Failed QE Caused Market Falls?

23 Aug

The "Black Hole" of QE [courtesy Google Images]

The “Black Hole” of QE
[courtesy Google Images]

Last Thursday (Aug. 20th, A.D. 2015), the Dow Jones Industrial Average fell 358 points.  The New York Times wrote “China Woes Send Stocks Into Tailspin” in an attempt to blame the fall in US markets on the previous fall in the Chinese stock markets and recent devaluation of the Chinese yuan:


“Stock markets around the world plummeted on Thursday, signaling that investors have not gotten over the shock of China’s devaluation last week and remain nervous about the health of the global economy.

“The selling began in Asia . . . . moved to Europe . . . and ended with a rush for the exits in the United States.

 “The Dow Jones industrial average tumbled 358.04 points, or 2.1 percent, to close at 16,990.69.

“. . . the S&P 500 declined 43.88 points, or 2.1 percent, to 2,035.73, its lowest level in six months . . . .

“The biggest source of uneasiness right now appears to be China’s economy. Many analysts assumed that China’s recent devaluation was in part motivated by a desire to stimulate China’s economy. . . .

“But the devaluation stoked suspicions . . . that China’s economy might be weaker than its official figures suggested.”


China is trying to shore up its stock market with a Chinese version of Quantitative Easing (QE).  But will QE work in China?

In fact, will QE work anywhere?

As you’ll read, the answer may be No.

If QE doesn’t and can’t work, what will prevent China’s and the world’s stock markets from falling further?


•  The Dow’s decline didn’t end on Thursday.

On Friday, August 21st, A.D. 2015, CNBC wrote “Europe markets plunged 3%; China and oil dominate”:


European stock markets faced severe selling on Friday, with major markets crashing in excess of 2.5 percent, following U.S. stocks lower as worse-than-expected Chinese economic data and a sharp drop in oil prices spooked traders.

“Oil was testing investors’ nerves on Friday, with light crude trading near $40 per barrel . . . . U.S. oil prices heading for its eighth week of falls running on Friday, the longest losing streak since 1986.

“Big falls across Asian stock markets on Friday, after China August PMI data showed that China’s factory activity . . . shrank at its fastest pace in more than six years. The Shanghai Composite Stock Exchange closed over 4 percent lower.”

The Dow had fallen another 531 points.


•  But the big news, perhaps the real “bomb” that triggered the global stock market declines, may have been a seemingly innocuous “white paper” released by the St. Louis Federal Reserve on Tuesday, August 18th.

As reported by (“St. Louis Fed official: No evidence QE boosted economy”):


“In a white paper dissecting the U.S. central bank’s actions to stem the financial crisis in 2008 and 2009, Stephen D. Williamson, vice president of the St. Louis Fed, . . . said that:

1) “The zero interest rates in place since 2008 that were designed to spark good inflation actually have resulted in just the opposite.

2)  “The ‘forward guidance’ the Fed has used to communicate its intentions before it acts has instead been a muddle of broken vows that has served only to confuse investors. And, most importantly,

3) “The quantitative easing, or the monthly debt purchases that swelled the central bank’s balance sheet past the $4.5 trillion mark, have at best a tenuous link to actual economic improvements.”

“As for spurring inflation, reducing employment or otherwise generating sustained economic activity, the results, particularly for QE, are “at best mixed.” In addition to muted inflation, the gross domestic product has yet to eclipse 2.5 percent for any calendar year during the recovery, while wage gains, and consequently living standards, have been mired around 2 percent or less.

“There is no work, to my knowledge, that establishes a link from QE to the ultimate goals of the Fed—inflation and real economic activity.  Indeed, casual evidence suggests that QE has been ineffective in increasing inflation,” Williamson wrote.

“For example, in spite of massive central bank asset purchases in the U.S., the Fed is currently falling short of its 2 percent inflation target,” he added. “Further, Switzerland and Japan, which have balance sheets that are much larger than that of the U.S., relative to GDP, have been experiencing very low inflation or deflation.”


In other words, QE has not only failed to significantly stimulate the US economy, it’s also failed to provide intended “stimulation” in Switzerland and Japan.  This suggests that QE is an inherently failed and ineffective strategy around the globe.

