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Monetary Regimes and Inflation

History, Economic and Political Relationships

Peter Bernholz

This book explores the characteristics of inflations, comparing historical cases from Roman times up to the modern day. High and moderate inflations caused by the inflationary bias of political systems and economic relationships – and the importance of different monetary regimes in containing them – are analysed.
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Chapter 5: Characteristics of Hyperinflations

Peter Bernholz


INTRODUCTION In the last chapter we analysed the characteristics of a number of moderate inflations under paper money standards. In all these cases it was advantageous that the main trading partners enjoyed metallic monetary regimes, so that the situation was closer to an experiment than in the time after 1914/1930 when all countries had moved to discretionary monetary regimes. We will later discuss a few such cases of moderate inflations, when we turn to examine the conditions under which successfully stabilising monetary reforms can be expected. In the present chapter, however, we will analyse only hyperinflations, for the following reasons. First, whereas it is still possible to enumerate all paper money inflations which occurred before 1914, when most countries were still on a metallic standard, this is no longer true for all such cases since that date. But the number of hyperinflations which have occurred can still be counted (see Table 2.1). Second, and more important, hyperinflations make it easier to find out the characteristics of high inflations because of their extreme nature. I have lost all feeling for numbers [during the last phase of the German hyperinflation]. Yesterday [8 October 1923] we paid for the cinema together with the fare for the tram 104 million [marks]. . . . today is again a last ‘cheap day’ for stamps (today still 2 million for a long distance letter, tomorrow 5) (p. 752). The dollar jumps daily by billions – on Saturday by 17 [20 October] –, prices follow, a loaf of bread costs now 1.5...

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