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You're confusing inflation with hyperinflation.

The war debts could be inflated away with mild inflation and that wouldn't have caused runaway inflation.

War reparations was external debt denominated in foreign currency. You cannot pay that by inflating, and attempting to do so can lead to runaway inflation.

Hyperinflation crises always have to do with trying to inflate to pay debts that cannot be inflated away, be it because they debt is itself inflation-indexed (a relatively recent but dangerous development) or because it is denominated in foreign currency.

In the 1980s there were at least two Eastern European countries which had currency crises as a result of too much foreign debt. Romania went the route of imposing a depression domestically in order to pay the debt, Yugoslavia went the hyperinflation route.

Debt in your own currency can never cause hyperinflation.

Economics is politics by other means

by Migeru (migeru at eurotrib dot com) on Fri Jun 3rd, 2011 at 09:39:17 AM EST
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Migeru:
Hyperinflation crises always have to do with trying to inflate to pay debts that cannot be inflated away, be it because they debt is itself inflation-indexed (a relatively recent but dangerous development) or because it is denominated in foreign currency.

Hm, does the French revolution inflation and the US revolution inflation fit this pattern? My assumption would be that the weakness of the states caused it, and rightfully so as fiat money backed by a defeated state in general becomes worthless.

Sweden's finest (and perhaps only) collaborative, leftist e-newspaper Synapze.se

by A swedish kind of death on Sun Jun 5th, 2011 at 01:14:53 PM EST
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