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The country that suffered the worst inflation on record and where prices doubled every 15 hours

The country that suffered the worst inflation on record and where prices doubled every 15 hours

Much is known of the inflation and how it can cause the prices of basic products to rise in a matter of hours. Hungary knows very well about this economic concept and suffered the worst inflation recorded in 1946.

At its peak it reached 41,900,000,000,000,000%. Reason why every fifteen hours, the average prices doubled.

The novelist Gyorgy Faludy tells BBC World that when he returned to Budapest in 1946 he used all his money (300,000 million pengös) that he earned from the publication of a book to buy a chicken, two liters of oil and some vegetables.

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What happened to Hungary?

The European country, like many in its region, suffered the consequences of the Second World War. He was directly on the side of the Axis and supported in such a way that it became the battlefield between the USSR and Germany.

Thus, the country’s economy was in the ground. The Germans had looted around $1 billion worth of goods and commodities, and industrial capacity was destroyed, as most factories had structural damage.

In addition, most of the railways and locomotives were destroyed, and those that were good were stolen by the Soviets. To top it off, Hungary agreed to pay $300 million in reparations to the Soviets, Yugoslavs, and Czechoslovaks. Still, there were no international loans for the Hungarians.

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no improvement

The government of Hungary he decided to stimulate the economy and printed money, although he had to borrow to pay for the ink. He gave himself loans to consumers and money to the people. However, the citizens could not pay anything with that money.

He pengo, currency that was adopted as control measures went into free fall and its zeros became absurd. It went to nominations such as 100 million thousandpengös or one billion thousandpengös.

How was the day to day?

At one point, the value of the ticket did not achieve anything and in the markets everything was sold by weight. Béla Tomka, Professor of Modern Social and Economic History at the University of Szeged in Hungary, tells the BBC that if you wanted a dozen eggs, the seller would weigh them and the buyer would have to pay with the weight of the bills.

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This is how many companies began to pay with species in case they produced potatoes, sugar and more. Real wages fell by more than 80% and although people had jobs, hyperinflation made the country poor.

A wad of Hungarian banknotes (Pengos) is used to weigh merchandise, in a shop, in January 1946 in Budapest, during the inflationary crisis that Hungary experienced between August 1945 and July 1946. (Photo by Louis FOUCHERAND / AFP)

How was hyperinflation ended?

On August 1, 1946, Hungary placed the florin as a new currency to seek financial stability. Said currency arrived to put an end to hyperinflation and this was due to the gold reserves of the Hungarian National Bank.

“The shipment of 22 tons of gold, bullion and coins, brought from Germany under heavy guard and military secrecy, marked the first wholesale return of monetary assets to an enemy country,” Tomka commented.

The Central Bank became independent and the issuance of banknotes was limited. Thus, the guilder became one of the most stable currencies until 1960.

Source: Gestion

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