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29 Hyperinflations In The Last 100 Years: Is The Biggest One Coming?

Jul. 16, 2012 3:54 PM ETFXI, GLD, INDY, SLV, SPY, XOM, JJCTF, COPX, KOL78 Comments
Disruptive Investor profile picture
Disruptive Investor

The world has witnessed 29 instances of hyperinflation in the last 100 years, the latest being the one in Zimbabwe (2007-09). A striking commonality in all these is policymakers hitting upon the same mistakes and the ensuing outcome. I intend to address this in the light of an economic environment characterized by sluggish economic growth and thereby easy monetary policies by central bankers around the world.

The question I address in this article - Are we headed for another major hyperinflationary period?

I say "Hyperinflationary Period" because the phenomenon stretches over quite some time. The period of 1986 to 1996 witnessed as many as 18 cases of hyperinflation.

The table below gives a list of hyperinflations in the history of capitalism.

List of Hyperinflation in the History of Capitalism
(Click to enlarge)

So, the talk is not about a possible hyperinflation in one country. With the current monetary policies, several countries in the world could potentially experience hyperinflation or high inflation.

Before I discuss the probability of hyperinflation in the foreseeable future, there is another important observation to make from the last hyperinflation in Zimbabwe.

The chart below gives the relation between the rise in inflation and money supply in Zimbabwe (1994-2009).

Relation between inflation and money supply in Zimbabwe
(Click to enlarge)

Clearly, the inflation and money supply (M3) have risen in tandem in Zimbabwe. A look at all other instances of hyperinflation in history, shows a similar trend.

However, in the current context, one important factor needs to be considered when looking at the probability of hyperinflation in U.S. or in the eurozone - the dollar and the euro are global currencies unlike most of the currencies in the past, which returned to their intrinsic value of zero after hyperinflation.

Keeping this factor in mind, presented below is the money supply for selected economies (especially after the financial crisis).

M2 in United States
(Click to enlarge)

Euro Area M3
(Click to

This article was written by

Disruptive Investor profile picture
Analyst with interest in various asset classes for portfolio diversification. My field of expertise includes equities, precious metals, commodities and cryptocurrencies. Special interest and love for economics.

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Comments (77)

SethM profile picture
The graphs comparing money supply growth are very misleading. The Zimbabwe graph is on a logarithmic scale while the others are on a linear scale. This is an apples to oranges comparison and should be disregarded.
dividend_growth profile picture
The bond market has a completely different opinion.

With productivity skyrocketing and world population aging rapidly, we are facing the greatest deflationary pressure since the industrial revolution began.
dividend_growth profile picture
One example is the internet, its appearance has reduced the distribution costs of many industries to zero, and that's the prime example of hyper-DEFLATION.

The one area facing great inflation is the healthcare, but almost everything else, and pretty much all consumer goods, are facing gigantic deflationary pressures.
Disruptive Investor profile picture
Are you suggesting that fuel prices are trending down? Or education cost is trending down? Or just look at 2000 to 2011, food prices trending down?

I am not sure where is deflation for consumers.
winningtrader profile picture
Last year medical cost went up 6.5% ... this is the deflation. As usual, the solution to all problems for most people is to bury their heads in the sand and ignore reality.
GreenRiver profile picture
Completely ridiculous article.

First the charts - as I've commented twice alread (sorry), its mislead to the point that I feel it is intentional deception to show a log scale chart for Zimbabwe and a linear scale chart for the rest.

Beyond that:

Hyperinflation occurs after the economic output of a nation collapses. Unless we suddenly stop producing GDP, our currency will still have value to our trading partners, and we'll be able to use our currency in trade because our trading partners want US produced goods and services.

There is not a single example of a nation which has not had a collapse in economic output but HAS experiecned hyper-inflation.
winningtrader profile picture
The charts are from the FED - check the source. Call the FED and tell them that their charts are crap.
GreenRiver profile picture
The first chart is a log scale, indicating a 10 billion billion fold increase in the data.

