Topic: Why did hyperinflations happen? - page 2. (Read 4378 times)

Actually it's just a way to default on their debt. That's all it really is and they have to do it because they want to keep the appearance of paying off their debt.

Yeah, but otoh, you might think of defaulting to try to shock people back into hoarding money. "OMG, the welfare fund is empty, maybe save a little in case this stuff catches value again." Not saying it would work, but in these situations nothing really is, so, try?

When $1B dollars buys a house you promise a soldier $1B, later it buys a coffee, but you don't have it anyway. Print........

To try and maintain the appearance of at least some credibility.

And that's what puzzles me; why do they print millions of new notes, even if they lose value within few days (for example, I have 100 billion pengő banknote dated 04/29/1946 and 10 trillion one dated 05/24/1946 - that's one month only!)? If no one uses it anyway (I don't believe somebody would - it wasn't just possible to pay with earned money, when you got 500B one day and a week later a loaf of bread costs 2T!), why do governments continue to print over and over?

The massive printing of huge bills is an effect of hyperinflation not (usually) it's cause. Hyperinflation is caused by a loss of faith in a currency. This can be caused by various things, massive printing is one of them and not the usual one. When people don't believe that their money will hold value anymore them immediately spend it on anything they think will. They don't want to wait and pay any price. Now if the government still wants to get hold of stuff they need more money than ever and they print it. It is already too late at this point. Eventually everyone gets it and no one accepts bills above their value as paper.

It's basically caused by millions of people suddenly realizing that their paper investments (retirement funds) aren't really backed by anything, and withdrawing them all at once.  Just think of the tens of millions of workers who quietly invest and re-invest large percentages of their income and are too busy to really manage it properly.

Hmm why does hyperinflation happen. Well that's a really tough question.

Well actually it's not at all. All you have to is follow the current events in Belarus: http://www.zerohedge.com/article/welcome-hyperinflation-hell-following-currency-devaluation-belarus-economy-implodes-sets-blu

Uhm, yes there is- a country makes bills that are of much larger denominations. Zimbabwe introduced notes which were of larger and larger denominations until the currency completely collapsed. I happen to have a 100 trillion dollar Zimbabwe note that I bought off of Ebay for $3 (and that's me paying for the novelty of it, not any sort of exchange).


From Wikipedia:
The paper notes were Z$500, 100, 50, 20, 5 and 2. The coins were Z$5, 2, 1, 50, 20, 10, 5, and 1 cents. As the inflation rose, larger bills were needed to pay for menial amounts. The bills that ultimately were printed ranged from the original denominations up to Z$100billion. The Central Bank of Zimbabwe planned to print and circulate denominations of up to Z$10, 20, 50, and 100 trillion.[34] The Central Bank would no sooner print and distribute one denomination of its currency and within days there would be a new announcement of a higher denomination being printed. The announcement for the Z$200,000,000 bill came just days after the printing of the Z$100,000,000 bill.
As inflation rose, the government continued to print larger and larger bills. They did not attempt to combat the inflation with other fiscal and monetary policy. In 2006 before the hyperinflation reached its peak, the bank had already announced that it would be printing larger bills to buy foreign currencies. This led the Reserve Bank to print a Z$21trillion bill to pay off debts owed to the IMF.

go to mises.org and search through their media database. I'm confident you'll find your answers.

simplified explanation: there is not enough goods and services to be bought by the money that exists => money owners compete in spending them and this is driving prices up (since gov & central bank have issued more money than there are things that the money can buy)

this backfires, government needs to buy as well the stuff that is now more expensive (tax revenue will probably not be enough) so they print more money adding presure to the spending competition.
why don't you try wiki? i bet my 7 bitcents that english and especially german wiki about hyperinflation are pretty explanatory.

There were several hyperinflations in the world. From mild ones, such as in France after WW2, through more serious, like in many Middle-European countries after 1989 and ending in drastic causes, like 1922-23 German hyperinflation and 1945-46 one in Hungary. I do not understand why is hyperinflation happening. OK, the main cause is that governments want to cover growing costs with newly printed currency. But why don't they stop at some point? Let's say, it's after-war period in some country. Studies report that, for example 500 million dollars is needed to cover costs of the country's revival. So, the government introduces 500 dollar notes and prints a million of them. But soon it comes out that these actions dropped the currency's purchasing power dramatically. And from now on I don't understand the concept. The central bank sees that what could be bought for $10 before war, now costs $500. So it issues $1000 and $2000 notes to provide essential high denominations. But the prices drop and now $2000 is worth less than $500 before. So the wheel spins and $5000, $10,000, $50,000 etc. up to $100 billion are printed. Do I understand the process correctly? Or there is someone who can explain it a bit?