Budapest Inflation, 1945

From Budapest: Portrait of a City Between East and West, by Victor Sebestyen (Knopf Doubleday, 2023), Kindle pp. 317-318:

The Hungarian national budget over the next eighteen months set aside as reparations five times more than was allotted for post-war reconstruction for Budapest. UN officials estimated three years after the war that total losses, calculating reparations, occupation costs and looting, amounted to 40 per cent of national income.

The currency collapsed – as it did in many places immediately after the war. Yet Hungary beat all records in terms of inflation. In July 1945 one US dollar was worth 1,320 pengős; by 1 November that year the exchange rate was one US dollar to 296,000. By spring 1946 hyperinflation took the rate to 4.6 quadrillion to the dollar (that is an almost unimaginable 15 noughts, 158,000 per cent a day). Most people in Budapest refused to be paid in money. As buildings were being repaired throughout the city, the walls in many rooms were decorated with large banknotes in fantastical denominations. In his marvellous book My Happy Days in Hell, György Faludy described the effect this had on daily life. A year after the war ended his publisher brought out a new edition of one of his books. He was paid 300 million pengős (which before the war would have been worth something like US$60 billion). When he collected his money, in cash, knowing it would have devalued by the time he had walked through Budapest, he ran to the central market a few blocks away. He spent the entire amount, he said, ‘on one chicken, a litre of olive oil and a handful of vegetables’. On 5 July a 100-quintillion-pengő note was issued – that’s twenty noughts; when an elderly gentleman in Budapest received one as wages he used it as part of the lining of his hat.

The currency was stabilized, largely with the help of the Americans. In April 1944, a fortnight after the German occupation, the Nazis had taken US$40 million ($570 million at 2022 values) in gold from various Hungarian banks. It fell into US hands at the end of the war and the Americans returned it a year later. Had the gold remained in Hungary at the moment of liberation, it is certain it would have been looted by the Red Army.