The second and subsequent charts, which look similar to the first, are linear scale, however, and show (depending on which chart) 10 to 100 fold increases.

The period is different for every chart as well, which leads me to believe that the author is cherry-picking his data.

In order to make a meaningful comparison, all the data should be presented on the same chart - same period, same vertical scale.

But if the author had done that, it would be immediately obvious that there is absolutely no similarity at all between M2 growth in Zimbabwe and M2 growth in the developed economies. But that wouldn't support the authors thesis, so he makes his data conform to his bias.

Beyond that, the author isn't even consistent in his monetary base measure, some of the charts are for M2 and some are for M3.

There is no way that I can see to make meaningful comparisons between any of the data in these charts, one wonders what the purpose in presenting such a heterogenous data set is.

Mark Twain said there are lies, damn lies, and statistics.

I'll leave it up to you to decide what is in this article.
winningtrader profile picture
The charts are from the FED. Check the sources .... ridiculous arguments. Some countries show M2 some M1 ... it depends what is provided. They are very correlated usually anyway.
Good article EF, I agree I think it we will see high inflation at some point in the near future and for a prolonged period...governments overshoot historically. Monetization of debt is Monetary dynamite as David Stockman says. I completely agree.
The Recusant profile picture
Physical Receipt: David Stockman is far more rational and insightful than most. Too bad Reagan didn't listen to him.
"Debt isn't an issue for the United States.......". Worldmarketwindow, such nonsense!

The day of reckoning always comes, sure you can delay and delay again, but it would be naive to assume that the US can borrow vast sums of money for next to nothing indefinitely......
The Recusant profile picture
turbobug: I agree. Amazing how wearing Old Glory across WMW's face makes everything he sees look so grand!
Thanks Recusant, I like your comment above too. I find it staggering how few people would agree. Just because currently you can issue more new debt to pay interest and repay principal on current debt, doesn't mean that this is a given, ad infinitum.
WorldMarketWindow profile picture
Good examples of governments who couldn't careless of their own monetary policies. Oh, wait, they didn't have any monetary policies that is why they printed themselves into hyperinflation, either by paying off war bonds (Germany) or by creating worthless paper (Zimbabwe). Creating money for Circulation use for the consumer creates inflation, Banks are hoarding the money supply, so when the consumer makes the run to the banks then we or you will have problems, but we are not, the consumer is buying gold, ipad's, ipod's, and TV's with debit/credit cards which keeps the money within the banks.

Debt isn't an issue for the United States because of our Fiscal Union and our Central Bank's Monetary Policies. You can read more on how our Banking system works with Money and Banking: Monetary Policies and Analysis by Milton Friedman. Ascent of Money is a good one too which explains the history of money.

If anything the World was going to experience Severe-Deflation like the United States did in the great depression but this time it is was going to be on a global scale. Ben bernanke is doing a great job in my opinion unlike Obama. The president is the spokesman of the people and for the people to create treaties or to get what we want outside the United States, not within.

Our dollar is the safe haven for the world and is the most liquid and in my opinion will remain this way for many many years. Our economic system is a free market which can't be taken over by our government. You hear off Iran doing separate deals with China or Russia, but China is buying more expensive oil if they are paying for it in their own currency then with the US dollar.

The problem that the EU is having is that they have separate governments and monetary policies for each country-state. The United States, has one because we are United as one. Our states can declare "Bankruptcy", The EU Country-states cannot.

Our dollar isn't cheap right now, in fact it is very strong, you can see by how low the 10-20 year yields have become. If Germany leaves the EU then you will see inflation in the dollar which will create more deflation in the EU Currency as well as for every asset class in the world. The Fed might have to jump in to maintain current market levels or risk deflation which one of its policies is to always create inflation, the policy was passed after the Great Depression.

The US Dollar is backed by trade and by the greatest military power ever in the history of the world which happens to be the United States of America.

Thank you.

