For the Austrians in my chan who are perpetually squawking about Zimbabwe:
…the two most frequently cited historical examples of hyper-inflation were instigated not by the exuberant printing of sovereign money, but rather by a sudden and severe drop in the availability of goods and services. Here they are:
Germany after World War I: What actually happened? Germanyâ€™s industrial heartland, the Ruhr, was shut down by the German workers protesting the imposition of war reparations by occupying Belgian and French troops. The German government continued to issue currency to pay the workersâ€”to support their protestâ€”and the amount of currency relative to the goods it could purchase was soon sky-rocketing out of balance.
Zimbabwe in 2008: What actually happened? A civil war destroyed the countryâ€™s industrial capacity and a land reform program transferred ownership of a highly productive agricultural sector to a segment of the population with no farming experience. With the collapse of both industry and food production, there were fewer and fewer goods and services to purchase and the value of the Zimbabwean Dollar collapsed.
In each of these cases, the sovereign government was forced to inflate the face â€œvalueâ€ of the currency it was issuing in a desperate race to keep up with its falling valueâ€”but in each instance what instigated the hyper-inflation was a sudden and rapid decline in national productivity.