The post-Revolutionary depression is so severe that George Washington, the young country's richest man, must pay a wagon load of money for a wagon load of supplies.
Corn is $80 a bushel. Shoes sell for $100 a pair. The Continental Congress had issued Continentals, but the paper money's value has decreased greatly due to inflation and has inspired the phrase "Not worth a Continental."
---------------
1791 Bank of the United States
Alexander Hamilton organizes the first Bank of the United States to fund the public debt after the Revolution, and provide a stable national currency for exchange within the US.
In addition, the Bank has power to regulate certain state-chartered banks. The Bank receives notes from private banks for money owed to the government. At any time, the Bank can ask the private banks to redeem their notes in gold and silver, effectively restricting the banks from overextending credit. This regulation protects the economy from inflation.
---------------
1792 France Goes for Broke Again
After a period of high inflation, France falls into national bankruptcy. The Girondist government prints more paper currency, the assignats, to continue its war against Austria and Prussia. This devalues the money and encourages consumption rather than saving.
---------------
1796 French Prices Skyrocket
The assignat declines in value causing inflation to soar. A bushel of flour costs $5.00, a cart full of wood costs $250.00, one pound of soap costs $8.00.(when it had sold for $.18), and a dozen eggs have gone from $.24 to $5.00.
---------------
1865 Greenbacks vs. Confederate
Inflation reduces Confederate paper money to $1.70 per $100. The Union greenback's gold value has dropped to $.46 on the dollar. The Confederate money will lose all its value and the greenback will not regain its strength until the end of 1878.
---------------
1880 Japan Promotes Industry
Japan's Meiji administration is short of cash, but believes investment in industry will make Japan strong. Military production, communications and infrastructure are provided by the government, the rest by private owners, although the government builds pilot industrial plants to stimulate the process. In the short term, the government spending leads to inflation, but it provides a sturdy foundation for Japan's industrial development. Some enterprises initially operated by the government later become private concerns. Iwato Yataro manages a government-operated shipping company which will eventually become the Mitsubishi Commercial Company.
---------------
1881 Japan Attacks Inflation
To recover from a massive inflation that has reduced revenues to the Japanese government, Finance Minister Matsukata Masayoshi acts to stabilize the national currency. The rigorous deflation policy will be maintained until 1885.
---------------
1883 Privatization in Japan
Struggling to suppress inflation, the Japanese government sells several industrial plants to private owners. Iwato Yataro, a friend of a leader of the Meiji Restoration, takes control of the government-operated shipping company that he has managed and turns it into Mitsubishi Commercial Company. The government gives him generous financial assistance, helping Mitsubishi become the largest shipping firm in Japan.
---------------
1884 Economic Trouble in Japan
As Japan's leaders draft a new constitution, the economy suffers from austerity measures imposed to combat inflation. Hard times allow party agitators to stir unrest. The government temporarily dissolves the political parties, and uses the police force and censorship to enforce the ban.
---------------
1890 Falling Crop Prices
In the Great Plains and the South, grain and cotton farmers, suffering from falling crop prices, demand currency inflation to raise prices.
---------------
1892 Populist Party
The new Populist party calls for the free coinage of silver to encourage inflation, which they hope will compensate for falling grain prices and relieve the farmers' debt burden. President Grover Cleveland opposes inflationary proposals.
---------------
1893 Depression of 1893
The Panic of 1893 plunges the US into a severe economic panic. Populist forces intensify their demand for free coinage of silver and other inflationist remedies, but President Cleveland opposes silver, believing that inflation will prolong the depression.
---------------
1918 German Inflation
Ruinous inflation besets Germany as the effort fails in World War I. The German mark will decline in value by 99% in the next five years.
---------------
1919 Winnipeg General Strike
Inflation soars in Canada after World War I. This and other economic dislocations lead to a general strike in Winnipeg in May of this year.
---------------
1919 French Inflation
Post-war inflation strikes France. The franc will lose 78% of its purchasing power in the next eight years.
---------------
1922 Germany Stops Payments
The payment of war reparations places an intolerable strain on the German economy, already ruined by more than four years of war. As inflation mounts, Germany suspends reparation payments.
