Hyperinflation

Hyperinflation is an extreme and accelerating form of inflation where prices increase so rapidly that the currency becomes virtually worthless. Economist Philip Cagan defined hyperinflation as exceeding 50% per month (approximately 13,000% annually). It typically occurs when governments finance massive fiscal deficits by printing money, often during or after wars, political collapse, or severe economic crises. The most famous example is Weimar Germany (1921-1923), where prices doubled every few days and citizens needed wheelbarrows of cash for basic purchases. More recently, Zimbabwe experienced 79.6 billion percent monthly inflation in November 2008, and Venezuela has suffered ongoing hyperinflation since 2016 with cumulative inflation in the millions of percent. Hyperinflation destroys savings, makes long-term economic planning impossible, devastates fixed-income earners and creditors, and can lead to social collapse and political upheaval. It typically ends only through drastic measures: adopting a foreign currency, creating a new currency, establishing a currency board, or implementing severe fiscal discipline.