Hyperinflations are very large taxation schemes. During the German hyperinflation the number of German marks in circulation increased by a factor of 7.32 × 10 9. In Hungary, the comparable increase in the money supply was 1.19 × 10 25. These numbers are smaller than those given earlier for the growth in. So in the last video I was talking about various functions of money you know the first was that it's a medium of exchange if you want to trade for things typically you give someone money and they give you the thing rather than trying to barter trading apples for oranges or horses for legal services or things like this the second is that it's a store of value if you hold on to your money its. Will attempt to economize on money holdings, a rising rate of inflation will imply that the average growth in real money holdings will tend to be negative. The decline of real money balances and rise in inflation along a stochastic trend are among the main features of hyperinflation discussed by Cagan (1956, pp. 25-27 and figures 1-7). The real interest rate is the nominal or current market interest rate minus the expected rate of inflation. Inflation reduces the value of money. The extremely high cost of using money during hyperinflations forces people to resort to barter, which is an inefficient means of transacting.

It is not surprising to learn that, during hyperinflations, the demand for real money balances. Decreases, as the value of the nominal money decreases. The cost of holding money is primarily the: the interest given up by not investing it. For real interest parity to hold, we require.

What do out-of-control national budgets, social upheavals, political chaos, wars, civil wars, revolutions, and government corruption have in common? They result in hyperinflation, a national crisis triggered by accelerated inflation. Hyperinflation erodes the real value of money while increasing the price of goods. When this happens to a country, the purchasing power of its currency loses all value.

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TOP 7 WORST CASES OF CURRENCY HYPERINFLATION IN HISTORY

Hyperinflation in Germany (1921-1923)
Hyperinflation in China (1935-1949)
Hyperinflation in the Soviet Union (1917-1924)
Hyperinflation in Zimbabwe (2007- 2008)
Hyperinflation in Hungary (1945-1946)
Hyperinflation in Yugoslavia (1992-1994)
Hyperinflation in Venezuela (2016-2019)

Hyperinflation can be caused by many different factors. Often, hyperinflation occurs because of a war with a foreign power or internal civil war. Because of this economic crisis, the government tries to stimulate economic growth by printing money. This money creation increases the money supply for a short period, but the increased circulation causes every denomination to lose its value.

Hyperinflation is high inflation that continues to accelerate rapidly. This causes the value of a national currency to keep falling while the price of goods and services rise quickly. In response, people jettison their own local currency and switch to a more stable foreign currency like the US dollar.

TOP 7 WORST CASES OF CURRENCY HYPERINFLATION IN HISTORY

Like the charts in the financial markets, the history of money itself has always been volatile. In extreme cases, the velocity of money forces government deficit and an economic crisis.

1. HYPERINFLATION IN GERMANY (1921-1923)

Hyperinflation in the Weimar Republic started in 1921 and ran until 1923. During this time, the general population experienced abject misery. For instance, people would take wheelbarrows to work on payday just to manage the large amounts of worthless currency. However, the roots of this great depression go back to August 1914 when the German currency abandoned the gold standard in August 1914 at the outbreak of the First World War.

Germany’s intractable economic problems struck from many angles. It faced a general strike in the Ruhr region. Germany also lost the Saar, the foundation of its industrial strength, and could not pay reparations for the first world war. Because of this overwhelming situation, by November 1923, its money was practically worthless–4,210,500,000,000 German marks were equal to one US dollar.

German hyperinflation made it possible for the rise of Adolf Hitler. The Treaty of Versailles held Germany and its allies responsible for the widespread loss and damage in Europe during the war, and the Allied powers asked Germany to pay $33 billion (worth about $396 billion today). Hitler rose to power because he promised an end to the overwhelming burden of the reparations and offered the country a new future. When his Nazi Party came to power, it stopped payments on the reparations. Incidentally, Germany finally paid this enormous debt off exactly 20 years after the country became reunified.

2. Hyperinflation in China (1935-1949)

Hyperinflation in China started in 1935 and ran to 1949. China was the first country in the world to use fiat money and also the first country to issue paper money. Paper currency proved to be a widely popular idea because it made commerce and trading far easier. It continued from one government to the next, but only worked when they applied tight control on the money supply.

When the governments strayed from this monetary policy, it resulted in having too much money in circulation. The Chinese discovered that an excess of money in the economy reduces the value of the money and increases the cost of products. China also has the dubious honor of being the first country in the history of money to discover hyperinflation.

Unfortunately, China did not learn from its own history, and in 1935, the nationalist governments naively created inflation when they increased the money supply by printing out large amounts of paper currency. This soon became runaway inflation that caused prices to spike over a thousand-fold.

By 1949, the government had finally learned its lessons. They had seen what happens when a nation injects large amounts of paper money into an economy. Huge monetary reforms to the currency put an end to the economic problems facing China.

3. Hyperinflation in the Soviet Union (1917-1924)

Hyperinflation in the Soviet Union started from 1917 and ran until 1924. It started during the Bolshevik revolution that occurred in November 1917 and reached 2013 percent from 1921 to 1922. It finally ended in 1924 after Russia introduced the “gold ruble” as the new standard currency.

4. Hyperinflation in Zimbabwe (2007- 2008)

Hyperinflation started Zimbabwe in 2007 and ran until 2008. In February 2007, hyperinflation destabilized the currency, and this peaked by mid-November of the following year by a rate of 79,600,000,000 percent each month.

Robert Mugabe’s government discovered that hyperinflation causes rapid currency devaluation. The highest denomination could be a billion or a trillion because of its low value. During this period of hyperinflation, the highest Zimbabwean denomination was a 100-trillion-dollar note. This was worth 40 US cents. This created the worst famine that the country had experienced in 60 years.

5. Hyperinflation in Hungary (1945-1946)

Hyperinflation started in Hungary in 1945 and ran until 1946. This hyperinflation following World War II is one of the worst in recorded history.

During Hyperinflations The Real Value Of Money