Editing Inflation (section)

==History==
[[File:US Historical Inflation Ancient.svg|thumb|upright=1.8|US historical inflation (in blue) and deflation (in green) from the mid-17th century to the beginning of the 21st]]

===Overview===

Inflation has been a feature of history during the entire period when money has been used as a means of payment. One of the earliest documented inflations occurred in [[Alexander the Great]]'s empire 330 BC.<ref name=parkin>{{cite journal |last1=Parkin |first1=Michael |title=Inflation |journal=The New Palgrave Dictionary of Economics |date=2008 |pages=1–14 |doi=10.1057/978-1-349-95121-5_888-2|isbn=978-1-349-95121-5 }}</ref> Historically, when [[commodity money]] was used, periods of inflation and deflation would alternate depending on the condition of the economy. However, when large, prolonged infusions of gold or silver into an economy occurred, this could lead to long periods of inflation.

The adoption of [[fiat currency]] by many countries, from the 18th century onwards, made much larger variations in the supply of money possible.<ref>{{Cite web |title=Fiat Money: What It Is, How It Works, Example, Pros & Cons |url=https://www.investopedia.com/terms/f/fiatmoney.asp |access-date=2024-01-30 |website=Investopedia |language=en}}</ref> Rapid increases in the [[money supply]] have taken place a number of times in countries experiencing political crises, producing [[hyperinflation]]s{{snd}}episodes of extreme inflation rates much higher than those observed in earlier periods of [[commodity money]]. The [[hyperinflation in the Weimar Republic]] of Germany is a notable example. The [[hyperinflation]] in Venezuela is the highest in the world, with an annual inflation rate of 833,997% as of October 2018.<ref>{{cite news |last1=Corina |first1=Pons |last2=Luc |first2=Cohen |last3=O'Brien |first3=Rosalba |title=Venezuela's annual inflation hit 833,997 percent in October: Congress |url=https://www.reuters.com/article/us-venezuela-economy/venezuelas-annual-inflation-hit-833997-percent-in-october-congress-idUSKCN1NC2F9 |access-date=9 November 2018 |work=Reuters |date=7 November 2018 |archive-date=December 12, 2021 |archive-url=https://web.archive.org/web/20211212194638/https://www.reuters.com/article/us-venezuela-economy/venezuelas-annual-inflation-hit-833997-percent-in-october-congress-idUSKCN1NC2F9 |url-status=live }}</ref>

Historically, inflations of varying magnitudes have occurred, interspersed with corresponding deflationary periods,<ref name=parkin/> from the [[price revolution]] of the 16th century, which was driven by the flood of gold and particularly silver seized and mined by the Spaniards in Latin America, to the largest paper money inflation of all time in Hungary after World War II.<ref>{{cite book |last=Bernholz |first=Peter |url=https://www.elgaronline.com/view/9781784717629.00007.xml |title=Introduction |year=2015 |publisher=Edward Elgar Publishing |isbn=978-1-78471-763-6 |language=en-US |access-date=June 9, 2022 |archive-date=June 18, 2021 |archive-url=https://web.archive.org/web/20210618191304/https://www.elgaronline.com/view/9781784717629.00007.xml |url-status=live }}</ref>

However, since the 1980s, inflation has been held low and stable in countries with independent [[central bank]]s. This has led to a moderation of the [[business cycle]] and a reduction in variation in most macroeconomic indicators{{snd}}an event known as the [[Great Moderation]].<ref>{{cite news |url=http://www.timesonline.co.uk/tol/comment/columnists/article1294376.ece |title=Welcome to 'the Great Moderation' |first=Gerard |last=Baker |work=The Times |date=2007-01-19 |publisher=Times Newspapers |location=London |issn=0140-0460 |access-date=15 April 2011 |archive-date=December 14, 2021 |archive-url=https://web.archive.org/web/20211214175030/https://www.thetimes.co.uk/ |url-status=dead }}</ref>

{{multiple image
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 | image1 = 
Fineness_of_early_Roman_Imperial_silver_coins.png
 | caption1 = Silver purity through time in early Roman imperial silver coins. To increase the number of silver coins in circulation while short on silver, the Roman imperial government repeatedly [[debasement|debased]] the coins. They melted relatively pure silver coins and then struck new silver coins of lower purity but of nominally equal value. Silver coins were relatively pure before Nero (AD 54–68), but by the 270s had hardly any silver left.
 | image2 = Decline_of_the_antoninianus.jpg
 | alt2 = 
 | caption2 = The silver content of Roman silver coins rapidly declined during the [[Crisis of the Third Century]].
}}

