What factors lead to hyperinflation, why it is so devastating, how hyperinflation can be overcome, and what can individuals do to be prepared for hyperinflation.
Topics covered include:
- What causes inflation and how do central banks manage it.
- How the causes of hyperinflation differ from more normal levels of inflation.
- What is the biggest challenge of living in a country with hyperinflation.
- How Zimbabwe and other countries were able to overcome hyperinflation and how Venezuela is slowly taking steps to combat hyperinflation.
- Why Zimbabwe is again experiencing high inflation.
- How individuals can protect against inflation.
- What individuals can do to prepare for hyperinflation in case it comes.
Would you like to read more about hyperinflation? Check out our Complete Guide to Understanding and Protecting Against Inflation.
Also Learn More About Inflation With These Podcast Episodes
Welcome to Money for the Rest of Us. This is a personal finance show on money, how it works, how to invest it, and how to live without worrying about it. I’m your host, David Stein. Today is episode 287. It’s titled “What Causes Hyperinflation And How to End It”
Hyperinflation, the rapid increase in prices. With inflation over 50% per month, it can destroy an economy. We’re seeing that in Venezuela today. We saw it in Zimbabwe in 2008/2009. And potentially again in 2020 in Zimbabwe.
In this episode, we’re going to look at what causes hyperinflation and we’ll see that it’s very different from the type of inflation that we’re used to; be it low or high. Hyperinflation is a completely different level of inflation. And to survive it is very different than what we would do in just combating normal inflation.
What is inflation?
First, as I mentioned inflation measures the rise in prices over time. Prices of food, housing, clothes, healthcare, recreation, and other goods and services. The more those prices are increasing, the greater the rate of inflation.
Government’s statistical agencies around the world measure inflation by using what is known as a “reference basket.” They look at a basket of goods and services. In the U.S., the Bureau of Labor Statistics calculates inflation as measured by the U.S. Consumer Price Index by looking at the price changes in over 200 categories of goods and services.
Inflation can only occur if businesses charge more to their customers for their products. A business will sometimes raise their prices if they see that their costs are rising and then they try to pass on those costs to their customers so that the business maintains the same level of profitability. That their profits don’t shrink as their costs rise, and they’re not able to get more revenue, by passing on those cost increases to their customers.
This can lead to a chain reaction…
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