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As a relatively brief background on one example of inflation, I present the Hungarian superhyperinflation of post-WWII. As seen in this paper, the general idea is that Hungary after the war had severe obligations that it needed to meet-namely, reparations to the Soviets for WWII damages and costs to pay for the occupying Soviet army. However, due to the tumultuous post-war situation, any actual means of increasing state revenues-for instance, by increasing taxes-would be difficult to implement at best. Thus, the government turned to inflation.

Inflation is both an economic phenomenon and a tool that can be used by anybody that controls the money supply. Essentially, while its most common implementation today is to increase liquidity in the capital markets (meaning that people who want to borrow money can get it from the banks), in post war days it was used as a means of meeting financial obligations. While theoretically, when people print money, the cost of goods rises, in practice there is a time lag between the printing of the money and the rise of costs, known as "sticky prices." The government could thus print money and use the excess paper to buy goods to meet its obligations, then as prices rise they print more money to do so, and repeating ad nauseum.

In the case of the Hungarians, they did so for two reasons. The first was to buy the goods and pay the Soviets accordingly, but the second-and the argument that the paper above makes-is that it was done to reinvigorate the economy. This may seem very strange, but it makes sense in a twisted sort of way. In a wartime scenario, people are likely hiding their wealth under their beds or overseas. To spur economic growth, you need to get people to either spend or invest that money. By having the specter of inflation, which devalues money that is sitting around uninvested or unspent, you encourage people to spend or invest that money now, and in doing so they pump money back into the economy. The argument thus made in the paper (which should be noted as being at least somewhat biased as at least one of the authors may be trying to cover for what might be taken as his bone-headed economic decision) is that by causing people to spend this money lying around through inflation, they were able to restart the Hungarian economy and eventually return to a more stable economic status.