Hungary’s Hyperinflation: The Worst Case of Inflation in History

Aug 29, 2018 0 comments


The amount of Bolivars needed to buy 2.4 kg of chicken in Venezuela today. Photo credit: Carlos Garcia Rawlins/Reuters

The economic situation in Venezuela today is depressing. The annual inflation rate is spiraling out of control and millions of Venezuelans are struggling to afford even basic items such as food and toiletries. Prices are doubling every month, and if economists are to be believed, the inflation rate will touch 1 million percent by the end of this year.

The last time hyperinflation of such scale occurred was in Zimbabwe between the 1990s and the 2000s, when the government famously printed banknotes of 100 trillion dollar in a vain attempt to make carrying cash convenient. That banknote was worth about USD 30 then.

But Zimbabwe’s hyperinflation was only the second worst in history. The worst was suffered by the Hungarians between 1945 and 1946, when the daily inflation rate was at over 200 percent. Compared to the inflation in Zimbabwe and Hungary, Venezuela’s train-wreck of an economy looks very amateurish.

Hungary got its first currency after the break-up of the Austro-Hungarian Empire at the end of the First World War. It was called kronoa, but being a new government with no real economy to back the currency, the value of kronoa quickly spiraled out of control. To stop inflation, the government decided to scrap korona and introduced pengő in 1927. Pengő was pegged to the gold standard, and in the beginning it was one of the most stable currencies in the world. It carried Hungary through the great economic depression of the 1930s, and then through most of the Second World War, until 1944 when Hitler’s troops marched into the Kingdom. The war that followed, between German and Soviet forces, devastated the country economically, and the value of the pengő plummeted.


A 500,000 Korona banknote issued in 1923.

When the war ended and pengő didn’t recover, the government decided to print money and flood the country with banknotes—because if the government couldn’t arrest pengő’s fall, they could at least make sure the people had enough money in their hands. We all know the fallacy of that argument, and it only pushed Hungary’s economy to the brink.

Prices shot through the roof and hit the stratosphere, as the Business Insider notes:

Something that cost 379 Pengö in September 1945, cost 72,330 Pengö by January 1945, 453,886 Pengö by February, 1,872,910 by March, 35,790,276 Pengö by April, 11.267 billion Pengö by May 31, 862 billion Pengö by June 15, 954 trillion Pengö by June 30, 3 billion billion Pengö by July 7, 11 trillion billion Pengö by July 15 and 1 trillion trillion Pengö by July 22, 1946.

At it’s peak, prices were doubling every 15 hours.

In 1927, when the pengő was introduced, there were 5.26 pengö to one US dollar. At the start of the inflation, in June 1944, the pengő had dropped to 33 against one US dollar. Then, the pengő collapsed. It went on falling at a fantastic rate until there was 460 trillion trillion pengő to one US dollar by June 1946.


A 100 million Bilpengö banknote issued during the Hungarian hyperinflation in 1946.

To cope with the pengő’s falling value, the government kept introducing new currencies with every increasing denomination. The Pengö was replaced by the Mpengö (or 1 Million Pengö) which in turn was replaced by the Bpengö (or 1 Billion Pengö) which was replaced by the inflation-indexed Adopengö. The notes had the same design but were colored differently. The note pictures above is a 100 million Bpengö or one followed by twenty zeros! It was the highest denomination circulated, but so bad was the inflation that it was worth only about twenty US cents.

An even higher denomination was printed (pictured below) but not circulated. It had a face value of 1 billion Bpengö or one milliard Bilpengö.


To give you an idea of how much money was being printed, consider the fact that in July 1945, the currency circulation stood at 25 billion. This rose to 1.646 trillion by January 1946, to 65 million billion by May 1946 and to 47 trillion trillion by July 1946. Towards the end, the government actually ran out of good quality paper to print bank notes.

Finally, in August 1946, the government ditched the pengő altogether and decided to start from scratch. A new currency, forint, was introduced at a rate of one forint for every 400,000 quadrillion pengő—that’s a 4 followed by 29 zeros. Fortunately, the country’s economic situation stabilized and the forint survived until the 1990s when transition to a market economy adversely affected the value of the forint.

Hungary still uses forint, but the plan is to transition to Euro by 2020.

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