Q:  What is China doing to shore up its falling stock market?

A:  QE.

Q:  What are the chances that Chinese QE will be any more successful than the QEs of Japan, Switzerland and the US?

A:  Near zero.

Q:  Why do nations continue to try to use QE if the evidence shows that it doesn’t work?

A:  Because, in a debt-based monetary system, there’s nothing else they can do.  They’re trapped and left with no solution to fundamental economic problems other than the dim hope that QE might work a little or at least buy some time.

Q:  How could the St. Louis Fed’s white paper have triggered the current global stock market declines?

A:  That hypothesis is a long shot, but the timing is at least coincidentally good (the St. Louis Fed issued that white paper on Tuesday and US markets began to fall on Wednesday). More importantly, the essence of the white paper is the claim and/or admission that QE doesn’t work.

Q:  What does this imply?

A:  First, it implies that if QE hasn’t worked in the past, it won’t work in the future. If so, we have no remedy for the current problems.  Further, the admission that QE hasn’t worked implies that the current economic problem is systemic and can’t be solved until the current “system” is abandoned and replaced by a significantly new “system”.

Q:  If the problem is systemic, what current “system” is so fundamentally flawed that it must be replaced?

A:  Probably, the current, debt-based, fiat monetary “system”.

Q:  If the current, debt-based, fiat monetary system had to be abandoned, what new system might replace it?

A:  Hard to say.  I see two possibilities:


1) The Powers That Be might be able to palm off a “new” monetary system based on “Special Drawing Rights” issued by the IMF.  But, that SDR system wouldn’t be fundamentally “new”.  It would only be another debt-based, fiat monetary system wrapped up in a bright new bow; and,

2) An asset-based monetary system based on something tangible like gold or silver.


The Powers want another debt-based, fiat monetary system in order to exploit the peoples of the world.

The world’s people need an asset-based monetary system to defend them against exploitation by governments and/or central banks.

We shall see which side prevails.


•  “In Williamson’s view, the Taylor rule dictates the level of interest rates in regard to economic conditions. The thinking essentially is that low rates beget low inflation, trapping central banks in zero interest rate policies (or ZIRP).”

In fact, low interest rates are believed to have two, contradictory effects:


1) According to the “Taylor Rule,” low interest rates will cause low inflation rates or even deflation.  Thus, low (Near-Zero) interest rates should have slowed the economy.  But,

2) According to politicians and the Federal Reserve, lower interest rates should have encouraged consumers to borrow more “cheap” currency from the banks and spend it on new homes, cars and flat-screen TVs.  Under that prevalent theory, since A.D. 2008, low (Near-Zero) interest rates should have stimulated the economy and caused it to grow.

The Fed and/or government apparently believed that Near-Zero interest rates would stimulate consumers to borrow and spend at such a high rate that the resulting inflationary effect would more than cancel out whatever “Taylor rule” deflationary effects that follow low interest rates.

The Fed was wrong.  After the onset of the Great Recession, the American people refused to borrow much currency at any low interest rate and therefore didn’t contribute to inflation or stimulate the economy.

Result?  The “Taylor rule” was right.  Near-Zero interest rates caused deflationary forces to become prevalent.  That, in turn, caused the economy to slide towards recession and/or depression, rather than recovery.


•  “With the nominal interest rate at zero for a long period of time, inflation is low, but the central bankers believe that maintaining ZIRP [Zero Interest Rate Policy] will eventually increase the inflation rate. But this never happens.  As long as the central banker adheres to a sufficiently aggressive Taylor rule, ZIRP will continue forever, and the central bank will fall short of its inflation target indefinitely,” Williamson said. “This idea seems to fit nicely with the recent observed behavior of the world’s central banks.”

“Many Wall Street strategists have issued forecasts expecting the Fed finally to end zero interest rates in September. However, uncertainty lingers: The CME’s FedWatch tool, which monitors futures contracts, indicates just a 36 percent chance of September tightening.”


Implication #1:

QE’s 1, 2 and 3 have cost most of $4 trillion.  If QE is now viewed as having been ineffective and having failed to achieve positive results during the past seven years, there’s no valid reason to invest more hundreds of billions of dollars in a QE4.

