Hyperinflation refers to an economical situation where the price increases are uncontrollable. When the inflation rate is extremely rapid, it is a sign that hyperinflation is coming. It is a devastating phenomenon that affects the world economy. It destroys the value of cash and bonds. It can be recalled that the hyperinflation in 1923 occurred in Germany. It has been reported that the price level of goods increased by a factor of 20 billion, and that it doubled every 28 hours.
Hyperinflation in the USA happened in 1861 to 1865, affecting the Confederate States of America, where the dollar depreciated to zero after the Civil War. After the First World War, the hyperinflation in Germany was one of the most studied phenomena in the world. The ratio for trade between the mark and the dollar was at 9:1 in the early 1920s. And in July 1821, the ratio rose to a staggering 77:1 and an extremely high ratio of 192:1 in January 1922. Similar to what happened in Germany the United States is also suffering the same fate. Inefficient money management can be one cause of this situation in the economy. It greatly affects world oil prices and market commodities throughout the world.
Hyperinflation is coming, and if we are not prepared, we will truly suffer the same fate that has happened in the past 150 years of the economy. Many experts believe that hyperinflation leads to the complete rejection of the currency of sovereign nations. It is an economic progression where paper money, bonds, and other paper assets lose their value.
One of the main causes of hyperinflation is the overflowing supply of paper money. The monetary and fiscal authorities are the ones responsible for issuing the supply of paper money. As a result, the government gains more at the expense of its citizens in the form of taxation. The value of money then declines because of the high taxation schemes that the government is imposing to those who possess paper money. Other factors affecting hyperinflation are unbalanced supply and demand caused by the excessive amount of printed money, and the minimal growth of products and services that do not match the large amount of printed money. Because there is excessive supply of money, its intrinsic value decreases.
Here are some points to remember to determine whether your economy is suffering from hyperinflation: when people prefer to convert their wealth to other assets such as gold or silver, people regard the value of their monetary fund in foreign currencies are more stable, and when people prefer to exchange or barter goods rather than use money. Although hyperinflation has some good effects, most of the effects are negative. The reallocation of wealth from the general public to the government is a serious consequence of hyperinflation. For borrowers, the effects of hyperinflation result to their gain, at the expense of the lender, particularly when contracts are signed during the worst point in inflation.
With the many catastrophes affecting the economy nowadays, we should be aware that hyperinflation is coming and establish a plan that will help us survive this serious problem.