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Opinion: June 11, 2021. What Causes Hyperinflation?

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@marcusantoniu26
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Hyperinflation is defined as a monthly inflation rate of more than 50%. In practical terms, if an item had a price of 10 at the start of the month, by the end of it the price of it would be 15 or more. Inflation occurs when there is money supply not supported by economic growth. This excess money supply, when placed in circulation, decreases the value of the currency so the prices increase in nominal terms.

Hyperinflation is generated when people start to spend the money in goods faster and sooner due to the fear of price increases. When this occurs, the demand of items increases pushing the prices higher. When this occurs, there is pressure, specially in the public sector of an economy, for salaries to be increased in order to be able to pay for the higher priced goods. So more unsupported money is printed. It becomes a vicious circle.

If not controlled, hyperinflation ends in economic collapse with the people unable to trust the currency, black markets for goods are created and a barter economy becomes the norm.

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