During the QE3 phase, some gurus chanted the slogan “QE to Infinity”.  That slogan signaled their belief that the US economy had not only become fragile but also become so dependent on QE monetary stimulus, that QE could never end.  But that slogan was based on the presumption that QE actually caused some positive effect.

However, if it’s true that QEs 1, 2 and 3 failed to deliver much of a positive result, there’ll be no logical reason to support “QE to Infinity” and therefore there shouldn’t be a QE4.


•  “The primary place where QE seems to have worked is in the stock market, where the S&P 500 has soared by 215 percent since the recession lows in March 2009.  Elsewhere, though, deflation fears have permeated and interest rates have remained low.”


Implication #2:

If QE has had any positive effect, that effect was concentrated in the stock markets.  After A.D. 2009, it’s been generally believed that QE prevented markets from plunging further, supported the markets, and ultimately pushed them higher.

If so, we’re left to wonder how much of the (former) 18,000-point Dow was based on fundamentals and was real and how much of that 18,000 was based on QE and was therefore illusory.

If it’s true that QE has so far failed to live up to expectations, and if it’s true that therefore there won’t be a QE4—then what will support the stock markets in the future?  Without continued support from QE4, what will prevent US stock markets from falling significantly—perhaps all the way back down to levels seen in 2008-2009 when the Dow Jones bottomed out at 6,440?

Without QE4, the US stock markets could fall dramatically.  The absence of QE4 might even help explain last week’s 1,000-point fall in the Dow.


Implication #3:

If the Fed really wants inflation, and if the Fed now agrees that low, Near-Zero, interest rates have actually contributed to deflation, then we can expect the Fed to quickly raise interest rates—perhaps as soon as next month.  In fact, although the Fed has talked about raising our Near-Zero interest rates by 0.25%, the Fed might even surprise us and raise interest rates by more than 0.25%.

If investors come to believe that there’ll be no QE4 (injecting more billions of dollars into the stock markets) and no more Near-Zero interest rates, the psychological impact alone should cause stock markets to fall.

If the implications of the St. Louis Fed’s recent white paper have already begun to seep into the US and even global investor community, that paper might’ve already helped cause last week’s 1,000-point fall in the Dow.  If so, that paper’s message is explosive.

If QE doesn’t work other than to support the markets, and if the Fed therefore decides to forgo QE4, then we can expect the unsupported markets to fall significantly.


Implication #4:

1) If the fall in the Chinese stock markets precipitated stock market declines in Asia, then the EU and finally the US; and,

2) If QE has been shown to be ineffective in Japan, Switzerland and the US; and,

3) If China is attempting to shore up its stock markets with QE; then

4) What are the chances that China’s government can prevent an even greater decline in China’s stock markets?

Not good.


5) If China started the current global stock market decline, and if China has no means to stop its own markets from declining further, then global markets may continue to fall with China’s.  If QE doesn’t work, what will support China’s markets and prevent global stock markets around the world from falling even further over the next weeks or months?




Until China’s economy and stock markets begin to rise, global stock markets may continue to fall.  Even if the Chinese economy and markets do begin to rise, the much-anticipated “correction” in the US stock markets could have gained so much momentum that US markets could continue to fall by 50%—maybe more.




Between August 19th and 21st, the DJIA fell over 1,000 points.  People were shocked.

But I was surprised because, so far as I know, no one in a position of power (like President Obama or Janet Yellen) took the podium to reassure Americans that everything was under control.  Why didn’t someone offer to kiss our boo-boos and tell us there was no need to cry?

More, during that 1,000-point fall, where was the Plunge Protection Team? Isn’t the PPT supposed to step in to stop the Dow from sudden declines?

For those who relish conspiracy theories, it’s almost as if the Powers want investors to panic and want a serious stock market crash.

Of course, that’s a crazy idea.  Why would gov-co want some sort of market crash?

Well, a large number of economic gurus have been warning for the past six weeks that, come September, “something big” was going to happen.  Whatever that “something big” might be remains to be seen.  But, some suspect that the government is about to declare some sort of extraordinary change in our financial or economic system.

