Chinese gold yuan collapses
The Nationalist Chinese government introduced the gold yuan in August 1948, attempting to stop runaway inflation of the existing fabi currency. The new note was promised to be backed by gold and foreign exchange reserves, and all Chinese citizens were ordered to exchange their gold, silver, and foreign currency holdings for the new yuan. Within eight months, the gold yuan had lost 99 percent of its value and people were back to using silver dollars and barter. The collapse of confidence in Nationalist money contributed directly to the final Nationalist defeat and the Communist victory in October 1949 — the People's Liberation Army entered cities where merchants had already stopped accepting Nationalist currency.
The gold yuan collapse is a rare case where a currency failure was a direct proximate cause of a regime change. Urban Chinese had been forced to surrender real assets in exchange for paper that was worthless within months — that experience durably turned the merchant class against the Nationalists. Mao's subsequent introduction of the renminbi in 1949 was careful not to require conversion of existing holdings.
05 · Hyperinflation Century
With gold constraints effectively removed after World War I, the 20th century produced the most spectacular currency collapses in recorded history. Weimar Germany, Hungary, Greece, China, Yugoslavia, and dozens of lesser-known cases all reached true hyperinflation — monthly inflation above 50 percent, continuing for months or years. The Hungarian pengő collapse of 1946 remains the worst on record, with prices doubling every 15 hours at its peak. The era ended with Nixon's closure of the gold window in August 1971, which made every major currency in the world fully fiat for the first time in history.
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