A Four Followed by Twenty-Nine Zeros
In July 1946 prices in Hungary doubled roughly every fifteen hours, the fastest inflation ever recorded anywhere. It was stopped on a single morning in August by a new currency, the forint, and that is still what Budapest prices in today.
The note is behind glass and it takes a moment to count the zeros. One hundred million b.-pengő. The abbreviation stands for billió pengő, and a Hungarian billió is a million million, so the face value is a hundred quintillion — a one with twenty zeros after it. It was issued on 3 June 1946 and it was legal tender for the two months the pengő had left.
Hungary in the summer of 1946 produced the fastest inflation ever recorded anywhere, before or since; the second-worst episode on the usual league table, Zimbabwe in 2008, is not close. At the peak in July, prices roughly doubled every fifteen hours. What ended it was not a gradual recovery or a foreign rescue. It was one morning, 1 August 1946, and a new currency called the forint.
How a country runs out of money
The war took something like two-fifths of Hungary's national wealth. The front crossed the country twice, the siege of Budapest ran from December 1944 to February 1945, and the retreating German army blew every bridge over the Danube in the capital. What machinery survived was largely carried off. Then the armistice signed in Moscow in January 1945 set reparations at 300 million dollars in goods — 200 million to the Soviet Union, the rest to Czechoslovakia and Yugoslavia — payable over six years, on top of the cost of maintaining the occupying army. The government had no tax base, no reserves and no credit, so it printed, and by the spring of 1946 printing was effectively the entire budget.
The tax pengő
Before the forint there was an improvisation worth understanding, because inflationary economies still reach for versions of it. From 1 January 1946 the finance ministry published a daily index unit called the adópengő — the tax pengő — for settling liabilities to the state, revalued every day against the collapsing currency. It began as an accounting fiction. By late May it was being printed as notes, and by July it had displaced the pengő in ordinary trade, for the obvious reason that a unit repriced daily holds value better than one repriced never. For seven months the country ran two currencies, one of which existed only to escape the other.
A wage paid in the morning was worth half as much by the time the shops shut. That is what fifteen hours means, and it is why nobody held money for longer than an afternoon.
One morning in August
On 1 August 1946 the pengő was withdrawn and the forint issued at one forint to 400,000,000,000,000,000,000,000,000,000 pengő — a four followed by twenty-nine zeros. The entire stock of pengő in circulation on the last day was worth, at the new rate, a small fraction of a single dollar. The name was a deliberate reach backwards past the whole modern period: Hungary had minted a gold florin to the Florentine standard from the 1320s, and the government wanted a word older than anything that had just failed.
That it held is the part that needs explaining, because new currencies mostly do not. Three things did it. The budget was forced into balance more or less overnight, through wage controls, compulsory agricultural deliveries and a tax system rebuilt on the adópengő index. Reparations were later rescheduled and reduced. And the National Bank's gold reserve, roughly thirty tonnes of it, which had been driven west ahead of the Red Army and ended the war in the American zone of Austria, was handed back and reached Budapest within days of the changeover — a visible reserve behind a currency that had none the week before. Hungary did all of this without foreign aid — the Marshall Plan did not exist yet, and when it did, in 1947, Moscow pressed Hungary to decline it. That is why the stabilisation still gets studied.
Who got the credit
It was designed and driven through by the Supreme Economic Council, established in December 1945 and run by Zoltán Vas, a communist. His party had taken about 17 per cent of the vote in the free election of November 1945 and lost heavily to the Smallholders, but it held the economic machinery, and the forint handed it the one thing campaigning could not buy: demonstrated competence at the moment the country most needed some. Within three years the coalition had been taken apart and the party governed alone. The stabilisation was a real achievement and it was a political instrument, and both of those are true at the same time.
The forint you are holding
Hungary joined the European Union in 2004, has not adopted the euro and has set no date for doing so. The forint remains one of the more volatile currencies in the union: it hit record lows against the euro in 2022, and Hungarian inflation passed 25 per cent in early 2023, the highest rate in the EU. None of that is 1946 and nobody sensible claims it is. The 1946 notes themselves are on show at the national bank's money museum, opened in 2022 in a converted railway headquarters on the Buda side and free to enter, and at the Hungarian National Museum on Múzeum körút. The practical residue is at every till in the country: prices are in forint, cards work nearly everywhere, and when a machine offers to charge you in euro instead, decline — the rate it applies is several per cent worse than your own bank's, and the shops that quote euro prices at the door are doing the same thing more slowly.