Your Capitalist.
Kingsman profile picture
This will be an "economically sophisticated" comment. I look at our unmanageable debt and obligations, and then I look at a bloated government without the discipline to do anything but more of the same. I see printing presses humming away with Monopoly money gushing into the system in one way or another, and I see my dollars worth less because of it...and no end in sight. I hit a brick wall in my mind when the arguments can favor inflation or deflation--this is like not being sure which way the 100 mph train is currently heading. For 4 years now I've been hiding under my bed with the bulk of my assets in Vanguard's VAIPX (TIPS), and I have been pleased with this though of course having loaded up heavily on PMs would have been the better course in hindsight. Nevertheless, I've stayed above water. All along I hear how foolish I am for being in this position. What think ye?
winningtrader profile picture
This is my take on the markets:
- equities overvalued. there are good ones but you really need to know what you are doing. the market is not in great shape and unlikely to do all that well.
- government bonds - yields are below inflation. this is a sure way to lose purchasing power going forward but i don't expect a collapse soon.
- precious metals - will go up due to money printing and economic weakness in the developed world.
- emerging markets are very risky and i don't trust their currencies or equities.
There isn't much one can do. If you manage not to lose purchasing power with your investments over the next 5 years, you are doing ok.
Tao Jaxx profile picture
To Kingsman:
Congratulations and welcome to the club! That makes at least two if us in that position. I have TIPS, bonds and cash, no complaints. That's my investment position.
On a trading basis (18 month to 2 year horizon, possibly more) I shorted gold in November last year as I think it got ahead of itself: I was gold bullish in the $1,000-1,200, took profit way too early (around $1,400-nobody's perfect...) and turned bearish last summer.
I believe stocks will go nowhere for quite a few years as a lot of mis-allocated capital has to be written down to zero (aka de-leveraging), Instead of doing this a la Herbert Hoover (GDP down 8.6%, 6.5% and 13.1& from 1930 to 1932), this is going to be slow growth for 5 to 10 years, through QE1, 2, etc...
Inflation unlikely in the period, the Fed can print like crazy, it gets sterilized by the market ("excess reserves")
Only asset class I like right now beyond cash-TIPS is farmland (Secular demand increase in proteins...).
Got to get this cash somewhere.
Kingsman profile picture
Thanks for the reply. Your comment about "not losing purchasing power" fairly well covers what my hopes are at this point. Never have had much luck chasing those pots of gold at the end of the rainbows. At various times over the past 4 years I have loaded up in the fund I mentioned (TIPS) by dumping in 465K. I am up 118K on that. I can accept that kind of performance even knowing what is happening to the dollar. I remain baffled though when I hear how foolish I am being. At 64 though, my roller coaster days are (hopefully) coming to an end in a financial sense. By the way, I blew it in my first sentence in my other entry, I meant to say, "This will NOT be an "economically sophisticated" comment," but I suspect that was plainly obvious. Again, thanks.
netbluesky profile picture
Econ fanatic.

Yips ... where to begin ...

First I will say I agree that inflation can occur in sectors of an economy. The great example at hand is our recent US subprime lending induced bubble in real estate. The clear story here is "excess credit creation", not money supply. The term "excess" would mean in this case, lending that exceeds the value of an asset or the lending to create an asset worth less than the loan amount.

Now lets talk about your other assertions: First just looking at money supply without a reference point is like saying a billionaire can't afford a million dollar house with a million dollar mortgage because his debt would be 4 times the average debt and therefore unsustainable. In fact the graphs of your major economies (India,Japan,US,China) show money supply that is completely consistent with the size and growth of the respective economies. Your chart of Zimbabwe shows a growth of money supply but we all know there was no concomitant growth in the economy. To me this smells of an intentional scare tactic on your part !!

Second, you completely fail to point out that nations such as Wiemar Germany and Zimbabwe truly used fiat currency to pay "DEBT DENOMINATED IN A FOREIGN CURRENCY". They also paid themselves in the same fiat currency. The US is not a true fiat currency. Currency created by Treasury is represented by debt, of which debt service is paid for with taxation. Our debt service is less than 3% of GDP; Zimbabwe debt service was in the 100's% of GDP.

