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  • 1. Hyperinflation
  • 2. Definitions Economists usually follow description that hyperinflation occurs when the monthly inflation rate exceeds 50%. hyperinflation occurs when a country experiences very high, accelerating, and perceptibly "unstoppable" rates of inflation. In such a condition, the general price level within an economy rapidly increases as the currency quickly loses real value.
  • 3. General Cause Hyperinflation is often associated with wars, their aftermath, socio-political upheavals, or other crises that make it difficult for the government to tax the population, as a sudden and sharp decrease in tax revenue coupled with a strong effort to maintain the status quo can be a direct trigger of hyperinflation. Hyperinflation sees a rapid and continuing increase in the supply of money, and the cost of goods.
  • 4. Major Cause • • • • • • Money Creation. Price Inflation. Velocity of Money. Supply and Demand of Money. Economy Depression. Complexity of Economies.
  • 5. Cost of Hyperinflation • There are three important costs related to hyperinflation are as following. • Shoeleather Cost. • Menue Cost. • Result from Tax Law. • Cost of inconvenience living in world.
  • 6. Shoe leather cost • Shoe leather cost refers to the cost of time and effort (more specifically the opportunity cost of time and energy) that people spend trying to counter-act the effects of inflation, such as holding less cash and having to make additional trips to the bank. • The term comes from the fact that more walking is required (historically, although the rise of the Internet has reduced it) to go to the bank and get cash and spend it, thus wearing out shoes more quickly. • A significant cost of reducing money holdings is the additional time and convenience that must be sacrificed to keep less money on hand than would be required if there were less or no inflation.
  • 7. Menu cost • menu cost is the cost to a firm resulting from changing its prices. The name stems from the cost of restaurants literally printing new menus, but economists use it to refer to the costs of changing nominal prices in general. • In this broader definition, menu costs might include updating computer systems, re-tagging items, and hiring consultants to develop new pricing strategies as well as the literal costs of printing menus.
  • 8. Examples of hyperinflation • Armenia • Armenia experienced high inflation and hyperinflation from January 1992-December 1994. Its first episode of hyperinflation was due to the use of the Russian ruble after the dissolution of the Soviet Union. The second episode was due to an unstable Armenian dram. • (1) Start and End Date: Jan. 1992- Feb. 1993 • (1) Peak Month and Rate of Inflation: Jan. 1992, 73.1% • (2) Start and End Date: Oct. 1993- Dec. 1994 • (2) Peak Month and Rate of Inflation: Nov. 1993, 438%
  • 9. Germany • Germany went through its worst inflation in 1923. In 1922, the highest denomination was 50,000 Mark. By 1923, the highest denomination was 100,000,000,000,000 Mark. In December 1923 the exchange rate was 4,200,000,000,000 Marks to 1 US dollar. • In 1923, the rate of inflation hit 3.25 × 106 percent per month (prices double every two days). Beginning on 20 November 1923, 1,000,000,000,000 old Marks were exchanged for 1 Renten mark so that 4.2 Renten marks were worth 1 US dollar, exactly the same rate the Mark had in 1914. • (1) Start and End Date: Jan. 1920- Jan. 1920 • (1) Peak Month and Rate of Inflation: Jan. 1920, 56.9% • (2) Start and End Date: Aug. 1922- Dec. 1923 • (2) Peak Month and Rate of Inflation: Nov. 1923, 29,525%[21]