🇭🇺Hungary

🇭🇺 Hungary's post-WWII hyperinflation (August 1945 – July 1946) is the worst monetary event in human history. At its peak in July 1946, prices were doubling every 15.0 hours — a monthly inflation rate of 4.19 × 10¹⁶ percent.

Context

Hungary emerged from World War II with its economy devastated: industrial output had fallen 80%, agriculture was disrupted, and the infrastructure was destroyed. The Hungarian government, under Soviet occupation, resorted to the printing press to finance reconstruction — while also being required to pay Soviet war reparations.

The Numbers

At the peak, the government was printing notes so rapidly that the ink was still wet when they were put into circulation. The pre-war pengő note had a face value of 1 pengő; by the end, the largest denomination was 100 quintillion (10²⁰) pengő — still not enough to buy a loaf of bread.

Causes

The Hungarian hyperinflation was driven by the same fundamental forces Professor Hanke has identified in every documented case:

1. Fiscal dominance: The government's expenditure needs far exceeded its ability to raise revenue through taxation; the central bank became a direct instrument of fiscal policy
2. Uncontrolled money creation: The National Bank of Hungary printed money at an accelerating rate to cover the fiscal deficit; money supply growth became exponential
3. War reparations: Soviet-imposed reparations created an additional, unrelenting drain on fiscal resources that had to be financed by money creation
4. Collapse of confidence: As inflation accelerated, the velocity of money increased sharply; people spent money as fast as they received it, further amplifying the spiral

The End

Hungary's hyperinflation was ended by the introduction of the forint on August 1, 1946, backed by gold and U.S. dollar reserves provided with Allied assistance. The redenomination was the most extreme in history: 4 × 10²⁹ pengős were exchanged for 1 forint.

In the Hanke-Krus Table

Hungary 1945–46 holds the #1 position in the Hanke-Krus World Hyperinflation Table — a position it has held since the table was first published in 2012. No subsequent hyperinflation has come close to matching Hungary's 4.19 × 10¹⁶% monthly inflation rate.

The Hungarian case demonstrates a pattern that Professor Hanke has documented repeatedly: hyperinflation ends only when the institutional framework for money creation is fundamentally reformed. Half-measures and gradual adjustments are insufficient. Only a complete break from the monetary institutions that caused the crisis — whether through a currency board, dollarization, or a hard-backed new currency — can stop the spiral.

Related Pages

• What Is Hyperinflation? — Definition and the Hanke-Krus framework
• The Hanke-Krus World Hyperinflation Table
• Zimbabwe — The second-worst hyperinflation in history
• Venezuela — A modern hyperinflation case
• Home: Hyperinflation — Return to the Hyperinflation overview