by Tim Robinson
"All that is solid melts into air" - Karl Marx
"And do my people value this as gold, Do court and army think these payments hold?" - Faust, Goethe.
In March 1987 in a ski resort restaurant in Slovenia the Yugoslav Prime Minister Branko Mikulić was refused service by striking waiters protesting the ceiling placed on wages by him. The wage ceiling was one of Mikulić's efforts to reduce the runaway levels of Yugoslavian inflation. In the late 80s and early 90s the Republic of Yugoslavia underwent the highest recorded levels of inflation culminating the in the 500 Billion Dinar note shown. The Republic reformed the currency in 1990 resetting 1 new dinar to be worth 10,000 old dinar, in 1992 (1 new for 10 old), 1993 (1 new for 1 million old) and twice in 1994 (1 new for 1 billion old then a month later 1 novi dinar for 10.5 million dinar)
The line of Mephistopheles from the play above "such paper-wealth, replacing pearls or gold is practical: you know just what you hold" falls short of reality. The value of money should by definition be stored over time, with currency this is not always the case, to various extremes.
The Case of Rome
In the 3rd Century Roman Empire the debasement of the coinage (as successive emperors began to adulterate the currency to meet military and administrative costs) led to such widespread distrust in the currency value that the government ceased to accept it as payment for taxes. The fleeting nature of the tenure of some emperors made banks hesitant to accept the coinage minted by usurpers. (For example the coins of the sons of Fulvius Macrianus , Macrianus Minor and Quietus who reigned in 260-1, who rose to the throne after the death of Valerian; in certain cases banks showed an "unwillingness to accept the divine coin of the emperors"[1]. Which given the length of their reign proved prescient.) Perhaps the most well known reaction to this inflation was Diocletian's edict on maximum prices (not an uncommon reaction, more recently the Zimbabwe government fixed the prices of certain commodities), fixing an upper ceiling on the prices and wages (for example a higher quality scribe could command up to 25 denarii for 100 words, but no more) as well as replacing the debased currency with a new coinage.
By means of policing these price fixes across the Empire artisan guilds would have to file schedules stating they were not exceeding the maximum prices set. (Arguable not a very vigorous method of policing)
The Diocletian reforms came on the heel of a series of debasements which had seen the silver content of the denarius fall 99% since the time of Marcus Aurelius (A period of about a century).
The Case of Modern Europe
In the 20s Austria, Hungary, Germany, Poland and Russia all suffered from fairly sustained periods of hyperinflation. Partially because of effort to fund the costs of the bureaucracy, partially because in the aftermath of war large amounts of territory were lost, and partially because of funding other wars. Austria and Hungary had to contend with the loss of its territory and printing money necessitated by the cost of payroll (The loss of territory effect also occurred for the Confederacy, as the Union forces took their territory people sent their remaining money back to the much smaller Confederate States.) The Treaty of Versailles made Germany responsible for large reparation payments to Allied powers in the aftermath of World War 1. From November 1918 until July 1919 (Prior to the signing of the Treaty) German price levels rose 42.7% on domestic prices. The Treaty was signed in January of 1921 agreeing that Germany pay around $394 billion in 2005 prices. From May 1921 to July 1922 prices rose by 634.6% on internal prices. Then from July 1922 to June 1923 internal prices rose by around 18,000%. By July 31st 1923 prices were 161,000 times higher than they had been about a decade earlier. By September 4th prices were around 182 times higher than the July 31st figure. By November 20th prices were around 576,397,515,527,950 times higher than the July 31st figure. Overall between 1913 to November 15th 1923 prices were internally 92,800,000,000,000,000,000 times higher.
In Germany some firms ceased accepting the national currency, and began delaying tax payments to reduce the extent of their liability, such was the extent of the inflation that even a short term delay had significant impact.
On the first of November 1923 infamously a single glass of beer cost 4 billion marks.
The Case of Zimbabwe
In December 2007 the Zimbabwe Standard ran the headline 'Gono labelled ‘No. 1 saboteur’. The Governor of the Reserve Bank of Zimbabwe has fallen since the declaration in early 2005 that he was 'man of the year', with the lofty statement that "one man can make a difference to the course of history".
Inflation reached 624% in early 2004, then fell back to low triple digits before surging to 1,730% in March 2007. In June 2007 the government released figures of 7,638%. The predictions for the annual inflation range from 3,000% (according to the IMF) to 8,000%. The Reserve Board of Zimbabwe in a written statement blamed rampant inflation in part on the slow distribution of larger notes causing inefficiency in exchange (lowering productivity). In early May 2006 the government printed around 60 trillion Zimbabwe dollars (In February it printed 21 trillion to borrow foreign money). In February 2007 certain price rises on commodities were declared illegal. In June 2007 the estimate of inflation (Month on Month) was 11,000%. The IMF estimates over 100,000% for January 2008. New notes have been issued superseding ones intended to last until the 30th June 2008. The ZRB is not unforthcoming with effort, this year it revalued the currency taking 10 zeroes from the notes (the largest of which was the 100 billion million Z$, released shortly before the revaluation.) Necessitated by the impracticality of the size of the monetary denominations the measure is likely to be only of short term aid. The official estimate of inflation year-on-year from the ZRB is 11268758.90%; prices doubling roughly every 22 days.
(Since this article was written the July 2008 figures have shown inflation levels year on year of 231150888.87%; prices double every 17 days.)
