Inflation is the devaluation of a country's currency that causes prices to rise. From this definition it can be seen that inflation, for example, will cause a certain price increases, but inflation is not the same as the general price increases: general price increases refers to a certain, certain commodities because of the imbalance between supply and demand caused by the prices of temporary, localized, reversible increases, so the price increases during the period of currency depreciation will not be caused; Inflation refers to the prices of the main commodities within the country that can cause a country to depreciate the value of the currency of the country. A sustained, generalized, and irreversible increase in the prices of the major domestic commodities of a country.
The direct cause of inflation is that the amount of money in circulation in a country is greater than the total effective economic output of the country, so that the country's currency has been depreciating and prices have been rising. Typically inflation is caused by a large amount of money being triggered during an economic downturn to curb the recession. In fact, inflation has always existed, but there are malignant and benign versions. Inflation has always existed in our daily economic life, but it is divided into malignant and benign.
Usually the inflation that is recorded in history is hyperinflation. As the saying goes, "good things happen to people, bad things happen to them" - people are sensitive to good things and bad things in different ways: good things are taken for granted, bad things are taken for granted, and bad things are taken for granted. Benign inflation has always existed in everyday economic life, so there is nothing to write home about. Only hyperinflation, which has caused disaster in people's lives, is documented in detail, because people want to draw lessons from it about how to avoid repeating the tragedy.
The 20th century saw three inflationary episodes of global significance. The direct economic damage caused by these three inflationary episodes was almost equal, and all three inflationary episodes caused serious social problems. one of the world's most significant inflationary episodes of the 20th century was in Germany after World War I. Germany lost 10 percent of its GDP in World War I, and it was the first country in the world to lose 10 percent of its GDP. World War I cost Germany about 10% of its population, nearly 1/7th of its land (excluding its colonies), and half of its iron and steel industry. The Saar coal mining region, which was vital to German industry, was also put into League of Nations escrow for 15 years (actually occupied by France).
The loss of territory, population, and industrial resources made Germany's post-war economic recovery difficult, and Germany, as a defeated nation, was burdened with heavy reparations. According to the result of the negotiation among Britain, France, the United States and Italy in April 1921, Germany needed to pay 132 billion gold marks to the victorious countries, which was to be paid off in 30 years with interest. The Weimar **** and the State, which was established after the First World War, could not afford to pay the huge amount of reparations to the Allied Powers at all. It had no choice but to sell bonds to German banks to make up the difference between expenses and tax revenues.
However, this was also a recipe for inflation, and in 1922, Germany repeatedly asked for a delay in the payment of reparations. The French not only refused the request for extension of the payment, but also joined forces with the Belgians to occupy the Ruhr area. Weimar called upon the inhabitants of the Ruhr to "passively resist" the French occupation policy. At that time, Weimar used 50 million dollars worth of gold reserves to support the struggle of the Ruhr stoppage, but this also made the German economy suffered a serious blow.
The value of the mark began to decline by leaps and bounds, and after April 1923 Germany basically gave up any idea of intervening in the mark. At the time, more than 300 paper mills and 20 printing presses in Germany were working 24 hours a day to provide the banks with the banknotes they needed. At the height of inflation, the bread money in the morning could not even afford the crumbs in the evening. 1923 saw the peak of inflation in Germany: a sign in front of a bakery in Berlin clearly read "One trillion marks for a loaf of bread". Numbers lost their meaning at this point.
Instead of burning wood to keep warm, the German people burned mountains of marks. Gradually, German children began to play with building blocks made of banknotes, because it was far cheaper to make toys with banknotes than to buy them with banknotes.
In December 1923, the financial genius Schacht was appointed president of Deutsche Bank. Immediately after taking office, Schachter pursued a two-pronged approach: he sought the support of foreign financial capital and undertook monetary reform. Schacht realized that the mark had lost its trust, so no one was willing to accept it, so the only way was to reissue the currency. The shahter took state land and houses and mortgaged them to replace the old mark, which had been issued extremely indiscriminately. The idea was that the new marks could be exchanged for land or houses at a certain ratio. This gradually led to people taking gold and dollars in exchange for the new marks.
The Bundesbank took this gold and foreign exchange as collateral and issued more new marks. At that time, the ratio of the old mark to the new mark was how much? 1 trillion: 1. This means that you have to take 1 trillion old marks to exchange 1 mark. This also shows the severity of inflation in Germany at that time. Schacht in the currency reform at the same time and the United States, Britain, France and other countries on the issue of World War I reparations for consultation. The United States believes that in order to get war reparations from Germany must first ensure that the German economy is not to, otherwise the Germans themselves can not live how to pay reparations to the victorious countries?
