History, Economic and Political Relationships
Chapter 8: Currency Reforms Ending Hyperinflations
Then something strange happened [in Germany in November 1923]. One day the incredible story began to circulate that soon there would again be money of a ‘stable value’, and this became reality some time later: small ugly green-blue notes with the inscription ‘eine [one] Rentenmark’. When somebody first used them for payment, he waited somewhat surprised to see what might happen. But indeed they were accepted and he received his goods – goods with a value of one billion [marks]. The same happened the following day and the subsequent days. Incredible. The dollar no longer rose, nor did share prices. And if one changed the latter into Rentenmark, behold, they amounted to nothing, like everything else. . . . But suddenly wages and salaries were paid in Rentenmark, and what a miracle, there even appeared ten and five pfennig pieces, strong, shining coins which maintained their value. It became possible to still buy something on Thursday with the money which one had received last Friday. The world was full of surprises. (Sebastian Haffner, German political journalist writing in early 1939; posthumously published in 2000, pp. 65f., my translation) 8.1 INTRODUCTION We turn now from the problem of ending moderate inflations to that of stabilising currencies which have suffered hyperinflation. Hyperinflations are, as mentioned, according to the definition by Cagan (1956), high inflations in which the monthly rate of inflation reaches 50 per cent or more at least during one month. The borderline drawn by this definition is of a somewhat dubious quality, since other...
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