Argentina’s 1989 Hyperinflation
Argentina’s 1989 hyperinflation, roughly 5,000% over the year and a monthly peak near 197% in July, was driven by persistent fiscal deficits financed by money creation and a total loss of faith in the currency.
| Annual inflation | ~5,000% (1989) |
|---|---|
| Monthly peak | ~197% (Jul 1989) |
| Cause | Deficits financed by printing |
Argentina in 1989 is a textbook hyperinflation, and a clear illustration that hyperinflation is fundamentally a fiscal problem.
Year after year the government ran deficits it could not cover with taxes or borrowing, so it had the central bank print money to pay the bills. Prices rose around 5,000% over 1989, with a monthly peak near 197% in July. As money lost value by the day, people spent it the moment they got it, sending the velocity of money, and prices, spiralling. Credibility in the currency collapsed entirely.
Stabilizing it ultimately required a credible regime change: fiscal reform and a hard monetary anchor, exactly the pattern Sargent found in the 1920s European hyperinflations. Printing money does not "buy" growth; past a point it destroys the currency, and output with it.
Sources: see the methodology and "Why hyperinflation happens."