The History of Hyperinflation: Weimar, Zimbabwe, Venezuela

Short answer: Hyperinflation means prices rise by more than 50% a month. In Germany a US dollar cost 4.2 trillion marks in November 1923, in Zimbabwe the central bank printed a 100 trillion dollar note in 2009, and Venezuela has struck fourteen zeros off its currency since 2008. Each time a state paid for its spending with new money while the economy shrank and people lost trust.

In German-speaking countries inflation today is a slow loss of two or three per cent a year. How this creeping loss of purchasing power eats into your savings is explained in Inflation and loss of purchasing power. This article goes to the other end: to where money loses almost everything within months. Three cases are well documented and show the same pattern.

What is hyperinflation?

In 1956 the economist Phillip Cagan set a threshold that still applies: hyperinflation begins when prices rise by more than 50% in one month. It ends when the rate stays below that for over a year.

50% a month sounds small next to the trillions that follow. Through compounding, however, it becomes almost 130 times in a year. If you save €1’000, after twelve months you can still buy what used to cost just under €8.

In 2012 the economists Steve Hanke and Nicholas Krus collected every known hyperinflation. Their list contains 56 cases, almost all from the 20th century. The record is held by Hungary in 1946, where prices at times doubled every 15 hours. The three cases here are the best known because they show a rich industrial country, an agricultural country and an oil country.

Weimar 1921 to 1923: bread for billions

How it came about

The German Reich paid for the First World War mostly with loans, not taxes. The Reichsbank bought the state's IOUs and printed money for them. After the war came reparations. In 1921 the victorious powers set them at 132 billion gold marks in the London Schedule of Payments.

Until 1921 prices rose sharply but not yet out of control. From summer 1922 the situation tipped. In January 1923 French and Belgian troops occupied the Ruhr because Germany was behind with deliveries. The government called for passive resistance and paid the wages of the striking workers with freshly printed money. At the same time the most important industrial region dropped out as a source of taxes.

The figures

For bread it looked like this: before the war a loaf cost less than one mark. At the start of 1923 it was a few hundred marks, in November 1923 in Berlin over 200 billion marks. In October 1923, the worst month, prices rose by 29’500% according to Hanke and Krus. They doubled roughly every 3.7 days.

In the end wages were paid daily, often twice a day. Whoever got their money ran straight to the shop with it before prices rose again. The Reichsbank had notes produced in over a hundred printing works. The largest was for 100 trillion marks.

The end: the Rentenmark

On 15 November 1923 the Rentenmark arrived. It was backed by a land charge on agricultural and commercial land, and above all its quantity was strictly limited. From 20 November: 1 Rentenmark = 1 trillion paper marks, and a dollar cost 4.20 Rentenmark, exactly as much as it had cost in marks in 1914. The government stopped financing its spending at the central bank. The Reichsmark followed in 1924.

Zimbabwe 2007 to 2009: the 100 trillion dollar note

How it came about

Until the 1990s Zimbabwe was an important exporter of food and tobacco. From 2000 the government had commercial farms expropriated and often handed to people without experience or capital. Harvests collapsed, exports and foreign currency were missing. At the same time the state spent more than it took in. The central bank (Reserve Bank of Zimbabwe) financed the deficit, state companies and loans to favoured recipients with new money.

The figures

The last official figure the statistics office published was an annual inflation rate of 231 million per cent for July 2008. After that there were no official figures. Hanke and Krus estimate a rise of 79.6 billion per cent in a single month for November 2008. Prices then doubled roughly every day.

The central bank struck off zeros three times:

That is 25 zeros in total. In January 2009 the most famous banknote in history appeared: 100 trillion Zimbabwe dollars, a 1 followed by 14 zeros.

The end: the currency was abandoned

At the start of 2009 the government allowed payment in US dollars, South African rand and other foreign currencies. The Zimbabwe dollar vanished from daily life practically overnight. Inflation stopped at a stroke as well, because the central bank could not print dollars. In 2015 it officially exchanged the last holdings: 35 quadrillion Zimbabwe dollars for 1 US dollar.

The story went on. In 2019 the country introduced its own currency again, which once more lost much of its value. In 2024 came the next one, the ZiG (Zimbabwe Gold). Trust, once destroyed, does not come back with a new banknote.

Venezuela since 2016: fourteen zeros and the dollar

How it came about

Venezuela has the largest proven oil reserves in the world. Oil brought in most export earnings and financed a large part of the state budget. When the oil price collapsed in 2014, this money was missing. At the same time output fell because the state oil company PDVSA had invested too little for years. Price controls emptied the shops, because production no longer paid at the fixed prices. The central bank (BCV) financed the holes in the budget with new money.