===Ancient Europe===

Alexander the Great's conquest of the [[Achaemenid Empire|Persian Empire]] in 330 BC was followed by one of the earliest documented inflation periods in the ancient world.<ref name=parkin/> Rapid increases in the quantity of money or in the overall [[money supply]] have occurred in many different societies throughout history, changing with different forms of money used.<ref>{{Cite news|last=Dobson |first=Roger |title=How Alexander caused a great Babylon inflation |newspaper=[[The Independent]] |date=January 27, 2002 |url=https://www.independent.co.uk/news/world/europe/how-alexander-caused-a-great-babylon-inflation-671072.html |archive-url=https://web.archive.org/web/20110515070120/http://www.independent.co.uk/news/world/europe/how-alexander-caused-a-great-babylon-inflation-671072.html |archive-date=May 15, 2011 |access-date=April 12, 2010 |url-status=dead |df=mdy-all }}</ref><ref>{{Cite book  | last = Harl  | first = Kenneth W.  | author-link = Kenneth W. Harl  | title = Coinage in the Roman Economy, 300 B.C. to A.D. 700  | place = [[Baltimore]]  | publisher = [[The Johns Hopkins University Press]]  | year=1996  | isbn = 0-8018-5291-9  }}</ref> For instance, when silver was used as currency, the government could collect silver coins, melt them down, mix them with other, less valuable metals such as copper or lead and reissue them at the same [[Real versus nominal value (economics)|nominal value]], a process known as [[debasement]]. At the ascent of [[Nero]] as Roman emperor in AD 54, the [[denarius]] contained more than 90% silver, but by the 270s hardly any silver was left. By diluting the silver with other metals, the government could issue more coins without increasing the amount of silver used to make them. When the cost of each coin is lowered in this way, the government profits from an increase in [[seigniorage]].<ref>{{cite web |url=http://www.mint.ca/royalcanadianmintpublic/RcmImageLibrary.aspx?filename=RCM_AR06_E.pdf |title=Annual Report (2006), Royal Canadian Mint, p. 4 |publisher=Mint.ca |access-date=May 21, 2011 |archive-date=December 17, 2008 |archive-url=https://web.archive.org/web/20081217200449/http://www.mint.ca/royalcanadianmintpublic/RcmImageLibrary.aspx?filename=RCM_AR06_E.pdf |url-status=live }}</ref> This practice would increase the money supply but at the same time the relative value of each coin would be lowered. As the relative value of the coins becomes lower, consumers would need to give more coins in exchange for the same goods and services as before. These goods and services would experience a price increase as the value of each coin is reduced.<ref>{{Cite web |last=Shostak |first=Frank |date=2008-06-16 |title=Commodity Prices and Inflation: What's the Connection? |url=https://mises.org/library/commodity-prices-and-inflation-whats-connection |access-date=2023-11-19 |website=Mises Institute |language=en}}</ref> Again at the end of the third century AD during the reign of [[Diocletian]], the [[Roman Empire]] experienced rapid inflation.<ref name=parkin/>

===Ancient China===
[[Song dynasty]] China introduced the practice of printing paper money to create [[fiat currency]].<ref>{{cite book |author=von Glahn |first=Richard |title=Fountain of Fortune: Money and Monetary Policy in China, 1000–1700 |publisher=University of California Press |year=1996 |isbn=978-0-520-20408-9 |page=48}}</ref> During the Mongol [[Yuan dynasty]], the government spent a great deal of money fighting [[Mongol conquests|costly wars]], and reacted by printing more money, leading to inflation.<ref>{{cite book |author=Ropp |first=Paul S. |title=China in World History |publisher=Oxford University Press |year=2010 |isbn=978-0-19-517073-3 |pages=82}}</ref> Fearing the inflation that plagued the Yuan dynasty, the [[Ming dynasty]] initially rejected the use of paper money, and reverted to using copper coins.<ref>{{cite book |author=Bernholz |first=Peter |title=Monetary Regimes and Inflation: History, Economic and Political Relationships |publisher=Edward Elgar Publishing |year=2003 |isbn=978-1-84376-155-6 |pages=53–55}}</ref>

===Medieval Egypt===
During the [[Mali Empire|Malian]] king [[Mansa Musa]]'s [[hajj]] to [[Mecca]] in 1324, he was reportedly accompanied by a [[camel train]] that included thousands of people and nearly a hundred camels. When he passed through [[Cairo]], he spent or gave away so much gold that it depressed its price in Egypt for over a decade,<ref>{{Cite web |date=2006-05-24 |title=Mansa Musa |url=http://www.blackhistorypages.net/pages/mansamusa.php |access-date=2023-11-19 |archive-url=https://web.archive.org/web/20060524015912/http://www.blackhistorypages.net/pages/mansamusa.php |archive-date=May 24, 2006 }}</ref> reducing its purchasing power. A contemporary Arab historian remarked about Mansa Musa's visit:

