Attempts to Control Inflation

Abstract

It did not take long before inflation rates reached levels consistent with an arbitrary but generally applied definition of hyperinflation. The rate of change in the cost of living (including rent) exceeded 50 per cent per month by July 1945, less than 2 months after the printing presses were back to work issuing P notes.¹ With the help of Table 7.1, where the average daily rate of change in the cost of living is listed for each month of the hyperinflation, one can define three phases in the course of inflation in Hungary between July 1945 and July 1946.

A nation which has experienced inflation till its final breakdown will not submit to a second experiment of this type until the memory of the previous one has faded … Made over-cautious by what they suffered, at the very outset of the inflation they would start a panic. The rise of prices would be out of all proportion to the increase in the quantity of paper money; it would anticipate the expected increase of notes.

L. von Mises, ‘The Great German Inflation’ (1932)