In 1924, the U.S. introduced the Dawes Plan, which attempted to use the restoration of the German economy to ensure that Germany paid its reparations. The main elements of the Dawes Plan were the reorganization of the Deutsche Bank under the supervision of the Allied Powers to carry out monetary reforms, and a loan of 800 million gold marks ($190 million) from the Allied Powers to stabilize the currency. The implementation of the Dawes Plan played an important role in the recovery and development of the German economy in the second half of the 1920s. The Dawes Plan created the conditions for the inflow of private capital from the United States and Great Britain into Germany and for the effective recovery of war debts from the Allied Powers.
After the implementation of the plan, the problem of Germany's capital shortage was solved, and at the same time, Germany also got a lot of material and technical help from the United States. From then on, a batch of dollars from the United States into Germany, and then in the form of reparations into the Allied Powers, and finally in the form of war debt flow back to the United States, thus forming a cycle. Schacht took advantage of this to exchange new marks based on the bank's gold reserves for old marks at the disparate rate of one to three billion. By August 1924 this process was almost complete. The exchange rate of the mark was thus stabilized on the international market.
The long inflation that had tormented Germany appeared to be over, but only superficially. Germany had mortgaged a great deal of state land and housing in order to solve the inflation problem. Germany was still very poor because almost everything of value had been mortgaged. 1929 saw the start of the Great Depression, which spread rapidly from the stock market in New York to the rest of the world. The German economy out of the inflationary predicament in the United States to a considerable extent depends on the United States, so this began in the United States of America, the Great Depression also led to heavy losses in Germany.
On the one hand, Germany's small and medium-sized enterprises went bankrupt, resulting in widespread unemployment; on the other hand, the United States of America's capital concentration of electricity, steel, chemicals and other major industries spawned a monopoly oligopoly. At this time, the greater desire of the Germans is to get rid of the economic crisis internally and improve their living conditions; externally, to lift the shackles of the Versailles system, thus enhancing Germany's status in the international community. It was against this background that the Nazi Party under Hitler's leadership vigorously advocated racism - the call to break the shackles of the Versailles system and develop the national economy to improve people's livelihood attracted a wide range of people .
In 1928, Hitler's Nazi Party had only 2.6% support in the general election, but by September 1930 it was the second largest party in parliament, with 18.3% support, and in July 1932, with 37.2% of the vote and 230 seats, it became one of the largest parties in parliament. That year Hitler became the Chancellor of Germany, and a year later the death of President Hindenburg made Hitler the supreme Führer of Germany. Hitler's drive to expand the military and prepare for war made Germany the European epicenter of the Second World War.
Although China was the first country in the world to issue banknotes, they were parallel to metallic currencies in China after the Song dynasty. During the Ming and Qing dynasties, the main currencies on the market were still metal currencies such as silver and copper coins, and even during the Republican period, the currency in circulation was still mainly silver dollars.In 1935, the National People's Congress (NPC) decided to carry out a monetary reform: to abandon the silver standard and to begin to issue fiat currency - fiat money. At the beginning, 450 million yuan of fiat currency was issued. At the beginning, the fiat currency was pegged to the US dollar: 1 fiat dollar was equal to about 0.2975 US dollars.
In 1937, after the outbreak of the Anti-Japanese War, the nation needed to invest a lot in military spending. In the early stages of the war, the nationalists lost many battles on the front line, and at the same time, their finances were gradually unable to support the war expenses. The nationalist government solved its financial problems by two means: first, it began to levy various new taxes, and second, it printed money for itself by increasing the amount of fiat currency issued. To do so was in effect to devalue the money in the hands of the nationals, and thus inadvertently to plunder the money in the hands of the people.
During the War of Resistance, the national currency issued exceeded the market demand by hundreds of times, and as a result, the wartime prices in Chongqing rose to 1,700 times what they were before the war. This means that in less than 10 years prices in Chongqing have risen more than 1,000 times. The money that could buy a car before the war could only buy two eggs. By the end of the war in 1945, the total amount of fiat currency in circulation was more than 500 billion yuan, an increase of about 1,000 times that of 1935 and 400 times that of 1937, and in June 1946 the authorities blatantly started the civil war. At this time, one fiat dollar was equal to about $0.0005.
