"Government is the only institution
that can take a valuable commodity like paper, and make it worthless
by applying ink."

Ludwig von Mises, Economist

What is inflation? Definitions abound, largely depending on the political slant of the publication or individual. It is an increase by the government in the supply of money. They do this for a variety of reasons, (all bad) but what results is the increase in prices of goods, which means the money the government injected into the economy creates more pain for the consumer. What happens next? More money is simply printed up (with no backing by hard assets like land or gold) and again moved into the economy, which fuels a tragic cycle that eventually ends in chaos, restructuring, and a tremendous loss of wealth and repute.

History has repeated itself innumerably. Franz Pick's book, Monies of the World is filled with nations that over the centuries have subjected their populace to financial ruin through inflation not once, but many times. Some speculate the government's intentions might initially be noble, but the inevitable result is agonizingly predictable. It seems we only learn by our mistakes when we think of them as mistakes.

Collecting inflationary currency can be both an intriguing and a sobering experience. Each note has a beauty all it's own, as well as a story to tell. What follows are some examples of these stories.

Hungary has suffered what was considered to be the worst inflation in recorded history. In 1941, the Pengoe was valued at 3.46 to the U.S. Dollar. Both during and shortly after World War II, however, the government printed billions of Pengo to offset the tragic results of war on the Hungarian economy. By March 3, 1946, 1 U.S. Dollar was equivalent to 10.3 million Pengoe. In the same year, a new currency unit was issued, Known as the Mil-pengo, which was equivalent to 1,000,000 pengoes. Soon after, the Bil-pengo denomination arrived. What you see here is a note valued at 10,000,000,000,000,000 Pengoe! On the last day of July, the rampant inflation ended with the issuance of the forint, an entirely new unit valued at a rate of one per four hundred million quadrillion pengoes.

One of the most famous inflations of modern times was the monetary collapse of Germany in the early 1920s. The financing of Germany's war machine during the Great War ultimately exhausted their resources, and as prices rose, the government issued larger and larger denominations.

In early 1923, the U.S. dollar was equivalent to 7,260 German marks. By November, the rate was trillions to one. In order to save ink and time, notes were printed on one side only. The exchange rate was posted three times a day; workers were paid in the mornings and tried completing their shopping before the new, higher rate took affect at noon. By early 1924, a new denomination, the Rentenmark which was backed by land holdings, brought sanity back to the markets. The issue rate was one rentenmark for one trillion inflation marks.

Most South American countries have suffered extreme inflations, most noticeably throughout the 1980s and 1990s. Argentina has experienced at the hands of its government a terrible period of hyperinflation, as noted by this one million peso note issued in 1981. It was during the late 1970s and early 1980s that easy loans were granted by the IMF to developing countries like Argentina for improvement. Mishandling of these funds, corruption, and a disregard for financial stability resulted in the world's third largest annual inflation rate for the years 1980 to 1993.

Zaire, formerly the Belgian Congo, has subjected its people to an annual inflation rate that has sky rocketed from 20% in 1989 to more than 6,000% in 1994. Government corruption, political instability, and an uncontrollable influx of refugees from neighboring Rwanda and Burundi have left its economy in shambles, in spite of the country's wealth in mineral deposits of diamonds, copper and cobalt. Even the salaries of mid-level government bureaucrats reached the equivalent of a mere dollar a month, not enough for a loaf of bread. The economy is presently working on largely a barter system. This 5,000,000 zaire note again demonstrates the futility of the printing press to solve financial crises.

The 1980 death of President Tito ushered in the beginning of the end of what was then Yugoslavia. The subsequent weak leadership, mounting international debt, and ethnic flare-ups between a populace of Croats, Muslims and Serbs fanned the desire to inflate. A violent civil war broke out in mid-1991, and as Yugoslavia shattered into fragments of independent governments, valueless paper and ink notes and press releases were about all the government could issue.

What might this 50 billion dinara note buy today?

References: The Beauty & Lore of Coins, Currency & Medals - Clain-Steffanelli; All the Monies of the World - Franz Pick; CIA World Factbook - 1995