Hyperinflation

In economics, hyperinflation is a condition in which prices increase extremely rapidly as a currency loses its value. It is inflation out of control. Formally, it is "an inflationary cycle without any tendency towards equilibrium."

Hyperinflation and the currency

As noted, in countries experiencing hyperinflation, the central bank often prints money in larger and larger denominations as the smaller denomination notes become worthless. This can result in the production of some interesting banknotes, including those denominated in amounts of 1,000,000,000 or more.

Related Topics:
Central bank - Banknote

~ ~ ~ ~ ~ ~ ~ ~ ~ ~

• By late 1923, the Weimar Republic of Germany was issuing fifty-million-mark banknotes and postage stamps with a face value of fifty billion marks. The highest value banknote issued by the Weimar government's Reichsbank had a face value of 100 Trillion marks (100,000,000,000,000) http://www.sammler.com/coins/inflation.htm. One of the firms printing these notes submitted an invoice for the work to the Reichsbank for 32,776,899,763,734,490,417.05 (3.28×10¹⁹, or 33 quintillion) Marks.
• The largest denomination banknote ever officially issued for circulation was in 1946 by the Hungarian National Bank for the amount of 100 quintillion Pengő (100,000,000,000,000,000,000, or {{sn|1.0|20}}). image (There was even a banknote worth 10 times more, i.e. {{sn|1.0|21}} Pengő, printed, but not issued image.) The Post-WWII hyperinflation of Hungary holds the record for the most extreme monthly inflation rate ever - 41,900,000,000,000,000% ({{sn|4.19|16}}%) for July, 1946, amounting to prices doubling every fifteen hours.

One way to avoid the use of large numbers is by declaring a new unit of currency (so, instead of 10,000,000,000 Dollars, a bank might set 1 New Dollar = 1,000,000,000 old Dollars, so the new note would read "10 New Dollars".) While this does not lessen actual value of a currency, it is called revaluation and also happens over time in countries with standard inflation levels. During hyperinflation, currency inflation happens so quickly that bills reach large numbers before revaluation.

~ ~ ~ ~ ~ ~ ~ ~ ~ ~

Some banknotes were stamped to indicate changes of denomination. This is because it would take too long to print new notes. By time the new notes would be printed, they would be obsolete (that is, they would be of too low a denomination to be useful).

~ ~ ~ ~ ~ ~ ~ ~ ~ ~