---------------
1922 German Inflation Worsens
Germany's stock market crashes and sends the German mark plummeting in value from 162 Deutsche marks to the dollar to 7000 marks to the dollar.
---------------
1923 Schacht Therapy
The German economy is in ruins and hyperinflation has wiped out the life savings of a nation. In November, Gustav Stresemann becomes chancellor of Germany and financier Hjalmar Schacht is appointed special currency commissioner. They introduce a new currency, the Reichsmark, and the inflation comes to an end. Stresemann will step down as Chancellor after only three months, but he will continue to serve as Foreign Minister. He negotiates foreign loans and a more reasonable schedule of reparation payments.
---------------
1923 Inflation Causes Food Riots
Wild inflation devalues the German mark, causing higher prices, which then leads to a strike, closes 14 markets and then causes food riots to break out throughout Berlin. The mark has gone from the 1922 7,000/US dollar to 7260 marks-to-one US dollar by January 2nd.
---------------
1923 German Inflation Skyrockets
By July 30, one US dollar commands one million German marks. Prices in Germany are rising so quickly that workers are being paid several times a day. 1.5 million are unemployed and 4.5 million work part-time. The rate in September is 13 million marks/$US, by Nov.1st 130 billion marks/$US, and by Nov. 30th over 4 trillion marks to the US dollar. The well-to-do part with their prize possessions in exchange for farm products like eggs and milk. It is possible to see modest farmhouses hung with Rembrandts, Gobelin tapestries and priceless musical instruments.
---------------
1924 Dawes Plan Two
The Dawes Plan helps dam the flood of inflation that has ruined Germany. The Allied Powers use the plan to reorganize Germany's Reichbank, set its World War reparations debts, and provide a loan of 800 million gold marks (the US contributes $150 million) to stabilize its currency. A new German currency, the Reichsmark, is issued at a value of 1 billion old marks to one Reichsmark. Taxes are put into effect and strictly enforced. The government will make it more difficult for businesses to get credit. The new mark is backed by 30% gold.
---------------
1928 Nazis Gain Influence
Germany is in economic ruins following defeat in World War I and repercussions from the collapse of the American economy. Government after government fails to adequately ameliorate Germany's colossal inflation rate. In this insecure climate Adolf Hitler's National Socialist Party wins twelve government seats.
---------------
1934 National Union for Social Justice
Father Charles Coughlin, a priest with a radio program, organizes the National Union for Social Justice. He preaches radical inflation as a solution to the Depression.
---------------
1946 Pengo Wins Worthless Prize
Hungary holds the distinction of the all time highest inflation; the gold pengo becomes worth 130 trillion paper pengos.
---------------
1946 Truman vs. Meat Prices
The high price of meat becomes such an issue that some call for the resignation of US President Truman. Prices fall after the Office of Price Administration (OPA) relieves all wartime wage and price controls except rent control. Truman fears inflation more than post war depression.
---------------
1961 Certificate Deposits Born
The First National City Bank of New York offers fixed term certificate deposits at a higher rate of interest than is permitted on savings accounts. Other banks begin to do the same with much success as investors want to save without inflation eroding their savings.
---------------
1963 Indonesian Inflation
Inflation increases so rapidly in Indonesia that the currency will decrease in value 688 times in seven years.
---------------
1968 Gold Not Sold
As inflation mounts, the United States and six countries of Europe agree not to sell gold to private buyers.
---------------
1970 Nixon Asks For Help With Inflation
In a fight against inflation, President Nixon makes a speech over TV to ask the nation to voluntarily resist increasing wages and profits. He sets up a commission to find ways to increase worker output.
---------------
1971 Nixon's War on Prices
With the 1972 presidential election looming, US President Nixon makes some dramatic moves to deal with a recently shaky stock market, recession, high unemployment, a deluge of imports that has caused the US its first trade deficit, and the fear of inflation, all of which is related in part to the Vietnam War. He also must be ready if the Federal Reserve causes a depression by tightening credit.
