The pengő (sometimes spelled as pengo or pengoe in English) was the currency of Hungary between 1 January 1927<!-- do not modify this date, since this is the date of introduction included in the Act XXXV of 1925 -->, 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 was rendered worthless by the most extreme hyperinflation ever recorded.

Name

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 15th to the 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 paper money of the Austro-Hungarian gulden () in Hungary, the term pengő forint was used to refer to forint coins literally meaning 'ringing forint', figuratively meaning 'silver forint' or 'hard currency'.

At the beginning of the First World War, precious metal coins were recalled from circulation. 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 (plural| Pengö) in German, pengő ( pengi) in Slovak, пенгов ( пенгова) in Cyrillic script Serbo-Croatian, пенгыв ( пенгывов, later пенге) in Rusyn, and pengő ( pengei, later penghei) in Romanian. Later pengov ( pengova), the Latin script Serbo-Croatian version was also added.

The symbol of the pengő was a capital P placed after the numerals and it was divided into 100 fillér (symbol: f.).

History

Introduction of the pengő

After the First World War, according to article 206 of the Treaty of Saint-Germain, the Austro-Hungarian Bank 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 a League of Nations loan helped bring down inflation, and the korona was replaced on 1 January 1927 by a new currency, the pengő, which was introduced by Act XXXV of 1925. It was valued at 12,500 korona, and defined as 3,800 to one kilogram of fine gold &ndash; which meant that the pengő was pegged to the gold standard, but was not convertible to gold. In the beginning the cover ratio (which included gold and &ndash; up to 50% &ndash; foreign exchange) was fixed at 20%, but this had to be raised to 33.3% within five years. This goal was reached quickly: the cover ratio was 51% on 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.

World War II

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, and the issue of money was proportional to budgetary 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 one of the last acts of World War II, 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.

As a result of the war, the Hungarian economy was destroyed and the government faced large reparation requirements coupled with low revenue. Thus, the Hungarian government chose to use inflation to its advantage in order to restore production and the economy as well as essentially a form of tax to generate revenue.

Hyperinflation

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The pengő lost value dramatically after World War II, suffering the highest rate of hyperinflation ever recorded in human history. This far exceeded the hyperinflation that affected the German mark in 1923. The denominations milpengő (one million pengő) and bilpengő (short: b.-pengő, one trillion ()&nbsp;P) were used to simplify calculations, cut down the number of zeros and enable the reuse of banknote designs with only the colour and denomination name changed.

The hyperinflation was so out of control that at one stage it took about 15 hours for prices to double The value of the adópengő in terms of regular pengős started at par, but the rate declined to 630&nbsp;pengős by 1 May 1946, and then two sextillion pengős ( = 1,000 billion billion) by 31 July the same year.

On 29 May 1946, Ferenc Gordon (then Minister of Finance) started issuing adópengő tax bills,

End of the pengő

On 11 July 1946, the Hungarian National Bank released the last pengő banknotes, for 100 million B-pengős ( = 100 quintillion); the Bank also printed banknotes for one billion B-pengős ( = one sextillion), but they never entered circulation. The last adópengő banknote, for &nbsp;adópengős, followed on 25 July, and was equal to 200 octillion pengős ( = 200 billion billion billion) on 31 July.

Ultimately, only a new currency could stabilize the country's financial situation. On 1 August 1946, Hungary reintroduced the forint at a ratio of 400 octillion pengős to 1 ( = 400 billion billion billion), dropping 29 zeroes from the old currency, or &nbsp;adópengős to 1. By contrast, the largest tax bill in circulation (&nbsp;adópengős) was worth 50 fillérs each, and remained in circulation for a short time after the reform.

thumb|left|150px|10 million mil.-P, 1946

In 1945 and 1946, hyperinflation caused the issuance of notes up to 100 million b.-P (100 quintillion or 10<sup>20</sup>&nbsp;P). During the period of hyperinflation, note designs were reused, changing the colour and replacing the word pengő first with milpengő, then b.-pengő, to generate higher denominations. The largest denomination produced was 100 million b.-P (100 quintillion or 10<sup>20</sup>&nbsp;P). The note was initially worth about US$0.20. Notes of one milliard b.-P (one sextillion or 10<sup>21</sup>&nbsp;P) were printed but never issued.

thumb|right|150px|10 million adópengő, 1946

The introduction of adópengő was an attempt to limit inflation. It slowed inflation somewhat, but did not stop the depreciation of the currency. Bonds were issued by the Ministry of Finance in denominations between and adópengő. These simple design notes on low-quality paper became legal currency in the last months of the hyperinflation, almost completely replacing the pengő.

The enormous amount of paper consumed during the production of adópengő notes caused a shortage of good quality security paper, which hindered the production of forint banknotes.