For example, government might be about to announce a significant change in our currency.  Maybe they’re going to exchange our green dollars for new-and-improved pink dollars.

That’s an interesting possibility, but the Powers couldn’t just send President Obama to the podium to tell us to exchange our greenies for pinkies.  He’d need a pretext.  He’d have to have a reason that Americans all recognized and agreed was sufficient to justify a dramatic, systemic change.

So, I wonder.  If the market decline we saw last week is duplicated this next week and takes on really scary proportions, could it be that that decline is engineered and intended to serve as a pretext for something in the near future that’s even bigger, more dire and caused by government edict?


Tags: , , , , , ,

20 responses to “Failed QE Caused Market Falls?

  1. jody

    August 23, 2015 at 4:53 PM

    What a peculiar anomaly , the price of fuel oils declines while the prices of everything else on the shelves in the U.S. has steadily risen. Are the oil prices a smoke screen to deny the general public a clear vision of impending economic collapse ? Perhaps !

  2. palani

    August 23, 2015 at 5:48 PM

    The Federal Reserve expired in 2012. It was created 1913. Legal entities only survive for 99 years because law does not recognize perpetuitities except in the realm of trusts and religions. Since they no longer have existence (if they ever did) some change must be made to create another entity for the next 99 years.

  3. Oliver Medaris

    August 23, 2015 at 10:57 PM

    If they take my FRN’s I’ll cry. I love every iota of those Greenies. Not nearly so much as I like my Gold and Silver tender in payment of debt. May G-d control how much Gold we print.

    • Bart Shavitz

      August 24, 2015 at 12:35 AM

      @ I love every iota of those Greenies.
      You/I should! There are people who will exchange gold, Silver, etc. FOR those Greenies.

  4. Roger

    August 24, 2015 at 8:29 AM

    Some news outlets are blaming the recent fall in global stock markets mostly on China’s report of shrinking factory output and export demand – developments which tell of more slowdown ahead for the world economy. The yuan devaluation then panicked the markets because it’s an unusual move that confirms the more pessimistic interpretations of this economic data.

    A conspiracy theory I’m entertaining at the moment is that the recent drop in the Dow was also due to insiders cashing out ahead of a Federal Reserve decision to raise interest rates during its mid-September board meeting. The Fed has been telegraphing a rate hike for a while now, without saying when it would occur. This action during the current global recession would hit equity markets hard.

    • Henry

      August 27, 2015 at 5:31 PM

      All told, the DJIA lost about 2,000 points, or 7 percent, by the time it reached its low point on Monday.

      The DJIA has now recovered about 1,200 of those points.

      However markets in China, where the panic started, are still near their lows.

      • Roger

        August 27, 2015 at 6:13 PM

        Those 2,000 points were closer to 9 percent, but yeah.

        I’m interested to see how this China crisis affects the Fed’s interest rate decision on Sept 17th. Interestingly, the 10-year Treasury (TNX) has recovered even faster than the Dow and is already back up where it was before the crash.

  5. Bart Shavitz

    August 24, 2015 at 11:37 PM

    How many people caught this?
    May 28, 2014 … Obama March 26, 2014 Obama keynote speech in Brussels. … own affairs…
    individuals must surrender their rights to an all-powerful sovereign”

  6. dog-movr

    August 25, 2015 at 8:38 AM

    What has occurred in the last three trading days is just the opening act. Could the bull market that culminated in A.D. 1982 with falling interest rights be over. Just as falling rates are bullish for equities, rising rates are toxic to the underlying bullish trend. 3 month LIBOR rates and 3 month treasury rates are on a tear, thus indicating short rates sharply on the rise. LIBOR rates have been rising sharply since December A.D. 2014. It was noticeable, that the market as measured by the Dow Jones Industrial Average reached it’s ultimate top in May of A.D.2015. If ever a Wall Street maxim were true the “sell in May and go away” maxim was a clear and true . Now we will probably witness the averages going down the “slope of hope”, false hope, the worst kind. I say to myself, this is the big one, God help them who have faith and still believe in ‘this state” at this late hour. The Plunge Protection Team can only do so much. The degree of reverse leverage devices that have been created in the last 15 years in the form of ETF,s will intensify this bear market, this is a monster device that will cause much intensity in the sell off’s. The PPT can only erect speed bumps at this point and time . All we can ask at this point will the decline be orderly or will it get out of hand, I suspect the latter. The silver and gold market are surprisingly at very reasonable levels, this window is about to close. As the averages have dropped with intense speed, it’s very likely we will soon witness silver and gold moving up in rapid fashion.