"All that is solid melts into air" - Karl Marx
"And do my people value this as gold, Do court and army think these payments hold?" - Faust, Goethe.
In March 1987 in a ski resort restaurant in Slovenia the Yugoslav Prime Minister Branko Mikulić was refused service by striking waiters protesting the ceiling placed on wages by him. The wage ceiling was one of Mikulić's efforts to reduce the runaway levels of Yugoslavian inflation. In the late 80s and early 90s the Republic of Yugoslavia underwent the highest recorded levels of inflation culminating the in the 500 Billion Dinar note shown. The Republic reformed the currency in 1990 resetting 1 new dinar to be worth 10,000 old dinar, in 1992 (1 new for 10 old), 1993 (1 new for 1 million old) and twice in 1994 (1 new for 1 billion old then a month later 1 novi dinar for 10.5 million dinar)
The line of Mephistopheles from the play above "such paper-wealth, replacing pearls or gold is practical: you know just what you hold" falls short of reality. The value of money should by definition be stored over time, with currency this is not always the case, to various extremes.
The Case of Rome
In the 3rd Century Roman Empire the debasement of the coinage (as successive emperors began to adulterate the currency to meet military and administrative costs) led to such widespread distrust in the currency value that the government ceased to accept it as payment for taxes. The fleeting nature of the tenure of some emperors made banks hesitant to accept the coinage minted by usurpers. (For example the coins of the sons of Fulvius Macrianus , Macrianus Minor and Quietus who reigned in 260-1, who rose to the throne after the death of Valerian; in certain cases banks showed an "unwillingness to accept the divine coin of the emperors"[1]. Which given the length of their reign proved prescient.) Perhaps the most well known reaction to this inflation was Diocletian's edict on maximum prices (not an uncommon reaction, more recently the Zimbabwe government fixed the prices of certain commodities), fixing an upper ceiling on the prices and wages (for example a higher quality scribe could command up to 25 denarii for 100 words, but no more) as well as replacing the debased currency with a new coinage.
By means of policing these price fixes across the Empire artisan guilds would have to file schedules stating they were not exceeding the maximum prices set. (Arguable not a very vigorous method of policing)
The Diocletian reforms came on the heel of a series of debasements which had seen the silver content of the denarius fall 99% since the time of Marcus Aurelius (A period of about a century).
The Case of Modern Europe
In the 20s Austria, Hungary, Germany, Poland and Russia all suffered from fairly sustained periods of hyperinflation. Partially because of effort to fund the costs of the bureaucracy, partially because in the aftermath of war large amounts of territory were lost, and partially because of funding other wars. Austria and Hungary had to contend with the loss of its territory and printing money necessitated by the cost of payroll (The loss of territory effect also occurred for the Confederacy, as the Union forces took their territory people sent their remaining money back to the much smaller Confederate States.) The Treaty of Versailles made Germany responsible for large reparation payments to Allied powers in the aftermath of World War 1. From November 1918 until July 1919 (Prior to the signing of the Treaty) German price levels rose 42.7% on domestic prices. The Treaty was signed in January of 1921 agreeing that Germany pay around $394 billion in 2005 prices. From May 1921 to July 1922 prices rose by 634.6% on internal prices. Then from July 1922 to June 1923 internal prices rose by around 18,000%. By July 31st 1923 prices were 161,000 times higher than they had been about a decade earlier. By September 4th prices were around 182 times higher than the July 31st figure. By November 20th prices were around 576,397,515,527,950 times higher than the July 31st figure. Overall between 1913 to November 15th 1923 prices were internally 92,800,000,000,000,000,000 times higher.
In Germany some firms ceased accepting the national currency, and began delaying tax payments to reduce the extent of their liability, such was the extent of the inflation that even a short term delay had significant impact.
On the first of November 1923 infamously a single glass of beer cost 4 billion marks.
The Case of Zimbabwe
In December 2007 the Zimbabwe Standard ran the headline 'Gono labelled ‘No. 1 saboteur’. The Governor of the Reserve Bank of Zimbabwe has fallen since the declaration in early 2005 that he was 'man of the year', with the lofty statement that "one man can make a difference to the course of history".
Inflation reached 624% in early 2004, then fell back to low triple digits before surging to 1,730% in March 2007. In June 2007 the government released figures of 7,638%. The predictions for the annual inflation range from 3,000% (according to the IMF) to 8,000%. The Reserve Board of Zimbabwe in a written statement blamed rampant inflation in part on the slow distribution of larger notes causing inefficiency in exchange (lowering productivity). In early May 2006 the government printed around 60 trillion Zimbabwe dollars (In February it printed 21 trillion to borrow foreign money). In February 2007 certain price rises on commodities were declared illegal. In June 2007 the estimate of inflation (Month on Month) was 11,000%. The IMF estimates over 100,000% for January 2008. New notes have been issued superseding ones intended to last until the 30th June 2008. The ZRB is not unforthcoming with effort, this year it revalued the currency taking 10 zeroes from the notes (the largest of which was the 100 billion million Z$, released shortly before the revaluation.) Necessitated by the impracticality of the size of the monetary denominations the measure is likely to be only of short term aid. The official estimate of inflation year-on-year from the ZRB is 11268758.90%; prices doubling roughly every 22 days.
(Since this article was written the July 2008 figures have shown inflation levels year on year of 231150888.87%; prices double every 17 days.)
1 comment:
excellent!
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