Thirdly, you state that somehow India and China will have control of inflation because of currency appreciation !!! As though the US doesn't use the floating exchange mechanism !!!. This is so disingenuous of you. In fact China does not allow free float of their currency; it is the reason they have high inflation.

Lastly, for you to say "increase in money supply does lead to hyperinflation" is COMPLETELY misguided and misleading, a mistruth and mistaken. There is no factual basis for that claim. You can only claim that in instances of hyperinflation there was an increase in money supply. This is like saying that in all instances of fatal car accidents, the victims were driving a car; thus if you drive a car you will die !!!
winningtrader profile picture
I think that this is pretty much what Jim Rogers is saying, more or less. I have a couple of comments:
- EM countries also print a lot of money. India and China have printed as much or more than the US or Europe. Of course, they've experienced high inflation, especially prices of necessities like food. I am not sure if money printing is going down and certainly not in India. EM equities are not to be trusted because the locals are not likely to let foreigners make easy money. They'll take it back through taxes and corruption. This is the most important reason I don't like EM equities but this is a very big reason. EM currencies are not an easy bet in my opinion, mostly due to money printing.
- Inflation will show up over time for sure but it will come here and there, while some prices may go down. Of course, in hyperinflation (which may take time to happen or not even happen medium term and can certainly be avoided) everything goes up but relative to each other things move a lot. The best hedges in a highly uncertain monetary environment are precious metals and farmland. The price of industrial metals is likely to underperform as economic activity is likely to be lower. Oil should do well but the companies may get taxed to death. I don't view equities as a good inflation hedge - check their abysmal performance in the 1970's.
- Standards of living are going to get hit and consumers will have lower spending power (in real terms). This will hit a lot of companies that rely on consumer discretionary spending - to be avoided as long term investments.
The real problem out there is not the level of economic activity. This can correct itself over time if left on its own (fat chance we see that happening) but the real issue is the debt. With 100% debt/GDP + another 500% of off balance sheet liabilities the so called Developed World has dug a hole for itself. This can be fixed slowly but there is no political will to do that and then it will end up getting fixed through ugly adjustments and things can get out of control. One thing is for sure, the next 10 to 20 years will be eventful, to say the least. Let's hope we can avoid a global war.
The type of crisis we see unfold now is not new. From the Biblical times people had a tendency of getting in debt and then become unable to pay it back. It always ended up in defaults and caused huge misery. The Roman Empire suffered such problems and they became very acute in the late stages of Rome. Defaults (often made legal by decree) and currency devaluations have always been the answer and that is unlikely to change as there is no other way.
mark elliott profile picture
To tag on to winngtraders coment:
The huge tax increases coming in January will certainly stifle economic activity here in the US and lower the standard of living for all Americans.
Some will say that the increases are not here yet and Congress will fix the issue. I choose to live in the real world and plan accordingly. If, and that's a big if in an election year, the increases are moderated before the new year, I'll be very happy. But, I don't plan for pollyanna outcomes until they're reality.
livedlong profile picture
you seem to confuse association with cause and effect.
flash9 profile picture
Per you Japan should be in hyperinflation but has had deflation. You need to explain this to have any credibility.
Disruptive Investor profile picture
I mentioned in one of my comments above, Japan has deflation for 20 years and Tokyo is the second most expensive city to live in the world.