    • Bart Shavitz

      August 25, 2015 at 10:13 PM

      @ , it’s very likely we will soon witness silver and gold moving up in rapid fashion.”
      More than likely it is very likely & SOONER THAN YOU THINK, SOME of us WILL WITNESS other things moving DOWN into the PITS of HELL in an EVEN MORE RAPID FASHION !!!!!

  7. dog-move

    August 26, 2015 at 12:40 PM

    The enemies of mankind fail to realize in the creating of their evil devices that THEY must submit themselveves to the Sovereign God of the universe,sooner than they think. For the Lord is shortening the Day’s as promised, thus confounding these fools (Matt 24;22) . The One who sits in the heavens laughs at them, they are fools! Psalms 2:4.

  8. Bart Shavitz

    August 26, 2015 at 8:25 PM

    @ The enemies of mankind fail to realize in the creating of their evil devices that THEY must submit themselveves to the Sovereign God of the universe,……………………………………….”

    I do not believe Obama meant THAT Sovereign “small minded” people MUST surrender their rights to. I’m presuming you watched the 1 minute video. Also, it’s sometimes impossible, at least for me, to know if other people are submitting scriptures for mocking purposes or because he/she believes it is true. I am presuming you inserted Psalm 2:4 because you believe what it says. I DO!

  9. Bart Shavitz

    August 27, 2015 at 2:39 AM

    This IS a very “thought provoking” 18 minute video.
    Global Market Meltdown – Shemitah Comes Early – Jeff Berwick on …
    1 day ago … Jeff Berwick is interviewed by Kerry Lutz for the Financial Survival Network
    Podcast, topics include: the recent market crash and the Shemitah …

  10. dog-move

    August 28, 2015 at 4:57 AM

    Bart, I never mock the Most High, I present scriptures in truth, never to intend evil purposes.
    The 7 year cycle is interesting, the 7×6=42 cycle is quite interesting as well;
    Years of monetary panics–1764+42=1806+42=1848+42=1890+42=1932+42=1974+42=”2016″
    To add powerful headwinds to the 7 year cycle add the proven 42 year cycle to the mixture and we/they may experience something very nasty.
    The centuries of power and control by western bankers is not going to have a happy ending. All power is moving East, as in China.

  11. gloria

    August 28, 2015 at 8:56 PM
    here is the real deal of why and how ,we experience in the present day.

  12. dog-move

    August 29, 2015 at 10:18 AM

    going the way of the Hungarian Pengo?
    Hungarian pengő

    From Wikipedia, the free encyclopedia

    Jump to: navigation, search

    Hungarian pengő

    pengő (Hungarian)

    Pengö (German)
    pengő (Slovak)
    pengov (Croatian)
    пенгов (Serbian)
    pengő (Romanian)
    пенгыв (Rusyn)

    HUP 100MB 1946 obverse.jpg
    100 million b.‑pengő (1946)

    Central bank
    Hungarian National Bank


    Hungary Kingdom of Hungary
    Hungary Republic of Hungary







    (all withdrawn)

    10 000, 100 000, 1 million, 10 million, 100 million, 1000 million milpengő;
    10 000, 100 000, 1 million, 10 million, 100 million, 1 billion b.‑pengő

    Hungarian Banknote Printing Corp.


    Hungarian Mint Ltd.


    This infobox shows the latest status before this currency was rendered obsolete.

    The pengő (Hungarian pronunciation: [ˈpɛŋɡøː], sometimes written as pengo or pengoe in English) was the currency of Hungary between 1 January 1927, when it replaced the korona, and 31 July 1946, when it was replaced by the forint. The pengő was subdivided into 100 fillér. Although the introduction of the pengő was part of a post-World War I stabilisation program, the currency survived for only 20 years and experienced the most serious hyperinflation ever recorded.

