Hyperinflation, something ever happen in fiat money only

In the term of economics, the term of “hyperinflation” is an out of control inflation. Price is ascending uncontrollably as a currency is losing its value rapidly. The current Zimbabwe economics crisis can be categorized as hyperinflation.

According to International Accounting Standard, these four factors can trigger hyperinflation in a country:

• People prefer wealth in non-monetary assets or in more stable foreign currency. Local currency is vastly spent to commodities to maintain its value.

• People regard monetary amount not on local currency but in relatively stable foreign currency. Price is rooted to foreign currency.

• Sales and purchases on credit take place at prices that compensate for the expected loss of purchasing power during the credit period, even if the period is short.

• Interest rates, wages and prices are linked to a price index and the cumulative inflation rate, in three years or more exceed 100%.

Since paper money (fiat currency) is far easier to be printed than minting hard currency from previous metals, sometimes central banks unwisely running printing machine over limits. Money is printed exceeding demand and supply of commodities and services, so there is massive and rapid increase in the amount of money, which is not supported by growth in the output of goods and services. Historically, there were episodes in countries experiencing hyperinflation in which there are returns to hard money, a money whose value is intact by nature (like gold silver, and other commodities). Older economies would revert to hard money or even barter when the money is excessively devalued. In this condition, gold has a stable value since a government printing money has less control of its supply.

There some unique thing happen in hyperinflation. Printed value in money reaches million or even billion. Also please look at above picture, a woman in German, in 1920s, feeding amount of paper money to her tiled stove, money is worthless than firewood. So burning money is cheaper than buying paper and it can last longer.

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