{"id":34383,"date":"2015-06-16T15:41:10","date_gmt":"2015-06-16T15:41:10","guid":{"rendered":"http:\/\/vskills.in\/certification\/blog\/?p=34383"},"modified":"2024-04-03T13:18:13","modified_gmt":"2024-04-03T07:48:13","slug":"paper-weapon","status":"publish","type":"post","link":"https:\/\/www.vskills.in\/certification\/blog\/paper-weapon\/","title":{"rendered":"PAPER WEAPON"},"content":{"rendered":"

\"PAPER<\/a><\/p>\n

The World War II was marked for the use of exceptional and highly destructive weapons in the history. But the Nazis had plans for one more weapon which would have ruined the British economy. Germans ran a secret operation known by a codename \u2018Operation Bernhard\u2019<\/strong> which aimed at forging British Pound notes of different denominations and flooding the British economy with the fake notes. They forged around \u00a3134 million worth of notes. The plan was to destabilize the British economy by dropping forged notes from the aircraft. But the idea was dropped later due to inadequate resources.<\/p>\n

In 1939 the British intelligence got wind of the secret plan. The Nazis placed some 100 agents who were ready to put the money in circulation in the United Kingdom. Nazis used the forged currency to finance its overseas operations and that\u2019s how they put it into circulation. Because the British were aware of the plan, Nazis didn\u2019t succeed in ruining the economy. Meanwhile, the British also had similar plans. But what would have happened if the plans were fully implemented? How is an economy affected by increase in currency notes?<\/p>\n

The answer can be explained by \u2018The Quantity theory of Money\u2019<\/strong>. Quantity theory of money states that changes in the money supply leads to a proportionate change in the price level. In simple words, Quantity theory implies price level is affected by changes in the money supply. Inflation is the percentage change in the price level. Therefore, growth in the money supply or the quantity of money determines the rate of inflation. If money supply increases rapidly then the price level also increases rapidly thus triggering inflation. That is why Milton Friedman said- \u201cInflation is always and everywhere a monetary phenomenon\u201d. If the Nazis would have succeeded in increasing the supply of pounds, it would have resulted in Hyperinflation in UK.<\/p>\n

The major effects of high inflation are:<\/p>\n