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In the world of economics, inflation is a term that gets thrown around every time the price of certain goods or services goes up suddenly. Inflation refers to prices rising over time, either in a particular industry or throughout the entire economy. Put another way, it's what happens when a unit of currency is worth incrementally less than it was in the previous fiscal period.

Healthy economies will always have small fluctuations, or constant low levels of inflation and deflation. Banks and other economic factors work to reduce these fluctuations as much as possible. The more successful the reduction, the more stable the economy.

Hyperinflation is an economically deadly and unnatural condition. It is a situation in which the value of currency goes into a free fall. It may be worth 1:1 when compared to another currency one month, 50:1 against the same currency the next and 2,000:1 the month after that.

For instance, near the end of the American Civil War, most Confederate supporters feared the war was already lost. The Confederate dollar, which had previously been almost on par with the U.S. dollar, suddenly dropped to a value of about 1,200:1. If the Confederate dollar had not fallen out of use entirely, it's likely that you'd see the ratio continue to rise until even a billion Confederate dollars could not purchase a U.S. Dollar.

Every time there is economic, civil or governmental unrest, experts voice concerns about hyperinflation. Stable economies do not want to trade with unstable economies, so massive upheavals mean that investors and trade partners no longer want to trade in the currency that is viewed as unstable. It is most common during and after wars — particularly for the losing side.

Though some experts use the thumbnail of a 50% or greater price level increase per month, there is no set-in-stone definition for hyperinflation. There is no guideline for the duration of "official" hyperinflation. Use of the term usually hinges on the real-world effects of the radical inflation, such as the sudden inability of median income earners to buy sufficient food or retain adequate housing. It is an extreme example of inflation, which economists agree appeared about 50 times worldwide in the last century.

Too much inflation is never a good thing, but significant inflationary levels can exist without being considered hyperinflation. For instance, if the U.S dollar suddenly moves from being worth twice as much as the Canadian dollar to being worth half as much, it is not generally considered hyperinflation. It is severe inflation and can cause significant economic instability but is unlikely to completely decimate the economy as a whole.

While hyperinflation is constantly on the minds of investors and economists in times of economic uncertainty, it is an extreme. Investment in precious metals, multiple currencies or critical commodities may help protect against potential hyperinflation.

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