The Chinese people paid a heavy price for winning the war against Japan: at least 35 million casualties among the military and civilians, $31.3 billion in direct property losses, and $20.4 billion in indirect property losses. This is only the loss caused by the Japanese invasion of China, which does not include China's military expenditure in the war against Japan. After fighting such a hard war, the authorities ignored the objective need of the people to recuperate and start a civil war. After the war of resistance and then the civil war made the financial burden of heavy pressure.
In order to solve the financial problem, the authorities once again resorted to issuing money indiscriminately. Since 1947, the authorities have been printing trillions of dollars every month: one thousand, five thousand, and ten thousand dollar bills have appeared on the market, and after October 1947, the whole country began to refuse to accept small bills of less than five hundred dollars. Some people could only exchange one catty of banknotes for one catty of vegetables with the farmers, but soon the value of the fiat currency depreciated to the extent that even the farmers did not accept it.
In 1948, the civil war took a turn for the worse: the people were winning battles with the support of the masses, and the army was losing on the battlefield and needed to replenish its supplies. The printing of money by the authorities thus reached the craziest state: by August 19, 1948, the price index in Shanghai was already equal to 5.71 million times that of the pre-civil war period (the inflation rate was as high as 571,000,000%)! The banknotes of 1948 had already reached the point where a sack of banknotes could not buy a catty of rice. People were carrying sacks of money when they went out on the street to buy things.
The History of Prices in China has recorded the items that could be bought with 100 Yuan in French currency at different times during the Republican period: two cows in 1937, one cow in 1939, one pig in 1941, one hen in 1943, one fish in 1945, one egg in 1946, one-third of a frying stick in 1947, and four grains of rice. The devaluation of the French currency was in fact a double-edged sword for the nation: while the nation compensated for its financial burdens in this way, the social problems it created also led to a loss of national confidence. Of course, the problem is not unrecognized internally.
The political conference held on August 19, 1948, adopted the monetary reform proposal put forward by Weng Wenhao and Wang Yunwu. That night, Chiang Kai-shek issued a "financial and economic emergency order" in the name of the President: privately held gold, silver, foreign exchange, all private holders are limited to September 30th, converted into gold coupons; the national price freeze at the level of August 19th. Subsequently, the nation began to issue a new currency - the golden dollar bill. At that time, 1 gold dollar note was exchanged for 3 million French francs. However, the country went back to its old ways: the golden dollar notes were printed even faster than the previous fiat currency.
The change from fiat money to gold certificates was in fact a change: it seemed like a new currency, but the abuses continued unabated. The change from fiat currency to gold vouchers could not solve the problem of inflation at the root of the problem. Although Chiang Kai-shek expressly ordered that private individuals may not hold gold, silver, foreign exchange, and may not hoard and inflate prices. Chiang Ching-kuo even traveled to Shanghai specifically to carry out economic control, however, Chiang Ching-kuo in Shanghai to investigate speculative traders directly to the head of Kong Xiangxi's son Kong Ling Kan.
The four families of Chiang, Song, Kong, and Chen within the city have never been in the same boat. Chiang Ching-kuo's fight against tigers in Shanghai ended up in vain with the intervention of Soong Mei-ling. Unable to break through the shackles of internal vested interest groups, it was simply impossible to solve the inflation problem at its root. The golden dollar coupons were soon devalued into a pile of waste paper, just like the fiat currency before them. In the second half of 1949, 5 million gold dollar bills were equivalent to 1 yuan of gold dollar bills at the beginning of the issue. At this time, a stone of rice cost 440 million yuan, and a baklava cost 5,000 yuan.
The regime did not solve the problem of inflation until the end. After the founding of New China began to issue a unified yuan nationwide. If the monetary policy of the new China makes China's economy realized from chaos to governance, then Zimbabwe, located in southern Africa, has experienced the process from governance to chaos. Zimbabwe is somewhat similar to South Africa: Zimbabwe had a strict policy of apartheid during the era of colonial rule. The white colonizers who ruled Zimbabwe also gave the region a Europeanized name, "Southern Rhodesia".
In 1964, the white right-wing forces of Southern Rhodesia formed a group led by Ian Smith, who in November 1965 declared "independence" with the support of the United Kingdom and the United States. Southern Rhodesia, like South Africa, had gained independence in name only, but it was still in the hands of the white colonialists, and from September 10 to December 15, 1979, the white population of Southern Rhodesia and the Patriots' Front led by Robert Mugabe convened the Lancaster House Conference in London under the mediation of their former sovereign, the United Kingdom.
At this meeting, the Lancaster Agreement was reached: there would be no land reform or land distribution for the next ten years, and white farmers would remain in possession of their land.