    Contents [hide]
    1 Name
    2 History 2.1 Introduction of the pengő
    2.2 After the Great Depression
    2.3 World War II
    2.4 Hyperinflation
    2.5 Adópengő
    2.6 End of the pengő

    3 Coins
    4 Paper money
    5 Historical exchange rates
    6 See also
    7 References
    8 Further reading
    9 External links


    The Hungarian participle pengő means ‘ringing’ (which in turn derives from the verb peng, an onomatopoeic word equivalent to English ‘ring’) and was used from the 15–17th century to refer to silver coins making a ringing sound when struck on a hard surface, thus indicating their precious metal content. (The onomatopoeic word used for gold coins is csengő, an equivalent of English ‘clinking’ meaning a sharper sound; the participle used for copper coins is kongó meaning a deep pealing sound.) After the introduction of forint paper money in Hungary, the term pengő forint was used to refer to forint coins literally meaning ‘ringing forint’, figuratively meaning ‘silver forint’ or ‘hard currency’.[1]

    At the beginning of the First World War precious metal coins were recalled from circulation, and in the early 1920s all coins disappeared because of the heavy inflation of the Hungarian korona. The name pengő was probably chosen to suggest stability. However, there was some controversy when choosing the name of the new currency, though the majority agreed that a Hungarian name should be chosen. Proposals included turul (a bird from Hungarian mythology), turán (from the geographical name and ideological term Turan), libertás (the colloquial name of the poltura coins issued by Francis II Rákóczi), and máriás (the colloquial name of coins depicting Mary, patroness of Hungary).

    The denomination of the banknotes was indicated in the languages of ethnicities living in the territory of Hungary. The name of the currency was translated as follows: Pengö (pl. Pengö) in German, pengő (pl. pengi) in Slovak, пенгов (pl. пенгова) in Cyrillic script Serbo-Croatian, пенгыв (pl. пенгывов, later пенге) in Rusyn, and pengő (pl. pengei, later penghei) in Romanian. Later pengov (pl. pengova), the Latin script Serbo-Croatian version was also added.

    The symbol of the pengő was P and it was divided into 100 fillér (symbol: f).


    Introduction of the pengő[edit]

    After the First World War, according to the Treaty of Saint-Germain, the Austro-Hungarian Bank (the joint bank of the Monarchy) had to be liquidated and the Austro-Hungarian krone had to be replaced with a different currency, which in the case of Hungary was the Hungarian korona. This currency suffered a high rate of inflation during the early 1920s. A stabilisation program covered by League of Nations loan helped to bring down inflation, and the korona could be replaced in 1 January 1927 by a new currency, the pengő, which was introduced by Act XXXV of 1925[2] It was valued at 12,500 korona, and defined as 3,800 to one kilogram of fine gold – which meant that the pengő was pegged to the gold standard, however, without exchange obligation. In the beginning the cover ratio (which included gold and – to 50% – foreign exchange) was fixed at 20% which had to be raised to 33.3% within five years.[3] This goal was reached quickly: the cover ratio was 51% in 31 July 1930. Later it decreased somewhat due to the economic and financial crisis caused by the Great Depression. Until then the pengő was the most stable currency of the region.

    After the Great Depression[edit]

    The effects of the Great Depression reached Hungary after 1930 and it hit predominantly agriculture. The pengő had to be devalued and the debt of the country increased. After a short period of recovery, the war preparations – amongst which the most important was the Győr-program – had loosened the financial and monetary discipline which in turn led to the depreciation of the pengő currency. The territories given back to Hungary by the Vienna Awards in 1938 and 1940 were economically less developed, which was an additional aggravating factor regarding the economic situation of the country.[citation needed]

    World War II[edit]

    [icon] This section requires expansion with: citations from books, etc. (September 2013)

    The war caused enormous costs and, later, even higher losses to the relatively small and open Hungarian economy. The national bank was practically under government control, the issue of money was proportional to the budget demands. By this time, silver coins disappeared from circulation, and, later, even bronze and cupro-nickel coins were replaced by coins made of cheaper metal. In the last act of the world war, the Szálasi government took control of banknote printing and issued notes without any cover, first in Budapest, then in Veszprém when Budapest had to be evacuated. The occupying Soviet army issued its own military money according to the Hague Conventions.


