Hyperinflation

AAA

DEFINITION of 'Hyperinflation'

Extremely rapid or out of control inflation. There is no precise numerical definition to hyperinflation. Hyperinflation is a situation where the price increases are so out of control that the concept of inflation is meaningless.


INVESTOPEDIA EXPLAINS 'Hyperinflation'

When associated with depressions, hyperinflation often occurs when there is a large increase in the money supply not supported by gross domestic product (GDP) growth, resulting in an imbalance in the supply and demand for the money. Left unchecked this causes prices to increase, as the currency loses its value.

When associated with wars, hyperinflation often occurs when there is a loss of confidence in a currency's ability to maintain its value in the aftermath. Because of this, sellers demand a risk premium to accept the currency, and they do this by raising their prices.

One of the most famous examples of hyperinflation occurred in Germany between January 1922 and November 1923. By some estimates, the average price level increased by a factor of 20 billion, doubling every 28 hours.

VIDEO

Loading the player...
RELATED TERMS
  1. Hyperdeflation

    An extremely large and relatively quick level of deflation in ...
  2. Reflation

    A fiscal or monetary policy, designed to expand a country's output ...
  3. Disinflation

    A slowing in the rate of price inflation. Disinflation is used ...
  4. Inflation

    The rate at which the general level of prices for goods and services ...
  5. Deflation

    A general decline in prices, often caused by a reduction in the ...
  6. Inflationary Psychology

    A state of mind that leads consumers to spend more quickly in ...
RELATED FAQS
  1. How can value investors benefit from investing in the metals and mining sector?

    Precious metals have an inverse relationship with stocks and currencies. They are usually unaffected by inflation, stocks ... Read Full Answer >>
  2. What's the difference between hyperinflation and inflation?

    In the world of economics, inflation is a term that gets thrown around every time the price of certain goods or services ... Read Full Answer >>
  3. What burst the Mississippi bubble?

    In 1715, France was essentially insolvent as a nation. Even though taxes were raised to extremely high levels, the hole ... Read Full Answer >>
Related Articles
  1. Bonds & Fixed Income

    Coping With Inflation Risk

    Inflation is less dramatic than a crash, but it can be more devastating to your portfolio.
  2. Options & Futures

    The Consumer Price Index: A Friend To Investors

    As a measure of inflation, this index can help you make key financial decisions.
  3. Economics

    What You Should Know About Inflation

    Find out how this figure relates to your investment portfolio.
  4. Options & Futures

    Introduction To Inflation-Protected Securities

    Inflation is an enemy to investors - except to those who invest in IPS, which guarantee a real rate of return with no credit risk.
  5. Economics

    An Introduction To Hyperinflation

    Hyperinflation isn't some historical curiosity. It is a very real risk that countries and governments still struggle with today.
  6. Economics

    The Importance Of Inflation And GDP

    Learn the underlying theories behind these concepts and what they can mean for your portfolio.
  7. Credit & Loans

    Top US Housing Market Indicators

    A quick overview of the top economic indicators to track the housing market in the US.
  8. Mutual Funds & ETFs

    GLD vs. IAU: Which Gold ETF is Better?

    Looking to play gold with ETFs? A look at SPDR Gold Trust Shares (GLD) versus iShs Gold Trust Trust Units (IAU).
  9. Economics

    What is the Income Effect?

    In economics, the income effect is the change in the consumption of goods caused by a change in income, whether income goes up or down.
  10. Economics

    What is Fiat Money?

    Fiat money is currency that a government has declared to be legal tender, but is not backed by a physical commodity.

You May Also Like

Hot Definitions
  1. Asset Class

    A group of securities that exhibit similar characteristics, behave similarly in the marketplace, and are subject to the same ...
  2. Fiat Money

    Currency that a government has declared to be legal tender, but is not backed by a physical commodity. The value of fiat ...
  3. Interest Rate Risk

    The risk that an investment's value will change due to a change in the absolute level of interest rates, in the spread between ...
  4. Income Effect

    In the context of economic theory, the income effect is the change in an individual's or economy's income and how that change ...
  5. Price-To-Sales Ratio - PSR

    A valuation ratio that compares a company’s stock price to its revenues. The price-to-sales ratio is an indicator of the ...
  6. Hurdle Rate

    The minimum rate of return on a project or investment required by a manager or investor. In order to compensate for risk, ...
Trading Center