Inflations

This page lists various historical inflations.

See also: History of Money and Banking

Inflation of the Schinderlings in Austria

The fall of the Roman Empire brought an economic decline in Europe's Middle Ages. Luckily, it was spared for the most part major inflations.

The coinage in Western Europe was inspired by the Romans and later reformed by Charlemagne to a silver standard. The Pfennig remained a key coin, the privilege was given to many cities and high nobles, so by the 13th century many local pfennigs circulated in Austria and surrounding countries. Many local lords recalled the coins every year, exchanging them for new coins, keeping a part of them; some did so even more often. Duke Rudolf IV made an end to this practice and instituted a tax instead. But the purity and value of the pfennigs kept sinking.

After the death of Albert II, a conflict inflamed between the brothers Frederick IV and Albert VI over the inheritance. Frederick, who was very capable with finances did not have the means to finance the war, which has broken out in 1457. He started to massively devalue the currency and gave the privilege to others; binding them to maintain the same quality as of his own coins. Albert followed suit, and the practice has spread further. Besides the white pfennigs appeared "black pfennigs", then grey pfennigs, and all the bad coins came soon to be called hebrenko or schinderlings. Finally, they turned into copper coins.

The continuing inflation of the pfennig (1 pound was 8 schillings and 240 pfennigs) could be seen in its exchange rate against the Hungarian gulden, a solid gold coin based on the ducat. At the beginning of 1458 was the rate 1 gulden = 7 schillings 12 pfennig (222 pfennigs). In April 1960 was 1 gulden exchanged for 15 pounds 2 schillings 26 pfennig (3686 pfennig - over 15 times the rate!). The price was going up daily by 20 to 30 pfennigs. By 1460 was the situation so bad, that people complained to the emperor, "that he may command a better coin, for all wars, robberies and fires did not impoverish the land as the bad coins did". Frederick blamed others and promised a new coin to be made, but it failed completely and the prices continued to rise. Eventually was the minting of the bad coins stopped.

This devaluation carried many signs of a modern inflation. People refused the money, and no goods were to be had, unless one happened to have the good old money or the Bohemian groschen. The chronicles describe the great suffering in the lands of Austria and neighboring Bavaria, and there are reports of deaths of individuals as entire families, and the destruction of countless livelihoods. The return to normal was possible with a return to good currency.

Vellon inflation in Spain

After the unification of Spain, king Charles the 1st (emperor Charles V) reigned over all the lands of the Habsburg line, Germany, Netherlands and large parts of Italy. The discovery of the New World made Spain a colonial empire upon which the sun would never set. Though it enjoyed growth from trade, it kept little of the treasures of silver and gold, that streamed through it into Europe.

Though he was the most powerful ruler in Europe, Charles the Fifth had huge problems with his finances. The constant wars meant huge expenses, the incomes from his lands were varied and insufficient. The taxes, tariffs and various donatives were much larger than the incomes from silver and gold imports, still it was not enough. The interest rates were 10-20% high (at times up to 30%), incomes had to be often pawned or sold off. It is estimated, that at his abdication had his government a debt of 20 Million ducats, the interest ate most of the incomes.

When Philip II took over, he was advised to renounce the debts of his father, but chose not to as it would mean effective bankruptcy. The introduction of new special tariffs, selling of monopolies on salt and noble titles and offices brought some relief. He also confiscated several shipments of gold and silver, which caused many bankruptcies. By 1564 was the debt 23 Million ducats, in 1574 already 35 Millions. Since the interest consumed all incomes, in 1575 were all payments stopped and the public debt should be revised by a commission, the interest lowered. Since so many of the great trading companies of all across Europe were lenders to the Spanish Crown, many were pushed to the brink of bankruptcy and some beyond. The debts had to be recognized in full, but at least the interest was lowered.