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Hyperinflation

A financial condition in which money loses its value very quickly. The strict definition is when prices have to be raised daily or more often: 1000% per month.

Russia was said to be approaching this condition after the abolition of Communism.

Historically it was found in Germany , Hungary and other countries after the first world war. In Germany it led to banknotes for 1000 million marks. It was stopped by issuing a new currency and abandoning the old one. The dispossessed voted for the Nazis. After the war the Germans have had the lowest inflation of any country, perhaps as a reaction.

The prices in Serbia were being changed twice a day (August 1993) and 50 million dinar notes printed. The cause is that there was no production of goods but the government printed money to pay for the war.

The main effect is to destroy all monetary savings. Thus the Middle Classes - those with savings - are hit hardest. The Upper Classes, whose wealth is mainly in land or other real property are usually immune, and indeed gain from the process. As the economy is hard hit, unemployment rises and the poor are reduced to starvation.

At present (2008) Zimbabwe is experiencing this condition. A recent - 2007 - currency reform removed three zeros from currency notes but the inflation continued.

Article on hyperinflation in Zimbabwe.

In 2008 the US dollar and the South African rand became legal for all purposes and the Zimbabwe dollar ceased to be current.

Last revised 30/09/09


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