A Case of Inflation

Jun 29th, 2015
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In the early 1920s Germany experienced one of the most severe inflations of all time.1 The inflation was not apparent in 1920, but began showing up in 1921. Thereafter it got steadily worse until it came to an abrupt halt at the end of 1923.

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A Case of InflationIn the early 1920s Germany experienced one of the most severe inflations of all time.1 The inflation was not apparent in 1920, but began showing up in 1921. Thereafter it got steadily worse until it came to an abrupt halt at the end of 1923. At its worst in the second half of 1923, prices rose more than fivefold each week.Some idea of the magnitude of this catastrophe can be seen in table below. During 1920 and early in 1921 the signs of inflation were mixed. The price of food was increasing, but the price of dollars in terms of marks (the mark was the name of the German currency) was dropping, and so were the prices of products bought from the United States. However, the signs of inflation were unmistakable in the next year, from mid 1921 to mid 1922. In this period prices increased about six fold--that is, it took six marks at the end of the period to buy what one mark would have bought at the beginning. But this rapid inflation, greater than any yearly inflation in the history of the United States, was only a prelude for what was to happen.MEASURES OF GERMANY HYPERINFLATIONPercentage Change in Various Measures of InflationDatesInternal Prices Price of Dollars Cost of Living*Feb 1920 to May 19214.6%-37.2%39.2%May 1921 to July 1922634.6%692.2%417.9%July 1922 to June 192318094%22201%13573%July 1923 to Nov 20 1923854,000,000,000%381,700,000,000%560,000,000,000%*food until June 1923, thereafter based on all items. These data were calc

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