A Quick History of Failed Currencies
This insidious scenario has played itself out repeatedly in hundreds--or even thousands-- of nation states over the past 2500 years. The following brief summary, which is much like singing the same song with different verses, shows how it has led to economic collapse in nine different countries during the past century:
The Weimar Republic in Germany - 1922-23: Unable to pay war reparations as stipulated in the Treaty of Versailles at the end of WW I, the German government printed fiat currency in order to pay benefits to workers, as well as its delinquent international debt. As a result, the excessive currency that was circulated quickly became worthless. The largest denomination of the Papiermark increased from 50,000 in 1922 to 100 trillion a year later. By November, 1923, the estimated inflation rate was 325,000,000%!
Hungary - 1945-46: In compliance with the Treaty of Versailles, The Austrian Pengo replaced the Austrian-Hungarian Korona in 1926. Following the devastating effects of WW II, the highest denomination of the Pengo was a 1,000 note. It increased to 10,000,000 over the next year and was 100,000,000,000,000,000 by mid-1946. The Pengo was then replaced by the Forint in the ratio of 400 octillion to one. At that time, it was estimated that the value of ALL Hungarian currency in circulation was worth less than 1/1000 of one U.S. dollar! Today, $1 USD is worth approximately 195.2 Forints.
Chile - 1971 - 1981: In 1971, Socialist President, Salvador Allende, nationalized Chile's leading industries. Due to bureaucratic mismanagement, the Chilean Central Bank began printing huge quantities of fiat money. As a result, inflation soared to 600% by the end of 1971 and then skyrocketed to 1200% by the end of 1973. Then, following the overthrow of the Allende regime later that year, the Escudo was replaced by the New Peso at the rate of 1000 to 1. By selling off most of the state-owned enterprises, the Chilean economy then recovered, following a slight depression in 1981.
Argentina - 1975 - 1992: Following the 1973 oil crisis, the government was headed for a sharp recession. The situation worsened when the government refused to borrow to cover its deficits. From 1975 to 1976, the largest Peso denomination increased from 1,000 to 5,000. Following a violent military coup, it rose by 1979 to a Peso note of 10,000. Then, in 1981, the Argentine Central Bank introduced a 1,000,000 Peso note, and Argentina's GDP fell by 12%. Through three successive currency reforms in 1983, 1985, and 1992 (sometimes referred to as "The March of Zeros"), the Pre-'83 Peso was progressively devalued. As an end result, in 1992, 1 New Peso was equal to 100,000,000,000 Pre-'83 Pesos!
Peru - 1988 - 1991: During the 1980's, Peru privatized enterprise, increased public spending, and neglected its growing national debt. This resulted in negative economic growth, multiple deficits, and hyperinflation. The Peruvian government reacted to this by replacing the "Old Sol" with the Inti in 1985, at the rate of 1000 to 1. Within 2 years, monthly inflation increased by 132% in Sept., 1988 and to 400% by Sept., 1990. New notes, as high as 10,000,000 Inti, were introduced by 1991. The government then replaced the currency again, this time with the Neuvo Sol at the rate of 1,000,000,000 to 1. Thus, over a six year period, the value of the currency increased one billion times!
Angola - 1991 - 1999: A brutal civil war placed a great strain on Angola's economy, including its currency, the Kwanza, from 1975 - 2002. The largest Kwanza note was 50,000 in 1991. It soared to 500,000 by 1994. In 1995, it was replaced by the Readjusted Kwanza (Kwanza reajustado) at the rate of 1,000 to 1. The New Kwanza was introduced in 1999 at the ratio of 1,000,000 reajustados to 1 New Kwanza. This new currency, then, was equivalent to one billion of the pre-1991 Kwanzas.
Yugoslavia - 1992 - 1995: The denomination of the Yugoslavian Dinar note was inflated from 50,000 to 2,000,000 between 1988 and 1989. It was then replaced by the New Dinar in 1992 at the rate of 1 to 10. The highest denomination of this note then soared from 50,000 to 10,000,000,000 by 1993. The government then replaced it with a "Newer" Dinar by simply removing six zeros. It was replaced yet again in the next year at the astonishing rate of 1 to 1,000,000,000! The German Mark was then pressed into service as the country's fiat currency in 1995. By this time, prices had increased by a quadrillion percent in 2 years. At the height of this hyperinflation in 1994, currency was being devalued at the rate of 100% per day!
Belarus - 1994 - 2002: At the end of the cold war, the economy of Belarus was relatively well developed and had one of the highest standards of living in Eastern Europe. The largest Ruble note there in 1993 was 5,000. By 2000, it had increased to 5,000,000. The government then replaced it with a new Ruble at an exchange rate of 1 to 1,000 "old" Rubles. The highest denomination now is the 100,000 note, which is worth 100,000,000 1993 Rubles. Many citizens blame this on Lukashenko, who came into office in 1994. Currently, about 80% of the country's industries remain nationalized.
Zimbabwe - 2000 - 2009: Zimbabwe became an independent African state in 1980. At that time, the value of each Zimbabwe dollar was equal to 1.25 U.S. dollars. Following a series of race-based seizures of land and rampant printing of fiat currency, however, marked inflation ensued. This reached a high of 624% by 2004 and then declined again to less than triple digits before surging again to 1,730% in 2006. Although the currency was then replaced with a New Zimbabwe dollar at the rate of 1 to 1000, inflation continued at a progressively accelerating rate. It reached an annual increase of 11,000% by mid-2007 and then continued to soar. New Zimbabwe Dollars (ZWD) were released in May, 2008 with denominations of 100 Million and 250 Million and then 500 Million after two weeks. This note was worth about $2.50 in U.S. dollars. This escalation continued on a weekly basis as notes worth 5 billion, 25 billion, 50 billion, and 100 billion were sequentially released. In August, 2008, the government simply removed 10 zeros from the currency, making 10 billion ZWD equal to 1 new ZWD. At this point, the estimated annual inflation rate was about 500 quintillion percent, with a month rate of about 13 billion percent.
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