Involuntary Millionaires

A short story about hyperinflation

Two Million Marks (1924) by Stadrat MannheimEconomy Museum – Royal Coin Cabinet

Rapid Change

Hyperinflation is extreme: at least 50 percent inflation per month or 500 percent in a year. Money drops in value, people turn to foreign currencies, to gold, or switch to bartering. Shops change their prices several times a day. Eventually, even a backpack full of bank notes is not enough for a cup of coffee.

One Trillion Marks, reverse (1923) by ReichsbanksdirektoriumEconomy Museum – Royal Coin Cabinet

Many countries suffering from hyperinflation have excessive costs for the military or the public sector. There are invariably weaknesses when it comes to democracy and human rights and they often have problems with corruption and dictatorial leaders. Some countries have years of war behind them and need funds for reconstruction. But if a country’s central bank prints too much money, the value of money falls and inflation rises…

Four Hundred Livres (1792) by Hypothéqué sur les Domaines NationauxEconomy Museum – Royal Coin Cabinet

First Documented Hyperinflation
– France 1795

On 14 July 1789 furious Parisians stormed the Bastille Prison, an event that triggered the Revolution. Discontent had long simmered among the French population. The country was heavily indebted, almost bankrupt. Years of crop failure raised prices and it became difficult to sate everybody’s hunger. 

The economic problems in France did not disappear with the Revolution, instead they became worse. To fill the holes in the economy, the National Assembly issued a new type of bank notes called Assignats at the end of 1789. Bank notes were printed in the hope that the money would provide people with increased purchasing power.

Thousand Francs (1794) by Hypothéqué sur les Domaines NationauxEconomy Museum – Royal Coin Cabinet

The huge quantities of bank notes that came onto the market led to a quick rise in prices; inflation reached previously unimaginable levels. To gain control of rising prices, price caps on basic foodstuffs were introduced.

Ten Thousand Francs (1794) by Hypothéqué sur les Domaines NationauxEconomy Museum – Royal Coin Cabinet

But the situation was untenable. Hyperinflation continued from May 1795 to November 1796. Towards the end, prices had risen by more than 24,000% compared to the prices at the start of the Revolution. France sought for security and stability to end the economic crisis. To achieve this, precious metal coins were minted to ensure that their value would be maintained.

Edelacker Fifty Pfennig, fourth motif (1921) by Walther HegeEconomy Museum – Royal Coin Cabinet

The Most Famous Hyperinflation
– Germany 1923

A combination of large government expenses, war indemnity and the excessive printing of bank notes sent Germany straight into hyperinflation in 1923. Planning your economy for more than a few days was not possible. Many stores stopped accepting payment in Marks, the domestic currency, and switched to bartering. 

Ten Million Marks (1923) by ReichsbanksdirektoriumEconomy Museum – Royal Coin Cabinet

Inflation in Germany peaked in October of 1923. At that point it was decided that the current currency, the German Papiermark, would be replaced by the new Rentenmark. The exchange rate was 1 new Mark for 1 trillion old Marks. This new currency did not last very long, however.

One Hundred New Marks (1924) by ReichsbanksdirektoriumEconomy Museum – Royal Coin Cabinet

As early as 1924, the Rentenmark was abolished in favour of the Reichsmark, which was used until 1948 when the replacement Deutsche Mark was introduced as the official currency of West Germany. With the assistance of loans from England and the United States, together with a financial austerity policy, Germany was able to quickly rebuild itself to a certain level of prosperity.

One Hundred Trillion Pengo, obverse (1946) by Magyar Nemzeti BankEconomy Museum – Royal Coin Cabinet

A World Record No One Wants
– Hungary 1946

Large parts of Europe were in ruins after the Second World War. The German troops had retreated from Hungary with the country's gold reserve together with everything else that could be physically moved. Russia then occupied the country and demanded money for the stationing of their troops and much more.

One Thousand Trillion Pengo (1946) by Magyar Nemzeti BankEconomy Museum – Royal Coin Cabinet

The Hungarian Government saw no other way than to start printing bank notes at high speed to boost the economy. The state even distributed cash to its population, a stimulus measure for increased consumption later known as helicopter money. With so much money in society, the value of the Hungarian currency Pengö plummeted in value, as well as any confidence the people had in it.

One Hundred Million Trillion Pengo, reverse (1946) by Magyar Nemzeti BankEconomy Museum – Royal Coin Cabinet

In July 1946, one could only watch with horror as prices doubled every 15 hours. Hungary reached an inflation level of 41.9 quadrillion % a month in the same year. The highest denomination ever issued on a bank note was 100 million trillion (100,000,000,000,000,000,000) Pengö. In 1947 the currency was abolished and the Hungarian Forint was introduced. The exchange rate was then 400,000 septillion (400,000,000,000,000,000,000,000,000) Pengö for 1 Forint.

One Thousand Trillion Pengo, reverse (1946) by Magyar Nemzeti BankEconomy Museum – Royal Coin Cabinet

Austerity measures were introduced in government spending and taxes greatly increased. The country’s gold reserves was returned by the United States and hence could function as a guarantor of the value of the new currency. Prices fell rapidly and the country managed to extricate itself from hyperinflation.

Origami Wallet (2016/2017) by Banco Central de VenezuelaEconomy Museum – Royal Coin Cabinet

A Folding Economy – Venezuela 2015

Venezuela is a country with very substantial oil reserves, which meant that the country flourished economically in the 1960s and 1970s. The heavy reliance on the oil, and the ability to produce and export very large quantities of it, led to the abandonment of other industries such as agriculture and manufacturing industries.

Origami Bag, Banco Central de Venezuela, 2016/2017, From the collection of: Economy Museum – Royal Coin Cabinet
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When the price of oil fell, this resulted in an uncertain and unstable economic situation, however the political leaders turned a blind eye to the consequences that would follow as a result. Inflation rose, and quietly became hyperinflation in 2016.

Origami Bird (2016/2017) by Banco Central de VenezuelaEconomy Museum – Royal Coin Cabinet

Since 2015, economic chaos and other difficulties have led to millions of people fleeing Venezuela. Peru estimates that there are around 1 million Venezuelan refugees, many of whom have made the 450 km trek between the two countries on foot. In Venezuela, studies show that public health has deteriorated. Many children are malnourished and infant mortality has increased. The population of Venezuela loses an average of nine kilos per person in a year.

Origami Wallet, Banco Central de Venezuela, 2016/2017, From the collection of: Economy Museum – Royal Coin Cabinet
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Because so many people are leaving Venezuela, the have had to find new ways to make a living. Some work as vendors of Origami Venezolano, beautiful ornaments and bags made of the Venezuelan Bolivares Soberanos bank notes, that they sell to tourists. The objects provide more income than the value of the bank notes from which they are made.

Fifty Pfennig, reverse (1921) by NenckEconomy Museum – Royal Coin Cabinet

How to
End It All

Hyperinflation no longer seems to be a major threat for most countries. But where it does occur, it causes a significant amount of harm, both to the individual’s and to the country’s economy. In July 2020, Lebanon became the first country in the Middle East to end up in a situation where it faced hyperinflation. Another country with worryingly levels of inflation in 2020 is Sudan. The rate of inflation increased by 166.8 % in August this year compared with last year. In recent years persistent shortages of bread and fuel, as well as a growing black market in US dollars, have contributed to rising inflation. Will it end or will it be the next world record?

Credits: Story

Text: Economy Museum – Royal Coin Cabinet
Edit: G. Sandell, National Historical Museums.

Credits: All media
The story featured may in some cases have been created by an independent third party and may not always represent the views of the institutions, listed below, who have supplied the content.
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