Encyclopedia > Hyperinflation

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Hyperinflation is a form of economic inflation in which the general price level is increasing rapidly. No single definition is universally accepted; one simplistic definition is a monthly inflation rate of 50%. Hyperinflation is just out-of-control inflation at an extremely high rate.

Hyperinflation was rare before the 20th century, because past a certain level of inflation the economy would revert to either specie metals[?] or barter. The widespread use of fiat money created the possibility for hyperinflation as governments often tended to print larger amounts of money to finance their expenses. Such an increase in money supply is one of the main factors powering hyperinflation.

Rates of inflation of several hundred percent per month are often seen. Extreme examples include Germany in the early 1920s when the rate of inflation hit 3.25 million percent per month, Greece in the mid-1940s with 8.55 billion percent per month, and Hungary during the same approximate time period at 4.19 quintillion percent per month. Other more moderate examples include Eastern European countries in the period of economic transition in the early 1990s and in Bolivia and Peru in 1985 and 1988, respectively.

Hyperinflation produces some interesting banknotes.

One type has a big long row of zeros on the number. (like this: "10,000,000,000").

Another type uses words for part or all of the number (like this: "10 Billion" or this: "Ten Billion")

Still others avoid the use of large numbers simply by declaring a new unit of currency (so, instead of 10,000,000,000 Dollars, you might set 1 New Dollar = 1,000,000,000 old Dollars, so your new banknote would read "10 New Dollars".)

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