10 July 1946: Hungary suffers the world’s worst hyperinflation

Man sweeping up pengos in the street, Hungary © Getty images
The pengő had become all but worthless

Hungarians haven’t had a happy time with their currencies. Since 2008, the forint has fallen 37% against the dollar, due in large part to the eurozone crisis, although political instability hasn’t helped.

In fact, the forint is the country’s third currency in less than a century. And to this day, Hungary holds the unhappy record of suffering the highest rate of inflation ever recorded.

Hungary’s first currency was created after the break-up of the Austro-Hungarian Empire at the end of the First World War. Under the terms of the Treaty of Saint-Germain in 1919, the newly independent Hungary adopted the korona. Inflation started to spiral out of control, and in 1925, it was decided to scrap the korona for the pengő.

For the first few years, things went well for the pengő. Pegged to gold, it was one of the most stable currencies in the world. But in the 1930s, the Great Depression arrived and the currency was devalued.

Then came the Vienna Awards. Championed by Adolf Hitler and Benito Mussolini, Hungary was given back land it had lost in the aftermath of World War One. These territories were less developed and came at a cost to the economy.

Hungary at this point was little more than a puppet state of Nazi Germany. As a result, it entered the Second World War against the Allies. When the war started to go badly, and the Red Army was bearing down on its borders, the fascist government of Ferenc Szálasi took control of the printing presses.

Massive money printing continued after Hungary fell to the Soviets, which led to hyperinflation, reaching its peak on 10 July 1946. Prices were rising at just under 350% a day, and the pengő had long since become all but worthless.

In August that year, the government took drastic action – it ditched the pengő. The forint was introduced at a rate of one forint for every 400,000 quadrillion pengő (that’s 29 zeros).

Hungary joined the European Union in 2004. But as part of its accession, it agreed to one day adopt the euro – a currency with a troubled history of its own.

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