Hyperinflation causes a lot of poverty and ultimately the transition to a new monetary system, a reset.
The economy is just over the sum of transactions.There are 2 sides to each transaction: a good/service and a medium or exchange (money). So any transaction (outside barter = Swap trade) consists of 50% money/Credit (the promise of money in the future).
Some of the consequences of hyperinflation (not chronologically or so) are:
Wages are not able to follow prices
Humans give the fast declining money out immediately, with in effect the inflation to accelerate still
Production falls/stops, transactions, future investments,… Be quasi impossible.
Sales drops/stops, demand is towering but 50% of the transaction is dropped
There will be a new (or multiple) medium or Exchange (money).
Debts are wiped out
Commercial banks stop borrowing
Central banks begin to finance the exponential printing of money for the expenditure of the Government as the population needs assistance, which makes the problem just worse.
In short, hyperinflation is the good thing nobody want to have since it drops in value so quickly.Half of the transaction nobody wants to have anymore. The ‘ Store of value ‘ property of good money has been completely dropped.
This also brings us to what properties need good money for ‘ good ‘ money.To limit the presentation, I will not go into this post.
For hyperinflation to be somewhat understood there are some notions that you should understand.
Inflation is ALWAYS a result of an interaction of the following
1.More demand than offer = Price rises (Money quantity!)
2.Less offer than question = Price rises (Money quantity!)
3.Equal supply, equal demand, more money = Price rises
These 3 conditions/combinations ensure price rise.
However, it is crucial to set the factor of money/credit properly.Short by the bendExample: set: The whole world has 鈧? (= Total money supply) and 1 Coca-Cola bottle (= total of products and services).The price of 1 cola bottle is equal to 鈧?. When you now produce an extra cola bottle, the price of 1 Cola bottle will be 鈧?.5. If you have 1 Cola bottle and 鈧? extra (‘ print ‘-Quantative Easing) The total money quantity would be 鈧?. 1 Cola bottle is purchased for 鈧?.
Inflation is thus measured by the supply and demand of one, several or all products in combination with how much money/credit in circulation (quantity) there is as well as the rate at which money is in circulation (velocity).
When we look at inflation levels from a macro-economic standpoint, inflation is always a result of the increase in Money (+ credit) (in circulation…).Indeed, it is unlikely that all goods and services (supply) fall into an economy.
Since the price cannot rise from all products/services when no more money is available, inflation is impossible with an equal supply of goods and services.If the supply of goods and services remains the same and the amount of money remains the same, we get deflation. The biggest fears of a central bank/government as we operate in a debt-based monetary system. (This is another very interesting story, so we don’t go deeper into it).
Finally, I am familiar with one situation where hyperinflation has been stopped.This was partly thanks to Paul Volcker (the then president of the Federal Reserve, the central Bank of the United States) that the interest rates at some point brought to 21% after the dollar leaned to hyperinflation after completely disconnecting the dollar from Gold in 1971 by Nixon (because of necessity, the Americans had pressed more dollars, that at that time were ‘ claims checks ‘ on gold, than they had gold.
It’s always the same story.History is full of hyperinflation.
I have regular contact with a Venezuelan physician.Then you would think: highly educated, permanent job in a hospital: it will save. It describes total, absolute, all-digesting poverty, drugs that are nowhere to be found, a huge increase in violent crime, a corrupt and violent administration, riots and many demonstrations. Last, she had a puncture; It took her 8 month salaries to replace it.
In Venezuela, it is mainly scarcity that is a problem. Hyperinflation is a result of this scarcity.We knew hyperinflation without major scarcity in Germany in the early ‘ 20s. The consequences were that savers and rentenists were ruined, but people in employment and those with high debts profited correctly.
That is how a thickness is acceptable to the population, then it happens and it is too late.