Hyperinflation is an extreme case of monetary devaluation that is so rapid and out of control that the normal concepts of value and prices are meaningless. Hyperinflation is often described as inflation exceeding 50% per month, though no strict numerical definition exists. This catastrophic economic situation has occurred many times throughout history, with some of the worst examples far exceeding the conventional threshold of 50% per month.
Perhaps the best-known example of hyperinflation, though not the worst case, is that of Weimar Germany. In the period following World War I, Germany suffered severe economic and political shocks, resulting in large part from the terms of the Treaty of Versailles that ended the war. The treaty required payment of reparations by the Germans through the Bank for International Settlements for the damage caused by the war to the victorious countries. The terms of these reparation payments made it practically impossible for Germany to meet the obligations, and indeed, the country failed to make the payments.
Prohibited from making payments in their own currency, the Germans had no choice but to trade it for an acceptable "hard currency" at unfavorable rates. As they printed more currency to make up the difference, the rates worsened, and hyperinflation quickly took hold. At its height, hyperinflation in Weimar Germany reached rates of more than 30,000% per month, causing prices to double every few days. Some historic photos depict Germans burning cash to keep warm because it was less expensive than using the cash to buy wood.
A more recent example of hyperinflation is Zimbabwe, where, from 2007 to 2009, inflation spiraled out of control at an almost unimaginable rate. Zimbabwe's hyperinflation was a result of political changes that led to the seizure and redistribution of agricultural land, which led to foreign capital flight. At the same time, Zimbabwe suffered a terrible drought that combined with the economic forces to virtually guarantee a failed economy. Zimbabwe's leaders attempted to solve the problems by printing more money, and the country quickly descended into hyperinflation that at its peak exceeded 79 billion% per month.
The worst hyperinflation ever recorded took place in Hungary in 1946 at the end of World War II. As in Germany, the hyperinflation that occurred in Hungary was a result of a requirement to pay reparations for the war that had just ended. Economists estimate that the daily inflation rate in Hungary during this period exceeded 200%, which equates to an annual inflation rate of more than 13 quadrillion%. During this period, prices in Hungary doubled every 15 hours.
Inflation of the Hungarian currency was so out of control that the government issued an entirely new currency for tax and postal payments. Officials announced the value of even that special-use currency on a daily basis due to massive fluctuations. By August of 1946, the total value of all Hungarian banknotes in circulation was valued at one-tenth of a United States penny.