Real estate might be in deflation, stock markets might be going nowhere in the last 20 years in Japan. However, it does not mean that everything is going down. Just check out for the food cost (as an example).
winningtrader profile picture
The Japanese so called deflation is the deflation of assets like real estate and stocks, not the price of items like food. Have you done any shopping in Tokyo? How about paying $150 and more for a melon? Many top foreign companies refuse to expense taxis from the airport to Tokyo and insist that their employees get to the city by train - the taxi ride costs $350 and more. So, when you hear about deflation in Japan, ask what they mean by that as it certainly doesn't mean lower prices. I believe that prices in Japan keep going up as everything is regulated and they don't encourage competition.
Tao Jaxx profile picture
That melon used to cost $200 and that cab fare $400.
You're confusing price levels across products (a Japanese melon with a run of the mill California cantaloup, a 60 mile cab fare in a highly regulated profession with an airport ride in a competitive US city) with price levels across time in the same economy.
Deflation in Japan is a fact, no one had disputed this, yet.
mark elliott profile picture
A suggestion to make to your article better and to perhaps put things in perspective is to plot the economies (GDP) for these various entities along the same timeline.
I suggest this action since GDP growth in the US from 1980-2000 roughly matched (percentage-wise) the growth in the M2.
Ray Lopez profile picture
But we are in 2012 now, not 1980-2000. I agree it was a good article.
mark elliott profile picture
True Ray, but you'll see a huge growth in the US M2 after about 2008 that doesn't have a corresponding increase in the GDP. That's inflationary by definition.
I'd be interested in seeing a plot of the other entities money supplies vs their economies to see how these other entities are growing their money supplies relative to the US. If they're growing their money supply relatively faster than the US, they're also creating a bubble which has a direct effect on whether I'd invest there due to currency risk.
netbluesky profile picture
Mark E.

A couple of things. Monetary inflation is not defined by greater growt in money supply than GDP. If the money is not in circulation in the economy, it is irrelevent except for lowering the cost of credit.

Also stating that if some other countries money supply is growing faster than US, then it is causing a bubble. This is untrue. The growth in a countries money supply should be relative to its own economic growth; too little begets deflation, too much begets inflation.In either case I am talking about money in circulation, not reserve money. So to say a growing economy with growing money supply in another country will cause a bubble makes no sense.
Pointless article, you keep mention hyperinflation, yet you recommend owning SPY, are you kidding?!

I agree metals, oil will soar, but that eventually depletes consumer spending power, bad for stock.

Hyperinflation is BAD, although I agree it maybe coming!
Disruptive Investor profile picture
Equities tend to do well in times of high inflation or hyperinflation. When enough money is printed, all asset classes are bound to surge. Companies might not do well fundamentally, but stock prices will soar.
winningtrader profile picture
In the 1970's equities did poorly. You lost purchasing power big time if you had invested in equities then.
Mark Anthony profile picture
Nice article. I will come back to read a second time.
Tao Jaxx profile picture
Apparently, Mr.Market has not received the memo: In the last 9 months, Brazil, India and even China have seen their currency slide (the former two) or erode (the latter).
Non food Commodities are down, PM are down, EM stock markets are down and capital flows shuttle back to advanced economies. Inflation is stuck around 2% with the private sector de-leveraging big time, the shadow banking system annihilated hence money velocity crashing.
But it is in human nature to project the EM experience of the last 5 years into the coming fifteen, and to transpose Zimbabwe into the US, because there are striking similarities:
Zimbabwe, I am told, was a reserve currency issuer home of the largest capital market in the World funding its government.
Robert Claassen profile picture
Some interesting data. I do however think it is a little disingenuous to show the Zimbabwe chart in log scale and all the others in linear scale to suggest the US and the other countries are in a similar situations.
Plebian profile picture
"Inflation is always and everywhere a monetary phenomenon."
-- Milton Friedman

"Insanity: doing the same thing over and over again and expecting different results."
--Albert Einstein

Therefore, the U.S. and Eurozone are going to inflate their fiat currency supplies and expect different results from those of history? What utter nonsense.
netbluesky profile picture

So are you saying "inflation is always and everywhere a monetary phenomenon" means that if we have a drought and the corn crop is destroyed and the price of corn triples, that this is a monetary phenomenon ????

You are in fact saying, by calling on this saying of Friedman, that supply and demand of a commodity is irrelevant; that price inflation is caused by monetary action.

