TIP624: Studying Financial History w/ Clay Finck
We Study Billionaires - The Investor’s Podcast Network
Exploring Historical Trends of Inflation and Currency Debasement
Price changes may differ from the change in money supply due to factors like increased productivity and new technologies leading to lower prices. Excessive currency debasement can cause financial chaos and higher inflation. Throughout history, inflation has been used by governments to default on debts, and governments have coercive power over their subjects in orchestrating defaults. Governments engage in massive money expansion to tax real money balances and reduce the real value of public debts. Historical examples include drastic currency debasements like the UK's 50% debasement in 1551, Austria's 55% debasement in 1812, and Russia's 41% debasement in 1810. The trend towards inflation of the currency rather than deflation has been prevalent since the Great Depression, with most countries experiencing high inflation. Some countries like Germany, Greece, and Latin America have faced multiple hyperinflation events since 1800. Dollarization, when a local currency is no longer used, is a consequence of sustained high inflation, prompting governments to prevent it to retain control over printing currency.
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