{{blockquote|Gold was at a high price in Egypt until they came in that year. The [[mithqal]] did not go below 25 [[dirham]]s and was generally above, but from that time its value fell and it cheapened in price and has remained cheap till now. The mithqal does not exceed 22 dirhams or less. This has been the state of affairs for about twelve years until this day by reason of the large amount of gold which they brought into Egypt and spent there [...].|sign=[[Chihab Al-Umari]]|source=Kingdom of Mali<ref>{{cite web |title=Kingdom of Mali&nbsp;– Primary Source Documents |url=http://www.bu.edu/africa/outreach/resources/k_o_mali/ |website=African studies Center |publisher=[[Boston University]] |access-date=30 January 2012 |archive-date=November 24, 2015 |archive-url=https://web.archive.org/web/20151124051633/http://www.bu.edu/africa/outreach/resources/k_o_mali/ |url-status=live }}</ref>}}

=== Medieval age and "price revolution" in Western Europe===

There is no reliable evidence of inflation in Europe for the thousand years that followed the fall of the Roman Empire, but from the [[Middle Ages]] onwards reliable data do exist. Mostly, the medieval inflation episodes were modest, and there was a tendency that inflationary periods were followed by deflationary periods.<ref name=parkin/>

From the second half of the 15th century to the first half of the 17th, Western Europe experienced a major inflationary cycle referred to as the "[[price revolution]]",<ref>[[Earl J. Hamilton]], ''American Treasure and the Price Revolution in Spain, 1501–1650'' Harvard Economic Studies, p. 43 (Cambridge, Massachusetts: [[Harvard University Press]], 1934).</ref><ref>{{cite web|url=http://www.chass.utoronto.ca/ecipa/archive/UT-ECIPA-MUNRO-99-02.pdf|archive-url=https://web.archive.org/web/20090306002320/http://www.chass.utoronto.ca/ecipa/archive/UT-ECIPA-MUNRO-99-02.pdf |url-status=dead |title=John Munro: ''The Monetary Origins of the 'Price Revolution':South Germany Silver Mining, Merchant Banking, and Venetian Commerce, 1470–1540'', Toronto 2003|archive-date=March 6, 2009}}</ref> with prices on average rising perhaps sixfold over 150 years. This is often attributed to the influx of gold and silver from the [[New World]] into [[Habsburg Spain]],<ref>{{cite book |author=Walton |first=Timothy R. |title=The Spanish Treasure Fleets |publisher=Pineapple Press |year=1994 |isbn=1-56164-049-2 |location=Florida, US |page=85 |language=en-us}}</ref> with wider availability of [[Silver coin|silver]] in previously [[Great Bullion Famine|cash-starved Europe]] causing widespread inflation.<ref>{{Cite journal|url=https://ideas.repec.org/p/bsl/wpaper/2007-12.html|title=The Price Revolution in the 16th Century: Empirical Results from a Structural Vectorautoregression Model|first1=Peter|last1=Bernholz|first2=Peter|last2=Kugler|journal=Working Papers|date=August 1, 2007|via=ideas.repec.org|access-date=March 31, 2015|archive-date=April 25, 2021|archive-url=https://web.archive.org/web/20210425223334/https://ideas.repec.org/p/bsl/wpaper/2007-12.html|url-status=live}}</ref><ref>{{cite book |author=Tracy, James D. |title=Handbook of European History 1400–1600: Late Middle Ages, Renaissance, and Reformation |publisher=Brill Academic Publishers |location=Boston |year= 1994|page=655 |isbn=90-04-09762-7}}</ref> European population rebound from the [[Black Death]] began before the arrival of New World metal, and may have begun a process of inflation that New World silver compounded later in the 16th century.<ref>{{cite book |author=Fischer |first=David Hackett |title=The Great Wave |publisher=Oxford University Press |year=1996 |isbn=0-19-512121-X |page=81 |language=en-uk}}</ref>

===After 1700===

A pattern of intermittent inflation and deflation periods persisted for centuries until the [[Great Depression]] in the 1930s, which was characterized by major deflation. Since the Great Depression, however, there has been a general tendency for prices to rise every year. In the 1970s and early 1980s, annual inflation in most industrialized countries reached two digits (ten percent or more). The double-digit inflation era was of short duration, however, inflation by the mid-1980s returned to more modest levels. Amid this, general trends there have been spectacular high-inflation episodes in individual countries in [[Interwar period|interwar Europe]], towards the end of the [[Nationalist government|Nationalist Chinese government]] in 1948–1949, and later in some Latin American countries, in Israel, and in Zimbabwe. Some of these episodes are considered [[hyperinflation]] periods, normally designating inflation rates that surpass 50 percent monthly.<ref name=parkin/>