Monetary Regimes and Inflation
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Monetary Regimes and Inflation

History, Economic and Political Relationships, Second Edition

Peter Bernholz

Exploring the characteristics of inflations and comparing historical cases from Roman times up to the modern day, this book provides an in depth discussion of the subject. It analyses the high and moderate inflations caused by the inflationary bias of political systems and economic relationships, as well as the importance of different monetary regimes in containing them. The differences for the possible size of inflations among monetary regimes like metallic currencies, the gold standard and fiat paper money are discussed. It is shown that huge budget deficits of government have been responsible for all hyperinflations. This revised second edition debates whether a growth of the money supply exceeding that of real Gross Domestic Production is a necessary or sufficient reason for inflation and also includes a new concluding chapter, which explores the long-term tendencies to create, maintain and abolish inflation-stable monetary regimes. Moreover, the conditions for long-term inflation-stable monetary regimes in history are explored.
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Chapter 5: Characteristics of hyperinflations

Peter Bernholz


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. Before turning to the qualitative characteristics of hyperinflations let us recall that, though they are all extreme, they differ much in their speed. The worst, Hungary II and Serbia, showed maximal monthly rates of inflation which surpass any understanding (Table 2.1). To comprehend them, weekly or even daily rates of inflation have to be calculated and the latter rose during the worst weeks to more than 300 per cent.

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