tedious but interesting read, similar (in style and content) to Bernholz's book on Monetary Regimes. After giving an overview of what hyperinflation is, the author gives descriptions of historical episodes starting with: - early Roman and Chinese currency debasements (on metallic standards), early Chinese paper currency, and Medieval and early modern hyperinflation - Post-World War 1 survey: Germany, Russia, Poland and other central and eastern european countries. - Post World War 2 survey: Germany, Japan, Greece, Hungary, Italy - Latin America and Africa in the 70s and 80s. - A special chapter on post war China. - Hyperinflation in Eastern Europe after the collapse of the Soviet Union. - ending with the modern day hyperinflation in Zimbabwe, Venezuela & North Korea. I was totally unaware of the most interesting case studies he presented. While reading the book I kept thinking that there is still so much to learn, which is both discomforting (by planting doubts about my level of knowledge), but also highly motivating (to learn more). Russia and other members of the CIS shared a currency called the ruble zone. All of these countries experienced hyperinflation (in part because they shared a currency causing a race in money issuance) resulting in each creating their own currency. Similarly as Yugoslavia broke apart some countries saw hyperinflation and others didn't. From what I remember those that didn't were not monetizing their deficit. Post war Germany was interesting because it did not experience hyperinflation after WW2. The author described how the allied restructuring plan created a decentralized banking system, with an economy that was in part reliant on barter. The German banking industry post WW2 is something I would like to learn more about. I would have liked the book more if the author created a generalization of the causes and process of hyperinflation, rather than a historical timeline and description of all major events. I am forced to make my own inferences. So, here is what I took away from all of these cases: 1. Hyperinflation is too much money and not enough stuff: either by growing money too quickly, or by production stagnating/falling. 2. Monetization of government deficit always *seemed* to be present. (I need to double check whether that was always the case.) The government also took control of the banking industry or central bank. That's how the money supply could grew significantly. 3. Hyperinflation was coincident with significant government intervention, such as price controls, capital controls or rationing. These constraints often became firmer as inflation picked up. 4. There were feedback loops that spurred higher inflation. Indexed deposits, indexed wages, more deficit monetization needed due to lower real govt revenue, more currency substitution with higher inflation. 5. Hyperinflation could not be stopped until the currency was convertible or backed by something (currency board, international bonds, commodity) or credit/money creation was somehow constrained. 6. Lastly, that it's not as simple as points 1-5 and depends on the 'plumbing' of the monetary system. The distinction between reserves and other forms of money was important for the monetary policies implemented after the GFC. (This last point is my thought, the author doesn't discuss this much and credits the lack of hyperinflation after the GFC to the institutions and government policies.) There is still more for me to learn about this topic until I fully internalize it. This book will be helpful to those who like learning about the function and behaviour of money, but I wouldn't recommend it to the passerby. ## Key Ideas ## Related - [[How Inflation Works]]