    Sweeping inflation banknotes after the introduction of the forint (August 1946).
    [icon] This section requires expansion with: citations from books, etc. (April 2011)

    The pengő lost value after World War II, suffering the highest rate of hyperinflation ever recorded. There were several attempts to break down inflation, such as a 75% capital levy in December 1945. However, this did not stop the hyperinflation and prices continued spiraling out of control, with ever higher denominations introduced. The denominations milpengő (1,000,000 pengő) and b.-pengő (pronunciation: bilpengő) (1,000,000 milpengő, 1,000,000,000,000 pengő or one billion pengő (long scale)) were used to alleviate calculations, cut down the number of zeros and enable the reuse of banknote designs with only the colour and denomination name changed.


    Main article: Hungarian adópengő

    The adópengő (lit. “tax pengő”) was introduced on 1 January 1946 as an accounting unit for budget planning. However, from 8 July 1946, it was allowed to be used as legal tender. It was intended to retain its value as the pengő’s fell. However, although its value rose dramatically relative to the pengő (finally reaching 2×1021 pengő), the adópengő nevertheless suffered severely from inflation. By July 1946, the adópengő became the only circulating currency as the pengő’s value had fallen to such an extent that even the 100 million b.-pengő note was effectively worthless.

    End of the pengő[edit]

    The Hungarian economy could only be stabilized by the introduction of a new currency, and therefore, on 1 August 1946, the forint was reintroduced at a rate of 400 000 000 000 000 000 000 000 000 000 (400 octillion) = 4×1029 pengő, dropping 29 zeros from the old currency. In effect, the total amount of circulating pengő notes had a value of less than 0.1 fillér (0.001 forint). A more realistic comparison was the exchange rate with the adópengő, which was set at 200 000 000 = 2×108 (hence the 2×1021 ratio, mentioned above).[4] The exchange rate for the gold was set at 13.21 forint per gram.


    Main article: Coins of the Hungarian pengő

    2 pengő, 1936
    In 1926, 1, 2, 10, 20 and 50 fillér and 1 pengő coins were introduced. The 1 and 2 fillér pieces were bronze, the 10, 20 and 50 fillér were cupro-nickel and the 1 pengő coins were 64% silver. In 1929, 2 pengő coins were introduced, also in 64% silver. Commemorative 2 and 5 pengő coins were also issued on anniversaries, with a non-commemorative 5 pengő coin issued in 1939.

    During the Second World War, the 1 fillér ceased production, the 2 fillér coins were issued in steel and then zinc, the 10 and 20 fillér coins were minted in steel and the 1, 2 and 5 pengő pieces were of aluminium.

    In 1945, the provisional government issued aluminium 5 pengő coins which were the last coins issued before the hyperinflation.

    Paper money[edit]

    Main article: Paper money of the Hungarian pengő

    10 pengő, 1926
    The Hungarian National Bank issued the first series of 5, 10, 20, 50, 100 pengő banknotes in the last days of 1926. These were offset prints on watermarked paper (except for the 5 pengő note). The banknotes featured the outstanding people of the Hungarian history on the obverse and either different sites of Budapest or paintings on the reverse: the banknotes also served education purposes.

    10 pengő, 1929
    A new series of banknotes had to be printed soon to meet higher security standards. The engravings were executed and designed by Endre Horváth, Hungarian graphic artist. New 5, 10, 20, 50 and 100 pengő notes were printed and even a 1000 pengő banknote was added to this series – however, the latter had such a high value that a big proportion of the people hardly ever saw any. This new series had almost the same topic as the previous. On the other hand, the 5 pengő notes were soon replaced with silver coins.

    10 pengő, 1936
    After the Vienna Award, Hungary had to supply its recovered territories with money. Since increasing the amount of silver coins would have been too expensive, 1 and 5 pengő notes were issued in 1941 and 1938, respectively. These notes were of simple design and poor quality. Meanwhile, a series of new banknotes including 2, 5, 10 and 20 pengő denominations was issued. The design represented ornaments based on Hungarian folk art and people.