What utter nonsense.
winningtrader profile picture
Medium and long term inflation is always a monetary phenomenon. Short term inflation can be caused by other things:
- weather.
- seasonal demand for certain goods.
- fashion.
This type of inflation is not only temporary but prices usually come back down again (for example, when the next crop is good).
Supply and demand for commodities are relatively stable. The only reason why demand can be unstable are monetary policies that promote bubbles. For example:
- housing bubble and higher prices of commodities involved due to easy monetary (low rates and easy credit) policies.
- higher food prices in India - due to money printing in India.
- higher food prices in the Middle East causing the Arab Spring - caused by global money printing.
The list goes on and on.
fishfryer profile picture
The U.S. probably won't see hyperinflation, but probably 'big' inflation in steps much like when the dollar in gold terms was redefined during the 1900s.

I can see a 70% cut in buying power in the next 10 years as being the minimum hit the U.S. consumer will feel. If the dollar loses reserve status, then much more than 70% is in the cards.

With respect to the poster above me, Shareholders Unite, we have a solvency problem, not a liquidity trap. The country is broke, the citizens are broke, the banks do hoard cash, but only because they understand the macro problems.

A liquidity trap has near zero rates, but our rates are unnaturally put at near zero by the Fed. This manipulation was never considered by J.M. Keynes, as a matter of fact, we simplify what JMK preached.

The western world is due for a big reset, a 10 year depression, then we will be able to compete against China and our other asian enemies.

buy gold.
flash9 profile picture
Looking at others as enemies is a mistake unless they truly are. Our biggest enemy has been our corrupt gov't.
netbluesky profile picture

you might want to start you frame of reference from 1973 when we not only had gone off the gold standard but had stopped convertibility to gold. More importantly we entered the "floating rate regime" This is the most brutal, free market force to ensure that a currency value, as perceived by the market, is the summation of monetary policy, fiscal policy, interest rates and the underlying economy.

The dollar has dropped about 20% in nearly 40 years; about 1/2% per year average. Not exactly falling off a cliff.

You seem to think that the MARKET has nothing to do with interest rate; only the FED. Very naive.
Ray Lopez profile picture
Amazing article, one of the best and a reason I read Seeking Alpha. Look at the charts (which tell 1000 words): notice in the case of Zimbabwe how money supply generation leads inflation by a long time, at least 6 months or more. This shows inflation lags money supply creation in the same way that boiling water will boil at some point after 100 C (212F) while the water is turned to steam--there's a lag. See for example Zim in 2003 to 2005 the rapid money supply generation (and contraction) caused hardly a stir in inflation. But once the central bank 'overdid' it, as after 2007, the tipping point was reached and inflation became hyperinflation.

I am betting the same mistake will be made by central bankers in the advanced economies. They will learn nothing from history. Then again, you can argue that inflation is the implicit goal of governments everywhere, to write off their massive debt, so perhaps they do know what they are doing.
netbluesky profile picture

dont fall for that crap. Money supply increased in Zimbabwe while the economy did not grow. Debts were denominated in foreign currency. There was no ralation in the size of the economy to the money printed. There was no possible way the government could tax the economy enough to pay debt service. See my comments below.
GreenRiver profile picture
Ray Lopez:

As netbluesky suggests, don't fall for the authors misleading and deceptive use of charts. He's counting on you not to notice, or perhaps not realize the significance, that the first chart has a log scale on the vertical axis, and the rest are linear scales.

The chart for Zimbabwe indicates that the money supply has increased 1E+19x in the chart period. That's 1 followed by 19 zeros - 10 billion, billion x from 1994 to 2009.

US money supply has grown about 10x in the last 50 years - about the same as the growth in our economy.

Maybe the author doesn't understand the difference between a log scale and linear one either.
winningtrader profile picture
What on earth is wrong with the charts? They are from the Federal Reserve. Check the source, it is on the chart. The growth of the money supply in the US is well above the growth of the economy, which is why the dollar has lost 98% of its purchasing power since 1970.
You are right about high inflation vs hyperinflation. The Fed and others WILL print. Peter Pham posted a great article entitled "A Message to the Deflationistas" http://wp.me/p2esYO-ag
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