Historical exchange rates

{| class="wikitable"

|+Exchange rates (US$1 in pengő)

!Date!!Pengő

|-

|align="right"| 1 January 1927 ||align="right"|5&nbsp;P. 26&nbsp;f.

|-

|align="right"| 31 December 1937 ||align="right"|5&nbsp;P. 40&nbsp;f.

|-

|align="right"| 31 March 1941 ||align="right"|5&nbsp;P. 06&nbsp;f.

|-

|align="right"| 30 June 1944 ||align="right"|33&nbsp;P. 51&nbsp;f.

|-

|align="right"| 31 August 1945 ||align="right"|&nbsp;P

|-

|align="right"| 31 October 1945 ||align="right"|&nbsp;P

|-

|align="right"| 30 November 1945 ||align="right"|&nbsp;P

|-

|align="right"| 31 December 1945 ||align="right"|&nbsp;P

|-

|align="right"| 31 January 1946 ||align="right"|&nbsp;P

|-

|align="right"| 31 March 1946 ||align="right"|&nbsp;P

|-

|align="right"| 30 April 1946 ||align="right"|&nbsp;P<br />(&nbsp;P)

|-

|align="right"| 31 May 1946 ||align="right"|&nbsp;P<br />(&nbsp;P)

|-

|align="right"| 10 July 1946 ||align="right"|&nbsp;P<br />(&nbsp;P)

|}

{| class="wikitable"

|+Black market exchange rates (US$1 in pengő)

!Date !! Pengő !! Scientific notation !! Spelled out

|-

|align="right"|1 July 1945 ||align="right"|&nbsp;P ||align="right"|1.32×10<sup>3</sup>||align="right"|

|-

|align="right"|August 1945 ||align="right"|&nbsp;P ||align="right"|1.51×10<sup>3</sup>||align="right"|

|-

|align="right"|1 September 1945 ||align="right"|&nbsp;P ||align="right"|5.4×10<sup>3</sup>||align="right"|

|-

|align="right"|October 1945 ||align="right"|&nbsp;P ||align="right"|2.35×10<sup>4</sup>||align="right"|

|-

|align="right"|1 November 1945 ||align="right"|&nbsp;P ||align="right"|1.08×10<sup>5</sup>||align="right"|

|-

|align="right"|December 1945 ||align="right"|&nbsp;P ||align="right"|2.9×10<sup>5</sup>||align="right"|

|-

|align="right"|January 1946 ||align="right"|&nbsp;P ||align="right"|7.95×10<sup>5</sup>||align="right"|

|-

|align="right"|February 1946 ||align="right"|&nbsp;P ||align="right"|2.85×10<sup>6</sup>||align="right"|

|-

|align="right"|March 1946 ||align="right"|&nbsp;P ||align="right"|1.775×10<sup>7</sup>||

|-

|align="right"|April 1946 ||align="right"|&nbsp;P ||align="right"|2.32×10<sup>8</sup>||align="right"| 232 million

|-

|align="right"|May 1946 ||align="right"|&nbsp;P ||align="right"|5.9×10<sup>10</sup>||align="right"| 59 billion

|-

|align="right"|First two weeks of June 1946 ||align="right"|&nbsp;P ||align="right"|7.6×10<sup>12</sup>||align="right"| 7.6 trillion

|-

|align="right"|Second two weeks of June 1946 ||align="right"|&nbsp;P ||align="right"|4.2×10<sup>16</sup>||align="right"| 42 quadrillion

|-

|align="right"|First two weeks of July 1946 ||align="right"|&nbsp;P ||align="right"|2.2×10<sup>19</sup>||align="right"|22 quintillion

|-

|align="right"|Second week of July 1946 ||align="right"|&nbsp;P ||align="right"|4.815×10<sup>23</sup>||align="right"|481.5 sextillion

|-

|align="right"|Third week of July 1946 ||align="right"|&nbsp;P ||align="right"|5.8×10<sup>24</sup>||align="right"|5.8 septillion

|-

|align="right"|Fourth week of July 1946 ||align="right"|&nbsp;P ||align="right"|4.6×10<sup>30</sup>||align="right"|4.6 nonillion

|}

{| class="wikitable"

|+Exchange rates (1 adópengő in pengő)

!Date!!Pengő

|-

|align="right"| 1 January 1946||align="right"|1&nbsp;P

|-

|align="right"| 1 February 1946 ||align="right"|1&nbsp;P. 70&nbsp;f.

|-

|align="right"| 1 March 1946 ||align="right"|10&nbsp;P

|-

|align="right"| 1 April 1946 ||align="right"|44&nbsp;P

|-

|align="right"| 1 May 1946 ||align="right"|630&nbsp;P

|-

|align="right"| 1 June 1946 ||align="right"|&nbsp;P

|-

|align="right"| 1 July 1946 ||align="right"|&nbsp;P<br />(&nbsp;P)

|-

|align="right"| 10 July 1946 ||align="right"|&nbsp;P<br />(&nbsp;P)

|}

Notes

See also

  • Zimbabwean dollar
  • Brazilian cruzado
  • Venezuelan bolívar
  • Hungarian National Bank
  • Hyperinflation
  • Great Depression
  • Names of large numbers
  • Long and short scales

References

Further reading

  • bankjegy.szabadsagharcos.org (Hungarian banknote catalog)
  • www.numismatics.hu (Roman and Hungarian related numismatic site)
  • papirpenz.hu (pictures of korona, pengő and forint banknotes)
  • www.eremgyujtok.hu (homepage of the Hungarian Coin Collectors' Society)
  • [http://index.hu/tech/tortenelem/png061230/] article on the history of the pengő