    At the end of the Second World War, the Szálasi government and the occupying Soviet army issued provisional notes in the territories under their power without any cover.

    10 million milpengő, 1946
    In 1945 and 1946, hyperinflation caused the issuance of notes up to 100 million b.-pengő (100 quintillion or 1020 pengő). During the hyperinflation, note designs were reused, changing the colour and replacing the word pengő with first milpengő, then b.-pengő, to generate higher denominations. The largest denomination produced was 100 million b.-pengő (100 quintillion or 1020 pengő). The note was initially worth about US$ 0.20. Notes of one milliard b.-pengő (one sextillion or 1021 pengő) were printed but never issued.

    10 million adópengő, 1946
    The introduction of adópengő was an attempt to keep inflation amongst limits, however, it could only slow down somewhat but did not stop the depreciation of the currency. Bonds were issued by the Ministry of Finance in denominations between 10 000 and 100 000 000 adópengő. These simple design notes on low-quality paper became legal currency in the last months of the Hyperinflation almost completely replacing pengő.

    The enormous amount of paper consumed during the production of the inflation pengő notes caused a shortage of good quality security paper; this hindered the production of forint banknotes.

    Historical exchange rates[edit]

    Exchange rates (1 USD = X pengő)



    1 January 1927 5.26
    31 December 1937 5.40
    31 Mar 1941 5.06
    30 June 1944 33.51
    31 August 1945 1320
    31 October 1945 8200
    30 November 1945 108000
    31 December 1945 128000
    31 January 1946 795000
    31 March 1946 1750000
    30 April 1946 59000000000
    31 May 1946 42000000000000000
    31 July 1946 460000000000000000000000000000

    Exchange rates (1 adópengő = X pengő)



    1 January 1946 1
    1 February 1946 1.7
    1 March 1946 10
    1 April 1946 44
    1 May 1946 630
    1 June 1946 160000
    1 July 1946 7500000000
    31 July 1946 2000000000000000000000

  13. Peg-Powers

    August 29, 2015 at 10:48 AM

    THANK YOU, Gloria, for bringing up this Kaminski video. This video should be sent to every man and woman in this nation.

    After retiring in 1995 I personally set out on a difficult 15-year quest of reading every old HISTORY book (hundreds) and older encyclopedias—–and BINGO—–this video gives a perfect summary of what facts and truth I discovered. Actually, it all boils down to this generally accepted truth: FOLLOW THE MONEY (money, power, control).

    The Good Book warns of a “DEVILISH EVIL SOMETHING” in this world, yet my church and Christian college had never taught me just what that was or how to identify it, so that I might steer clear and keep myself untainted.

  14. ralphfucetolajd

    September 3, 2015 at 11:52 AM

    “In Williamson’s view, the Taylor rule dictates the level of interest rates in regard to economic conditions…” – this is the essential error of the central bankers, believing that there is some “rule” — other than supply and demand — that “determines” the “proper” interest rate.

    It is an argument for the socialization of the media of exchange. On a free market there is no socialized fiat currency. Thus the solution is for governments and their banking cartels to get out of the money business and let the market provide the media of exchange.

    For over a thousand years, since Thomas Aquinas, we’ve understood that the “just” price is the market price.

    Central bankers forgot that.

    Solution? Americans need to do what we did twice before in our history: ABOLISH the central bank. Let the market do what it does best, provide goods and services, including the media of exchange. And the rest of the world should do the same.

    Any other “solution” will lead to hyperinflation, famine and war…

  15. Bart Shavitz

    September 3, 2015 at 7:40 PM

    Greg Hunter interviews Jeff Berwick.
    Jeff Berwick-Nothing but Black Swans Ahead – YouTube
    1 day ago … On gold, financial expert Jeff Berwick thinks, “Just in the last few weeks, I have
    noticed a change. When the markets have been crashing, gold …


Leave a Reply

Fill in your details below or click an icon to log in: Logo

You are commenting using your account. Log Out /  Change )

Google+ photo

You are commenting using your Google+ account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )


Connecting to %s