Economic Disasters of the Twentieth Century
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Economic Disasters of the Twentieth Century

Edited by Michael J. Oliver and Derek H. Aldcroft

The First and Second World Wars, the great depression, oil shocks, inflation, financial crises, stock market crashes, the collapse of the Soviet command economy and Third World disasters are discussed in this comprehensive book. The contributors subject these disasters to in-depth assessment, carefully considering their costs and impact on specific countries and regions, as well as assessing them in a global context. The book examines the legacy of economic disasters and asks whether economic disasters are avoidable or whether policymakers can learn from their mistakes.
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Chapter 5: Inflation in the Twentieth Century

Forrest H. Capie


5. Inflation in the twentieth century Forrest H. Capie In August 1993 inflation in Serbia was running at an annual rate of 363 000 000 000 000 000 per cent. It is difficult to grasp quite what life would be like under these conditions. And yet there were several experiences in the twentieth century of a similar kind. Inflation of this kind is almost exclusively a twentieth-century phenomenon. Almost all the severe inflationary experience belongs in the twentieth century. There were some isolated instances before 1914, but not many. The obvious explanation is that when the world was tied to metallic currency there was much less scope for expanding the money supply – the fundamental cause of inflation. Paper money, more obviously a technological possibility in the twentieth century, and the appeal it had for weak governments, combined to produce the inflation that characterized the world after 1914. The fundamental reason for the extreme cases is serious social unrest and weak governments. Grave social unrest or actual disorder provokes large-scale spending by the established authority in an attempt either to suppress or placate the rebellious element. And this is readily possible with a printing press. Social unrest is also likely to produce a sharp fall in tax revenues. The government then prints money. As Keynes (1923, 41) put it, inflation ‘is the form of taxation which the public find hardest to evade and even the weakest government can enforce when it can enforce...

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