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 8: Currency reforms ending hyperinflations

Peter Bernholz


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)

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