In a TV broadcast, Nixon repeals the Bretton Woods financial agreements with his "New Economic Policy." The US goes off the gold standard, no longer redeeming gold at $35 an ounce. The US gives up fixed exchange rates for "floating rates" that are determined by the supply and demand of the international currency market. In addition, he imposes 10% surcharges on imports, repeals the 7% levy on new cars, speeds up an income-tax cut, asks Congress to restore tax credits for investments, and freezes wages, prices, and dividends "for 90 days." The stock market reacts immediately with a record leap, but organized labor is not as easily convinced. Ultimately the economy will react favorably.
---------------
1972 US Prices Better
Nixon's dramatic actions last year have lead to a stronger economy; the inflation rate has lowered from 4% to 2%, and short-term interest rates are lower by 2 points, allowing easier credit. The US dollar has less value from the policy of ignoring the international gold standard, but Treasury Secretary J. Connolly doesn't call it "devaluation." The 90-day price freeze continues throughout the year.
---------------
1973 OPEC Sheik
"Sheik" Ahmed Zaki Yamani becomes the Organization of Petroleum Exporting Countries' strategist and Saudi Arabia's Oil Minister. He raises oil prices which leads to high inflation in first and second world countries, bring deeper poverty to the third world and transfers hundreds of billions of dollars in the greatest shift of economic wealth in history. He loses his post in 1986.
---------------
1973 Energy Crisis in France
The energy crisis contributes to high unemployment and high inflation in France. This makes the conservative government less popular, and gives Francois Mitterrand the opportunity to broaden leftist Socialist support.
---------------
1973 Dollar Devalued Again
Inflation stands at 8.5% and the US dollar is devalued for the second time in under two years. The devaluation is undertaken in order to make American products more competitive in the international market. American wheat, which Russia has bought for very reasonable prices, becomes even more of a bargain at $1.48 a bushel. The Russians sell bullion in London at a highly favorable rate. Americans pay higher prices for imported goods and oil.
---------------
1974 High Inflation in US
Inflation exceeds 10%, unemployment soars past 7% and oil prices rise in the United States.
---------------
1975 Retrenchment Under Fraser
Australia's Governor General, Sir John Kerr, dismisses Prime Minister Whitlam and dissolves both houses of Parliament. In the elections that follow, the Liberal-Country party returns to power under J. Malcolm Fraser. To reduce the increasing unemployment, inflation and foreign debt, Fraser adopts a policy of retrenchment and economy.
---------------
1977 Milton Friedman, Economist
Milton Friedman wins the Nobel Prize. He claims ceaselessly that slow, steady increases in the money supply will control inflation. This monetary theory is seized upon by anti-Keynesians and anti-interventionist conservatives in Britain and the Americas.
---------------
1979 Stagflation
Inflation and lagging productivity result in the birth of a new economic phrase, stagflation. The Consumer Price Index rises 13.3%. The Federal Reserve Board raises discount rates to 12% from 11%. The Prime Rate goes to 14.5%
---------------
1979 Thrift Banks Start to Falter
The Federal Reserve Board, led by Paul Volcker, tightens money supplies in the US in order to fight inflation. The Board strengthens the US dollar by raising the "prime" interest rate of loans given to banks, but many thrift banks will lose mortgage loan revenues as they maintain the 15% interest rate they give their depositors. Several thrifts begin to falter.
---------------
1979 Double Trouble
President Lyndon Johnson's immense Vietnam War budget and the printing of new money during his administration combined with former President Richard Nixon's separation of American currency from the gold standard, followed by Arab and Iranian control of the world's oil supply create unprecedented inflation. Paul Volker, as head of the Federal Reserve, restricts the money supply this year. Double digit inflation and double digit interest rates will result in the following year.
---------------
1982 France Struggles With Economy
France is losing the war of economic recovery; inflation is rising and exports are declining. The government devalues the franc by 10%, imposes a temporary wage and price freeze, and appeases businesses by granting tax concessions.
---------------
1983 Fixing Social Security
Social Security is in trouble. The payroll tax to fund US Social Security (required by FICA) is 13.4% of the first $35,700 of income; both employee and employer pay 6.7%. But last year, the SS retirement fund had to borrow money from two other funds to keep making payments. This is partially due to the high unemployment, slow economic growth, and rapid inflation of the late seventies. Congress passes laws to keep Social Security from going bankrupt: the tax rate increases are accelerated, the self-employed now pay 100% of the employee/employer FICA, wealthy recipients have their Social Security benefits taxed, new federal and non-profit employees will start paying into the system, and the retirement age will gradually be raised to 67 by the year 2027.
