1922: An Unusual Scheme

1922 Greek Banknote

In 1922, the Greek government concocted an unusual scheme for dealing with a large deficit in the country’s budget.  Largely caused by the expense of WWI, the deficit had soared exponentially, and the government could neither tax nor borrow itself out of the situation. Thus, on March 25, 1922, the government decreed that all citizens were to physically cut all banknotes in half. One half of each banknote would be kept by the owner and would be worth half the value of the original. The other half was to be surrendered to the governmentand the owner would receive in exchange a 20-year loan at 6.5 percent interest.

The plan may have worked. After peaking at 85% in 1923, inflation steadily declined until the end of the decade.

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