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Hyperinflation recovery case studies

  • 11-01-2019 9:34pm
    #1
    CPTM
    Registered Users Posts: 1,296 ✭✭✭


    I'm looking for information related to the famous hyperinflation case studies: Germany, Zimbabwe, or Hungary. Any medium from documentaries to written documents would be welcomed. I'm interested in the situation in Venezuela, and in the case a better leader reaches power, what they could do to recover from the awful nose dive the economy is in at the moment. While I understand how an economy can reach that point, I have very few ideas about how they can recover from it.


Comments

  • #2
    TiGeR KiNgS
    Registered Users Posts: 1,435 ✭✭✭TiGeR KiNgS


    https://www.bridgewater.com/big-debt-crises/

    PDF for Ray Dalio's new book. (free book).


  • #3
    Wanderer78
    Registered Users Posts: 28,783 ✭✭✭✭Wanderer78


    CPTM wrote:
    I'm looking for information related to the famous hyperinflation case studies: Germany, Zimbabwe, or Hungary. Any medium from documentaries to written documents would be welcomed. I'm interested in the situation in Venezuela, and in the case a better leader reaches power, what they could do to recover from the awful nose dive the economy is in at the moment. While I understand how an economy can reach that point, I have very few ideas about how they can recover from it.


    War, has been an effective way of recovering in the past, so let's see what happens.....


  • #4
    andrew
    Moderators, Science, Health & Environment Moderators, Society & Culture Moderators Posts: 3,368 Mod ✭✭✭✭andrew


    CPTM wrote: »
    I'm looking for information related to the famous hyperinflation case studies: Germany, Zimbabwe, or Hungary. Any medium from documentaries to written documents would be welcomed. I'm interested in the situation in Venezuela, and in the case a better leader reaches power, what they could do to recover from the awful nose dive the economy is in at the moment. While I understand how an economy can reach that point, I have very few ideas about how they can recover from it.

    Doing a bit of Googling/research about the Austro-Hungarian monetary union should be useful. Its demise led to hyperinflation in several countries.


  • #5
    micky jammy delahunty
    Registered Users Posts: 65 ✭✭micky jammy delahunty


    CPTM wrote: »
    While I understand how an economy can reach that point, I have very few ideas about how they can recover from it.


    Okay, first.

    My economics teacher, said Weimar hyperinflation was an unequivocal bad....

    But was it?



    What happened with Weimar....The war had been embarked upon with no other plan to pay for it but extracting tribute on winning....

    They did not win.....They completely shattered the German economy, not just the economy, but Germany's capacity to produce about anything...The last few months of the war, they're running on fumes in the tank...

    And then they had nothing....

    So, if you read something like Friedrich von Hayek's essay, on how his upper-middle-class parents, his father a retired doctor, had to burn their fine furniture in the absence of having anything to buy firewood with...their pension, being worthless...as the renting of money draws no worthwhile rent, when there's nothing for it to draw from...

    But what actually happened?


    Look at the photographs of the period, see that everyone playing with blocks of money is smiling....But look at as many photos as you can find because they tell much of the story.

    In hyperinflation, money has a rapidly decreasing value...but it still has value.. so if you have any...you must use it as fast as possible or lose it...you have to do something useful with it....

    The German public had no state to help them out, and no authoritarian state to stop them....Look at the photographs...Women sat outside their houses, selling baked goods they cooked in their own kitchens...men made things in garden sheds...everyone worked as fast as they could to create items and services of value for the purposes of trade....Had von Hayeks father, the Dr, sat outside his house with a sign that read "Bumps examined at incredible prices....This minor surgical madness must end soon", he would have had firewood, food, and whatever else coming out his ears in no time...the hyperinflation rapidly recovered the society's material productive capacity....And there is documentation to support this....and the photographs support this...

    Germany's economic edge of the present is based in that period of disruption..


    The hunger...the short hunger of the hungry thirties has nothing to do with hyperinflation...And it wasn't really caused by the austerity policies either...


    Russia, Zimbabwe, Venezuela....They do have different stories...at the same time, if you don't understand what happens in these situations, you'd be scratching your head wondering how anyone is able to even eat in these places...


  • #6
    KyussB
    Registered Users Posts: 2,314 ✭✭✭KyussB


    The key to understanding most cases of hyperinflation, is to look for gigantic economic shocks that collapse an economies ability to produce (e.g. Treaty of Versailles and the industrial collapse of the Ruhr).

    In the vast majority of cases, excess spending on its own is not what brings about hyperinflation (hyperinflation is nearly always accompanied by excess spending though, of course) - it is nearly always preceded by a large scale industrial collapse, and/or a sudden supply shock of a critical resource, or a series of economic sanctions acting as a supply shock - and it is this which is usually the primary trigger which causes the hyperinflation.

    There is a bad tendency in discussion of hyperinflation, which mixes this up, and incorrectly states that excess spending on its own will lead to hyperinflation - this is badly mistaken, because as long as there is room for productive capacity to expand in an economy, fast enough to keep up with demand causes by spending, then the excess spending can continue on for a very long time with only moderate inflation - until the economy reaches maximum output.

    One of the best examples of a recovery from hyperinflation is also Nazi Germany, from the Weimar years up to WWII - this recovery ended up being focused on rearmament for war, but it could just as easily have been focused on the domestic economy instead of war.

    This recovery was, in fact, funded specifically by excess spending using printed money - something that is nearly always (incorrectly) stated as leading to hyperinflation, today - the Nazi's did this in secret using MEFO bills, to get around restrictions imposed by the Treaty of Versailles - and it was led by the Weimar-era central banker, Hjalmar Schacht - who is nothing short of a genius equivalent to Keyne's (indeed, his policies were effectively New Deal era Keynesianism, before Keyne's major works popularized these ideas).

    Very good article on it, here:
    https://fixingtheeconomists.wordpress.com/2013/12/11/hjalmar-schacht-mefo-bills-and-the-restoration-of-the-german-economy-1933-1939/


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