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  • #16
    Super or Hyper Inflation

    [quote=Steve;64327]What causes Super Inflation and what are the results of it?[/quote]

    Inflation is a sustained increase in the aggregate price level. Superinflation or hyperinflation is very high inflation.

    Although the threshold is arbitrary, economists generally reserve the term to describe episodes when the monthly inflation rate is greater than 50 percent. At a monthly rate of 50 percent, an item that cost $1 on January 1 would cost $130 on January 1 of the following year.
     
    What Causes Hyper Inflation

    Usually, countries with hyper inflation have the following features

    Large government debt, usually over 100% of GDP

    Printing Money. To cope with meeting the debt, the government starts printing money. This decreases the value of existing money creating a multiplier effect where people lose confidence in money and keep demanding wage increases.
     
    Reluctance / inability to deal with it. When Germany experienced hyperinflation in the 1920s it was not a phenomena they fully appreciated or understood. Their primary fear at the time was unemployment. They feared that unemployment could precipitate a Communist Revolution so they didn't want to do anything to reduce demand and possibly cause a recession.

    Steve



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    • #17
      When Germany experienced hyperinflation in the 1920s it was not a phenomena they fully appreciated or understood. Their primary fear at the time was unemployment. They feared that unemployment could precipitate a Communist Revolution so they didn't want to do anything to reduce demand and possibly cause a recession.
      That is certainly interesting. And then look where it led!
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