Cody Jessup

Double Entry Journal

Citation: Siklos, Pierre L. "Hyperinflations: Their Origins, Development and Termination." Journal of Economic
Surveys. 4.3 (1990): 225-248. Print.

Source: Quote (Page# or Paragraph #)

Responses

Capie argues that the combination of weak

governments,
civil disorder and unrest, lead to conditions
which facilitate the loss of fiscal
discipline and to the use of the inflation tax as
the overwhelming source of
government revenue. Pg 226

This is a very valid argument because most

governments back then couldnt control their
own economy.

Borrowing from Keynes' suggestion in his

Economic Consequences of the Peace
that "... even the weakest government can
enforce inflation when it can enforce
nothing else...." Pg. 226

I disagree with this, I feel like inflation is a

natural occurrence due to recession or war
rather than a policy implemented by the
government.

Moreover, as Fratianni (1986)

notes, there are likely to be just as many
historical episodes where the existence
of weak governments or civil disorder did not
lead to runaway inflation (e.g.,
Israel). Pg. 226

No comment

At best, Capie's hypothesis may be applicable to

the South American experience,
while it is generally the case that 20th century
European hyperinflations
emerged following the end of a major conflict or
were the result of severe
physical damage coupled with large demands for
reparations. Pg. 227

I agree because pretty much any conflict after

the treaty of Versailles suffered from inflation.

It has also been pointed out that as inflation

tends to redistribute income away
from wage earners towards rentiers (Kalecki
1962 Pg. 227

This is true considering that rents tend to rise

when wages rise.

the inflation route is viewed as facilitating the

No comment

Maintenance of an unequal distribution of

income. Pg. 227
a hyperinflation may be viewed as a
means of creating conditions in which a group
reluctantly accepts to bear the
economic burdens attendant to a stabilization.
Pg. 227

I completely disagree with this because there

is no reason for any country to have inflation
of such high extremes.

Another consideration which is often thought to loom

large in explaining the
origin of a hyperinflation is the problem posed by
demands for reparations payments. Pg. 228

I feel like this is a huge contributor to

hyperinflation because after WWI Germany
owed so much money due to the Treaty of
Versailles.

Physical damage, reparations,

recovery from a wartime economy or, as in the
case of the German hyperinflation
of the 192O's, the ending of subsidies financed
by the inflation tax to the
capital goods producing sector (Garber 1982),
are factors which imply that an
analysis of conditions which lead to a
termination of runaway inflation must
disentangle
aggregate demand influence, emanating from
monetary and fiscal policies,
from aggregate supply side changes which
follow recovery from many
experiences with hyperinflation. Pg. 229

No comment

In particular,
the authors demonstrate that if the real debt is
entirely monetized and
is sufficiently large, real balances would increase
over time instead of decreasing
as in all known hyperinflations. Pg. 233

I agree because over time many factors

compensate for inflation such as population
growth.