---------------
1989 Capitalism Now
While Communist countries, including republics of the Soviet Union, the USSR itself, and former Iron Curtain countries are opting for a free market economy, the way in which capitalism works or does not work is undergoing scrutiny in the United States. Inflation has been reduced, the real estate boom has gone bust, junk bonds seem like junk, hostile takeovers are losing their glamor, and leveraged buyouts have bit the dust since the LBO of United Airlines is believed to have resulted in the stock market crash of 1987. Members of both major parties want the defense budget cut and the deficit reduced.
---------------
1990 Soviet Economic Woes
On the brink of economic disaster, Soviets must cope with ten percent inflation, and even a decrease in oil exports during an oil shortage. Economic advisors worry that should certain Soviet republics gain independence, they will have sole control over important resources such as oil fields in Baku, gold mines in the Far East, and steel in the Urals.
---------------
1990 Brazilian Economic Reform
Cartels fix prices on items from coffee to diapers to automobile pistons in Brazil. Newly elected President Fernando Collor de Mello sees this practice as a contributor to inflationary psychology. He opts to cut government spending and to cease production of new money. Inflation drops from 82% to 11% per month shortly after he institutes this policy. He briefly confiscates 80% of all bank deposits, causing a recession and the loss of one million jobs. But then recovery appears to be imminent. Loan restructuring agreements are reached. Price controls are abolished so that the competitive spirit can emerge. Automatic inflation-rate wage raises are dropped. Unfortunately, Collor's reforms will not prevent an economic downward spiral.
---------------
1991 Coffee Decline
Mexico's coffee cartel is in a state of collapse. Coffee is Mexico's number one export. The average coffee picker still earns only two dollars a day. There have been no raises in the last three years due to overproduction, inflation and fierce competition with other producing countries such as Brazil and Colombia. Many coffee growers now grow marijuana, opium poppies or sugar cane to help compensate for the deflated coffee market.
---------------
1992 Bush Scores Media
President George Bush complains repeatedly during the election campaign that the news media have unfairly stressed negative economic data. He notes that the press frequently refer to the economy being in recession when it is in fact growing at a rate of 2.2%. The customary definition of a recession requires zero growth or a contracting economy. He also points out that much is made of high unemployment figures, while these are far lower than they were in 1981-82, and that inflation and interest rates are the lowest in decades.
---------------
1992 Reporting the Economy
In the US, inflation for the year is 3.1%, yet consumer confidence is at its lowest point since 1974, when inflation was 14%. It is suggested that the news media have depressed consumer confidence. Between October 1990 and September 1992, 91% of prime time news reports about the economy have been negative.
---------------
1992 Yeltsin Frees Prices
Continuing its drive toward a market economy, the government of Russia does away with state subsidies for all goods and services. Prices go through the roof and Russians take to the streets in sometimes violent demonstrations. President Yeltsin stands his ground and continues to deregulate the Russian economy, although it makes him increasingly unpopular. Inflation runs at 1200%. Within a year, price controls will be imposed on food staples and other necessities.
---------------
1992 Euro Cash Crisis
The redemption of East German currency has vastly expanded the German money supply. The Bundesbank has raised interest rates to resist inflation. The US has lowered its interest rates to stimulate the sluggish economy. International investors rush to exchange their dollars for Deutschmarks. As the dollar falls and the mark rises, the European Exchange Rate Mechanism (ERM) is severely strained. The British are forced to take the pound out of ERM temporarily, and the regulated relationship of European currencies must be readjusted.
---------------
1993 US Resists Inflation
The US Federal Reserve Board keeps interest rates low to stimulate the economy. Despite the fears of many economists, inflation does not return. At the same time, the Germans are keeping their interest rates extremely high to fend off inflation. A major reason the US economy resists inflation is that America's highly mobile and largely non-unionized workers are slow to demand wage increases, while any increase in the German money supply is quickly consumed by a highly unionized workforce.
