Hungarian pengő
The pengő 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 case of hyperinflation ever recorded.
Name
The Hungarian participle pengő means 'ringing' 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. 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'.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, turán, libertás, and máriás.
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 in German, pengő in Slovak, пенгов in Cyrillic script Serbo-Croatian, пенгыв in Rusyn, and pengő in Romanian. Later pengov, the Latin script Serbo-Croatian version was also added.
The symbol of the pengő was P and it was divided into 100 fillér.
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 League of Nations loan helped bring down inflation, and the korona could be 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 - which meant that the pengő was pegged to the gold standard, however, without exchange obligation. In the beginning the cover ratio was fixed at 20% which 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.After the Great Depression
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 First and Second Vienna Awards in 1938 and 1940 were economically less developed, which was an additional aggravating factor regarding the economic situation of the country.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 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.Hyperinflation
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 and b.-pengő 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.Adópengő
The adópengő 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, 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
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 = 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. A more realistic comparison was the exchange rate with the adópengő, which was set at . The exchange rate for gold was set at 13.21 forint per gram.Coins
In 1926, coins of 1, 2, 10, 20 and 50 fillér and 1 pengő 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
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. The banknotes featured the outstanding people of Hungarian history on the obverse and either different sites of Budapest or paintings on the reverse: the banknotes also served educational purposes.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.
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.
In 1945 and 1946, hyperinflation caused the issuance of notes up to 100 million b.-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. The note was initially worth about US$0.20. Notes of one milliard b.-pengő were printed but never issued.
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 the inflation pengő notes caused a shortage of good quality security paper; this hindered the production of forint banknotes.
Historical exchange rates
| Date | 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 | |
| 1 July 1946 | |
| 10 July 1946 |