The Patriotic Front, led by Mugabe, was victorious in the general elections of February 1980.
The Lancaster Agreement was signed on December 15, 1980, at the Lancaster House meeting in London. On April 18 of the same year, the colonial name "Southern Rhodesia" was abolished and "Zimbabwe" became the new name of the country. This marked the beginning of a new page in Zimbabwe's history. Zimbabwe was the second richest country in Africa after South Africa when the blacks under the leadership of Robert Mugabe came to power.
Zimbabwe was not only self-sufficient in food, but also generated significant foreign exchange through the export of food. Zimbabwe is therefore known as Africa's "food basket" in the hunger-stricken continent. Zimbabwe's founding of the early Mugabe in dealing with race relations adopted the policy of "reconciliation and coordination": he said "will never in turn to promote racism", "welcome the white people to stay, *** with the construction of new Mugabe's policy of "reconciliation and harmonization". Mugabe held up the banner of "against tribalism" and "against localism" and called on the people to put the interests of the people against secession in the first place.
Mugabe kept his ten-year pact with the whites: Smith, the white prime minister, continued to enjoy his Zimbabwean pension while retaining his farm. Many whites who had previously fled Zimbabwe for fear of black persecution returned. British companies continued to invest in Zimbabwe, and international institutions such as the World Bank continued to provide aid to Zimbabwe. In the first two decades of Mugabe's rule, Zimbabwe was a paradise in a continent plagued by hunger and war.
Zimbabwe is rich in food for export when other Africans can't even get enough to eat; Zimbabwe has achieved national reconciliation when other Africans are still fighting civil wars. During this period Zimbabwe, as Africa's second only to South Africa's wealth in all endeavors to achieve steady development. The literacy campaign launched by Mugabe after he came to power, after a period of white colonization in which almost all blacks did not go to school, has brought Zimbabwe's literacy rate to 64 percent. This does not seem high to us, but it is among the highest in Africa. At one point, Zimbabwe's HIV rate was 31%.
The Mugabe era succeeded in reducing the HIV rate in Zimbabwe to 20% by controlling mother-to-child transmission and promoting condoms. If Zimbabwe had continued on this trend it might have become a cranky developed in an Africa plagued by poverty, hunger, war, and disease. But Zimbabwe's development took a turn for the worse at the end of the 20th century: a new relationship with Britain deteriorated, and a financial crisis triggered by the deployment of troops to the Democratic Republic of Congo led to a wave of rebellion in the country.
Mugabe's attempts to stay in power were accelerated by the 2000 parliamentary elections, which resulted in the forcible repossession of white farmers' land. Because Mugabe came to power promising to keep white farmers' land, the unfair land distribution of the colonial era was left intact. At that time, nearly half of the arable land in Zimbabwe was concentrated in the hands of 6,000 white farmers, while more than 7 million black residents were left with no or little land. Zimbabwe's accelerated agrarian reform process has led to a redistribution of land resources.
However, the lack of effective management policies in this process has led to serious corruption and violent evictions of white farmers. The hard-won national reconciliation in Zimbabwe has been undermined once again. The acceleration of the agrarian reform process led to the exodus of white farmers from Zimbabwe. When they left Zimbabwe, they took with them advanced farming techniques and equipment. As a result, Zimbabwe, one of Africa's few food-exporting countries, experienced a sharp decline in food production.
Zimbabwe, in the face of such internal and external problems, resorted to issuing banknotes to quench its thirst. If you traveled to Zimbabwe in 1980 and earned 10 billion Zimbabwean dollars, you could get 14.7 billion dollars back by exchanging those Zimbabwean dollars for U.S. dollars. However, instead of converting them into dollars, you deposit them in a local bank, so by the time 2001 rolls around the money you take out will only be worth $100 million. The money that would buy a chicken in the morning won't even buy an egg in the evening.
Hyperinflation has made Zimbabwe known as a "money poor country". Zimbabwe has issued the largest 100 trillion dollar bill ever issued by mankind: Zimbabwe is full of millionaires, but even to buy a breakfast, you have to carry a sack of money to go, and may wait until the next day a sack of money is not as valuable as a sack. Pockets carry millions of large-denomination banknotes, but can not afford to buy anything. Zimbabwe's economy shrank by more than a third between 2000 and 2008, with unemployment at more than 80%. As of September 30, 2022, Zimbabwe's annual inflation rate has exceeded 350%.
