Inflation/Hyperflation

Now inflation touching 12.63 as compared to 12.44 last week, due to increase in the primary articles, manufactured products & 30 essential commodities, experts are predicting that still pain is left in this segment. As I mentioned in my previous blogs, inflation is calculated by comparing previous year’s respective weeks. So this base effect is going to be major hurdle until the end of the year. Any way now I am posting some interesting facts & figures about inflationary (or you can say hyperflationary) data & effect…

Ø India has never had to face the terror of hyperinflation. Since 1801, the highest inflation that India has ever seen in the past two centuries is 53.8%, in the year of 1943.

Ø India has spent about one out of every eight years with inflation about 20%.

Ø Manmohan Singh is no stranger to episodes of high inflation. He was chief economic adviser to the Indira Gandhi government in the mid-1970s, when two years of 20%-plus inflation was attacked. Then he was finance minister during the inflation spike in the mid- 1990s, when he and Reserve Bank of India governor C. Rangarajan pushed up interest rates to dizzying heights to bring inflation under control.

Ø But look at Zimbabwe, the estimate (in April) is that prices in that unfortunate African nation are rising at an annual rate of 66,000%. Prices change every day and sometimes every hour. Its central bank introduced a 500-million-dollar note last month. It can be used to buy two loaves of bread, Reuters had said in a 15 May report from Harare. Every citizen is a billionaire, but in terms of a currency that is worthless.

Ø In April 2008 the Reserve Bank of Zimbabwe issued a ZWD 50,000,000 note, which was then worth approximately 1.20 US dollars. In May 2008 the Reserve Bank of Zimbabwe issued bank notes or rather "bearer cheque" to the value of ZWD 100 million and ZWD 250 million. Meanwhile inflation had surged to an estimated 165,000 percent with some unconfirmed reports putting the figure as high at 400,000 percent. Ten days later, new notes with a value of ZWD 500 million (then equivalent to about USD 2) were issued. On 19 July 2008, the Reserve Bank of Zimbabwe announced that it plans to introduce a Z$100 billion bank note. On July 30, 2008, the Governor of the RBZ, Gideon Gono announced that the Zimbabwe dollar would be redenominated by removing 10 zeroes, with effect from August 1, 2008. ZWD10billion will become 1 dollar after the redenomination. On August 19, 2008, official figures announced for June estimated the inflation over 11,250,000 percent (Price doubling every 22 days).

Ø Germany in the early 1920s when the rate of inflation hit 3.25×10⁶ percent per month (prices double every 49 hours). By late 1923, Germany was issuing fifty-million Mark banknotes and postage stamps with a face value of fifty billion Mark. The highest value banknote issued by the Weimar government's Reichs bank had a face value of 100 trillion Mark (100,000,000,000,000; 100 billion on the long scale)

Ø 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 10²⁰; 100 trillion on the long scale. There was even a banknote worth 10 times more, i.e. 10²¹ pengő, printed, but not issued)

Ø Greece during its occupation by German troops (1941-1944) with 8.55 × 10⁹ percent per month (prices double every 28 hours)

Ø The most severe known incident of inflation was in Hungary after the end of World War II at 4.19 × 10¹⁶ percent per month (prices double every 15 hours)

Ø Yugoslavia suffered 5 × 10¹⁵ percent inflation per month (prices double every 16 hours) between 1 October 1993 and 24 January 1994.

Ø Between January 1861 and April 1865, the Lerner Commodity Price Index of leading cities in the eastern Confederacy states increased from 100 to over 9000. As the U.S. Civil War dragged on the Confederate States of America dollar had less and less value, until it was almost worthless by the last few months of the war.

Ø Between 1921 and 1922 inflation in Soviet Russia reached 213%. In 1992, the first year of post-Soviet economic reform, inflation was 2,520%, the major cause being the decontrol of most prices in January. In 1993 the annual rate was 840%, and in 1994, 224%. The ruble devalued from about 40 r/$ in 1991 to about 30,000 r/$ in 1999.

Ø Inflation in China reached 1,579% in 1947, when there was a civil war raging there.

Ø Beginning in 1971, during the presidency of Salvador Allende, Chilean inflation began to rise and reached peaks of 1,200% in 1973.

Ø Japanese inflation peaked at 568% in 1945, the year of defeat and economic collapse.

Ø South Korea saw inflation shoot up to 210% in 1951, when it was at war with the communist North.

Ø Between 1921 and 1922, inflation in Austria reached 134%.

Sources…

Wikipedia

Livemint

Rediff

Google