The figures

For 2018 the central bank itself reported annual inflation of 130’060%. Other estimates were even higher. More than seven million people have left the country since, according to the United Nations platform R4V.

That is 14 zeros in total. One bolívar digital equals 100 trillion bolívars from before 2008, exactly the face value of the famous Zimbabwe note.

The end? Dollarisation from below

Venezuela has not officially abandoned its currency. The people did it themselves. From 2019 the government tolerated shops pricing in US dollars. Since then a large share of purchases has been paid in dollars, in cash, by transfer from abroad or with stablecoins. The bolívar remains for small amounts and payments to the state. Inflation has fallen as a result, but it has not gone away.

What all hyperinflations have in common

Three countries, three decades, three triggers: war and reparations, a failed land reform, an oil price crash. Yet the sequence is the same every time.

1. The state finances deficits at its own central bank. Taxes are not enough, it can no longer get loans, so it has money printed.
2. Output collapses. Fewer goods meet more money. The Ruhr, the farms, the oil fields dropped out.
3. Trust is lost. From a certain point nobody wants to hold the money any more. Everyone spends it at once. Prices then rise faster than the printing press can print, and the state prints even more.

The third point explains why hyperinflation arrives so suddenly. As long as people trust their money, they save it, and new money spreads slowly. Once trust tips, a currency can lose almost all its value within a few months. How the monetary system works in principle and why its quantity grows anyway is explained in The fiat money system explained simply. What M1, M2 and M3 measure is covered in Money supply M1, M2, M3.

Who lost and who kept their wealth

Hyperinflation does not destroy all wealth equally. It shifts it: from those who own money or are owed money to those who own things or owe money.

In Weimar it hit the middle class above all. Many citizens had put their savings into war bonds and lost everything. Farmers with mortgages, on the other hand, were suddenly free of debt. Industrialists such as Hugo Stinnes bought companies with cheap loans and repaid the loans with devalued money. A revaluation law of 1925 later returned only a small part of their claims to creditors.

In Zimbabwe and Venezuela one more point came in: whoever had access to dollars, through work abroad, relatives sending money or an account abroad, got through. Whoever earned only the local currency did not. The crisis hit the poorest hardest.

The role of bitcoin

Bitcoin was created to get around exactly this problem. Its quantity is limited to 21 million, and no central bank and no finance minister can increase it. The curve shows how new bitcoin come into existence and when the last one will be mined:

What bitcoin does in such countries

In Venezuela people use bitcoin to get money across the border, to protect savings from devaluation and to receive payments without a bank. All it takes is a phone and an internet connection. Capital controls and frozen accounts do not reach it as long as you hold your keys yourself. In Argentina, where annual inflation in 2023 was 211.4% according to the statistics office INDEC, the picture is similar. That is high inflation, but by Cagan's threshold not yet hyperinflation.

Measured against a currency that loses 99% in a year, even a strongly fluctuating bitcoin holding is the better store for savings, viewed over several years.

What speaks soberly against it

• Daily life runs in dollars. In Venezuela and Argentina most people turn to US dollars or dollar stablecoins such as USDT, not to bitcoin. They need stable money for next month's rent.
• Bitcoin fluctuates strongly. The price has fallen by more than 70% several times since 2011. If you need your money within a year, you may have to sell at a low. How those phases played out is shown in All bitcoin bear markets compared.
• Access is not a given. Bitcoin needs electricity, internet and a way to exchange local currency. Exactly these are often scarce in a crisis. States can block exchanges or make the exchange harder.
• Custody decides. If you leave your bitcoin on an exchange inside the country, you have the same problem as with a bank account. Protection exists only in your own wallet.

So bitcoin is not a lifeboat for everyone. For people who have access and can plan in years rather than months, it is an option that did not exist in 1923 or 2008. Which properties money needs and where bitcoin meets them and where it does not is compared in What is good money?.

What you can take from this

You probably do not live in a country threatened by hyperinflation. History still shows three things that apply to you too:

1. Money in an account is a claim, not property. It is worth as much as the trust in whoever issues it.
2. Spread your wealth. Whoever had only a savings book in 1923 lost everything. Whoever also had real assets got through.
3. Bitcoin belongs in your own wallet. Its advantage, that nobody can multiply or freeze it, only applies if you hold the keys yourself. How to do that is explained in Storing bitcoin safely.