Italian inflation between 1872 and 2002

Letters of Note is an interesting and often amusing website which posts various, well, letters of note. They might be from a fan to a director, or from a musician to his producer, or from the FBI (anonymously) to Martin Luther King. They usually aren’t very relevant to what this blog is about, but this recent one caught my eye.

It was from a man who saw Verdi’s Aida twice and thought it was so bad he asked Verdi for his money back. Verdi sent the letter to his publisher with a request to pay the man. Verdi and his publisher thought the whole thing was funny. I don’t dispute this, but look at those prices:

Railroad, going: 2.60
Railroad, returning: 3.30
Theatre: 8.00
Disgustingly bad dinner: 2.00

Twice: 15.90

Total: 31.80

This is all in lire. When Italy adopted the euro the exchange rate was 1,936.27 ₤ to 1 €. That’s some inflation!

Wikipedia says:

World War I broke the Latin Monetary Union and resulted in prices rising severalfold in Italy. Inflation was curbed somewhat by Mussolini, who, on August 18, 1926, declared that the exchange rate between lira and pound would be £1 = 90 lire—the so-called Quota 90, although the free exchange rate had been closer to 140-150 lire per pound, causing a temporary deflation and widespread problems in the real economy. In 1927, the lira was pegged to the U.S. dollar at a rate of 1 dollar = 19 lire. This rate lasted until 1934, with a separate “tourist” rate of US$1 = 24.89 lire being established in 1936. In 1939, the “official” rate was 19.8 lire.

After the Allied invasion of Italy, an exchange rate was set at US$1 = 120 lire (1 British pound = 480 lire) in June 1943, reduced to 100 lire the following month. In German occupied areas, the exchange rate was set at 1 Reichsmark = 10 lire. After the war, the value of the lira fluctuated, before Italy set a peg of US$1 = 575 lire within the Bretton Woods System in November 1947. Following the devaluation of the pound, Italy devalued to US$1 = 625 lire on 21 September 1949. This rate was maintained until the end of the Bretton Woods System in the early 1970s. Several episodes of high inflation followed until the lira was replaced by the euro.


Author: rfmcelroyiii

Student and instructor of economics.

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 )

Twitter picture

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

Facebook photo

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

Google+ photo

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

Connecting to %s