Inflation is defined as an increase in the overall level of prices for goods and services in an economy over a period of time. Thus as the prices of goods and services increase each unit of currency actually buys less, therefore decreasing the purchasing power of the money.Hyperinflation therefore is defined as a very high rate of inflation or inflation that has gone “out of control”. During a hyper inflationary event price levels within a specific economy rise very quickly as a function of its domestic currency in contrast to a foreign currency losing its real value at an ever increasing rate.Definitions of hyperinflation range from the low end, being when there is an accumulation of inflation consecutively over a three year period reaching 100% or 26% per year. On the high end hyperinflation is seen as the rate of inflation exceeding 50% per month. In a hyper inflationary environment a ferocious cycle is formed where more and more inflation is produced by the ever increasing cycle of money printing. When a nation’s money supply runs up unchecked hyperinflation becomes visible and is usually connected to wars, political or social upheavals, aggressive bidding on currency exchanges or currency meltdowns.Below is a partial list of countries that suffered hyperinflation in the 20th and 21st centuries. It is important to note each country listed, suffered hyperinflation due to the destruction or failure of its own fiat currency. Throughout history fiat currencies have always failed, bringing down entire empires.• Poland: 1921 – 1924 Hyperinflation peaked at 988,223%• Austria: 1922 – Hyperinflation peaked at 1426%
• Germany: 1923 – Hyperinflation peaked at 325,000,000% in November• Greece: 1944 – Hyperinflation peaked at 11,300%• Taiwan: 1945 – 1952 Hyperinflation peaked at 2,420%• Hungary: 1946 – Hyperinflation peaked at 1.3 X 10 (16th power) %• China: 1949 – Hyperinflation peaked at 4,210%• Israel: 1971 – 1985 Hyperinflation peaked at over 900%• Chile: 1973 – Hyperinflation peaked at 600%• Mexico: 1982 – 1993 Hyperinflation peaked at over 10,000%• Bolivia: 1984 – 1985 Hyperinflation peaked at 20,000%• Argentina: 1989 – Hyperinflation peaked at 5000%• Brazil: 1990 – 1994 Hyperinflation peaked 30,377%• Yugoslavia: Oct 1, 1993 through Jan 24, 1994 had cumulative inflation of 5X10 (15th power)%• Bulgaria: 1996 – 311%• Zimbabwe: Nov 14, 2008 – Hyperinflation peaked at 79,600,000,000%. For all 2008 Hyperinflation was at 89.7 Sextillion%Frequently hyperinflation is caused due to a Central Bank’s decision to increase its money supply to finance its nations over-extended government debt and spending. Consequently there is a decrease for the demand on the nation’s money relative to the money supply that in severe cases will cause a total loss of confidence in the money such as a “run on the banks”. This transforms into a swift increase in the rate of spending causing rapid increases in prices. The continuation of hyperinflation will remain until such a time that excessive money printing or increased bank credit stops the promotion of excessive money creation.In excessive situations price controls that had been in place to prevent paper currency devaluation fail, quickly escalating the money supply that lacks intrinsic value. In this situation hyperinflation will continue until the point which the currency is completely destroyed or discarded. In general hyperinflation is linked to paper money or fiat money, this being said the money supply can drastically be increased with no more effort than it would take to press a start button on a printing press. Thus when “fiat money” is printed, government obligations that are not denominated in money increase in cost by more than the value of the money created.When the system for currency circulation becomes excessive and devalued it was generally followed with a “run” on the store of value or a bank run. Throughout history hyper inflationary events usually end by reverting back to “hard money” such as gold and various forms of bartering. As hyperinflation takes over an economy its devastating effects usually will wipe-out the purchasing power of all public and private savings which in turn distorts economies to support hording of real assets and extreme consumption forcing the monetary base of hard currency to quickly exit the country effectively turning the affected country into a wasteland for future investments.After effects from hyperinflation are just as complex. An area hit by hyperinflation has always seen painful and traumatic experiences by those suffering through it. Looking ahead, the next government to come out of it will most always enact some form of policy to prevent this event from ever happening again. This might include having the Central Bank become very aggressive towards maintaining price stability and possibly make a move towards some form of hard basis of currency. Furthermore the enactment of policies such as stringent wage and price controls.
However even this cannot always prevent further inflating of the money supply by its central bank leading to more widespread shortages of consumer goods and services unless these controls are absolutely strictly enforced. Should the new or any proceeding Government not heed its own laws pertaining to the controls it has set into place to prevent a re-occurrence, the stage will once again be reset towards hyperinflation reoccurring in the future.Sadly the United States is playing with its own toxic cocktail with the remaining ingredients soon to be added, there will surely be hyperinflation in America that could be on the scale of the 1920′s Weimar Germany hyperinflation or greater. The US dollar is the world’s reserve currency and if hyperinflation develops in America it will affect most countries around the world today. This is a reality that most Americans are blind to and those who do not prepare now beforehand, will more than likely have lost everything.Those who are prepared or start now while time is still on their side will ride out this event and be on the top when it is finished. The key is to invest what assets you have now into “Hard Assets” such as physical gold and silver because throughout history gold and silver have always been a true store of value regardless of any economic conditions in society and always seek their true value.Tom Genot -