Hyperinflation is a period of abnormally high growth in the cost of living. It is an economic condition that is seen more frequently in third world countries or emerging economies, when inflation is extremely high and increases at an accelerated rate. It is a rare economic phenomenon that affects the economy of a nation due to some particular factors. Behind every hyperinflation there is an extremely high rate of growth in money.
The German Hyperinflation, 1921-1923:
The costs of renovations and repair fees led the Weimar government to print more cash.
As the rate of growth of the money supply increased, so did inflation.
At one point, prices went up 41% each day.
In 1921, a newspaper sold for 0.3 points. In 1923, that same newspaper cost 70 million marks.
Inflation became a self-fulfilling prophecy, as people rushed to make purchases as soon as they received money.
Inflation only ended when confidence in the value of the currency was restored after Rentenmark was issued.
In Germany in 1923, prices were rising by 40% per day
–$100 à $140 (1 day). $100 à $753 (1 week). $100 à $1.7 million (1 month)
Hyperinflation in Some Other Countries:
Between August 1945 and July 1946, prices in Hungary increased by 19,000% per month. This translates into an increase of 39% in prices every day
Bolivia in 1985 saw an increase in prices of 12,000%
A story tells of a man who did just this. On his payday, he received 50 million pesos, and one dollar cost 500,000 pesos (the exchange rate). He was able to change his pay for $ 50. A few days later, a dollar cost 900,000 pesos, and he could only get $ 27 for his efforts. The value of his salary was essentially reduced by half in the course of two days.
A less severe level of inflation, but still high, occurred between 1970 and 1987 in Argentina, Bolivia, Brazil, Chile, Peru and Uruguay, which collectively experienced an average annual inflation rate of 120%.