What is Hyperinflation?
First I’d have to understand inflation. You’d think that it would be simple to understand inflation. After all I do shop for my own food. My 40-50 dollars is not buying what it used to buy. I actually started a garden this year to reduce my food costs but I still spend 40-50 dollars. Price inflation has clearly occurred in agriculture and its related food industries. In the past an increase in the money supply was considered inflationary but economists have demonstrated that inflation is really the increase in prices over time. Inflation is thus the reduction of the real value of money. The methods of determining the change of prices over time are varied. The Consumer Price Index (CPI) is the preferred inflation indicator through out most of the world. The US uses Core Inflation which is further refined to the Personal consumption expenditures price index (PCE). The PCE rises less than the CPI over time. Essentially the US inflation rate is artificially lower than global norm because t
In economics, hyperinflation is a term referring to inflationary action that is considered to be out of control, or increasing at a rate much greater than it normally would. The term is somewhat subjective in that there is no firm rule for determining when a situation goes from being inflation to hyperinflation. Thus, declaring hyperinflation is often the job of financial analysts and political pundits. While there are still some questions about when a situation becomes hyperinflationary, a number of suggestions have been made. No matter what definition is used, most economists agree hyperinflation exists when there is at least a 100 percent rate of inflation in the timespan of just a few years. No matter what it is called, inflation anywhere close to this level often results in a substantial hardship for the population. Hyperinflation takes place because a country’s currency loses its value rapidly, causing prices to rise in response. Most countries have experienced a period of hyperi
Hyperinflation is when the rate of inflation is 40%+ per year. One of its most important characteristics is a breakdown in commerce; i.e. a return to barter, and a reluctance to take on financial assets. What causes hyperinflation? Hyperinflation is an economic AND political phenomenon. It is also characterized by both expansion of the money supply as well as a collapse in demand. If it does happen, when will it occur? Herein lies the key question, and one that is not easily answered, as psychology plays a critical factor. Amongst those who consider it likely, expectations range from 2010 to over a decade away. What to Watch For Over the Long-Term Recall our previous post on the five indicators of US dollar stability; they are still worth watching. Here is an update on some things to watch for in our current environment: 1. Credit Default Swaps. This can be thought of as an insurance policy on an underlying asset. If credit default swaps for the US sovereign debt is rising in price, it