After March 2008, Zimbabwe's economic situation deteriorated to a peak: the key sectors of finance, treasury and taxation basically stopped functioning, and the functions of water, electricity, communications, health care, education and other social **** management were almost paralyzed. At one point, 5.5 million people in rural Zimbabwe faced food shortages, and some 2.2 million people in urban areas were food insecure. Zimbabwe has gone from being one of the leading countries in Africa to being almost the poorest in the world, and after 2009 Zimbabwe had to replace its national currency with the US dollar and the South African rand.
The Chinese Yuan also became one of Zimbabwe's legal tender in 2022. Zimbabwe also implemented a series of reforms in the country, including the introduction of foreign investment and the revitalization of the country's mineral resources. The economic situation in Zimbabwe has improved since then, but this has not solved the problem completely. Because of the lack of foreign currency reserves and bank controls, the hyperinflation in Zimbabwe did not end with the abandonment of the national currency, but rather triggered a "hoarding wave" of Zimbabweans: people began to hoard cars, real estate, stocks, and other things that they believe have the ability to retain value.
In addition to the three major inflationary episodes of the 20th century, there is another one that is currently in the throes of inflation. South America's Venezuela, like the Middle East's Saudi Arabia, the United Arab Emirates, and Qatar, is rich in oil, and in 2000 Venezuela had about 4% of the world's oil reserves, one of the largest in South America and the fifth largest in the world. With the detection of new oil resources in the Orinoco Heavy Crude Oil Belt, Venezuela's oil reserves increased by 41% to 297 billion barrels, which is nearly 30 billion barrels more than the Saudis, and jumped to become the world's potential oil resources reserves greater.
Venezuela in the Chavez era supported a set of high welfare policies with revenue from oil exports: free housing, universal healthcare, and cheap food. In Venezuela, it is free to have children, free to educate, free to see a doctor, and almost all the welfare policies of the Nordic high welfare have been directly copied by Venezuela, without the slightest consideration of the fact that this is actually far more than the Venezuelan finances can afford. In Venezuela, there are queues of women in front of maternity wards because free healthcare is being offered at the expense of cutting beds.
There is literally no place for children to go to school, because free education comes at the expense of cutting funding for school construction. Who dares to attend classes when the schools are then in a state of disrepair? And when emergency patients are sent to hospitals, no one cares because the healthcare workforce has been downsized, and medical equipment that is too slow to be upgraded not only fails to save lives, but also becomes a tool for killing people in the event of an accident? At the beginning of the Venezuelan system problems are not very prominent, mainly because of Venezuela's rich oil resources.
However, Venezuela's economic structure is quite monolithic. Having failed to establish a complete industrial system, Venezuela is almost entirely dependent on oil exports to generate foreign exchange: oil revenues account for 95% of its total exports. This model of development is fine when oil prices are high, but from the second half of 2022 when oil prices began to fall, the problem arose: revenues fell sharply, in order to make up for the deficit, Venezuela came up with a brilliant idea is to increase the issuance of banknotes, so the country's printing presses are running at full steam to work overtime to print banknotes, and the result is that hyperinflation inevitably came to the head of this.
In the case of unsustainable domestic finances, Chavez chose to use foreign exchange reserves to alleviate the situation, but the result of doing so is tantamount to sitting on a mountain of empty hemlock to quench their thirst, and finally Venezuela had to rely on borrowing foreign debt to live on, and the borrowed foreign debt and its interest has become the pressure on the Venezuelan finances on top of a huge stone. Finally, corruption in Venezuela has further exacerbated the loss of wealth: senior officials have opened private accounts abroad and transferred state assets belonging to all Venezuelans to accounts in their own names.
This has not only cost Venezuela a great deal of wealth, it has also devastated the working people at the bottom, which has hampered productivity. Since 2013, Venezuelan supermarkets have been facing frequent stock-outs, and Venezuelans are gradually getting used to standing in long lines to buy daily necessities. When Chavez changed the name of Venezuela's currency to the Venezuelan Bolivar to emphasize his political color of Bolivarianism, the liberator printed on Venezuelan banknotes did not become the protector of the Venezuelan economy.
A larger denomination of 100 bolivars is worth only 2 cents in Venezuela's whopping 700% inflation rate. Today's bolivar has been devalued to the same level as the golden dollar and Zimbabwean coin of yesteryear. Venezuela's economic and livelihood turmoil has also spread to the political sphere and has continued to this day, and the U.S. forces have also taken advantage of Venezuela's domestic turmoil to make a comeback: Venezuela's domestic opposition leader, Speaker of the House of Representatives, Guaido self-proclaimed interim president, the United States as the leader of the West have immediately supported Guaido and Venezuela to start sanctions.
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