Hyperinflation

Hyperinflation

See: Inflation

---

hyperinflation

A very high level of inflation that tends to result in the breakdown of the monetary system, the hoarding of goods, and difficulty in achieving real economic growth. The classic case of hyperinflation occurred in Germany during the 1920s. Hyperinflation, which tends to motivate people to own real goods, adversely affects security prices.

---

Hyperinflation

A very high rate of inflation, especially sustained over a long period of time. While there is no set numeric definition, it is associated with inflation percentages in the millions and billions. Hyperinflation is almost always caused by poor monetary policy on the part of the government. For example, a government that rapidly increases the money supply without a corresponding growth in GDP often undergoes hyperinflation. This situation often leads to (though it may also be caused by) wider economic instability, and may lead to a lack of confidence in the government. As a result, hyperinflation that persists for a long time may lead to the government issuing a new currency entirely.

---

Hyperinflation

What Does Hyperinflation Mean?

Extremely rapid or out-of-control inflation. There is no precise numerical definition of hyperinflation. Hyperinflation is a situation in which the price increases are so out of control that the concept of inflation is meaningless.

Investopedia explains Hyperinflation

When associated with depressions, hyperinflation often occurs when there is a large increase in the money supply that is not supported by gross domestic product (GDP) growth, resulting in an imbalance in the supply and demand for the money. Left unchecked, this causes prices to increase as the currency loses its value. When associated with wars, hyperinflation often occurs when there is a loss of confidence in the ability of a currency to maintain its value in the aftermath. Because of this, sellers demand a risk premium to accept the currency, and they do this by raising their prices. One of the most famous examples of hyperinflation occurred in Germany between January 1922 and November 1923. By some estimates, the average price level increased by a factor of 20 billion, doubling every 28 hours.

Related Terms:
• Behavioral Finance
• Consumer Price Index—CPI
• Deflation
• Inflation
• Stagflation