What is hyperinflation?

HyperinflationBefore explaining its meaning, it is a big problem for every country, because it generates problems in the economy and harms the standard of living of its inhabitants. Hyperinflation is the very high increase in prices and the deterioration of the value of the local currency and a detriment to the monetary patrimony of the country.

Likewise, we could say that hyperinflation is also the loss of purchasing power that a nation has, because its currency loses any value within the foreign exchange market. Essentially, it is the uncontrolled rise in inflation of products, goods and services found in the local market.

This occurs when the amount of money is drastically and rapidly increased, but was not acquired through the sale of goods and services. In other words, it is somewhat contradictory but logical. If you have more money that has not been acquired by the sale of some good or service, inflation shoots up and creates hyperinflation, because everything increases in price considerably. In this sense, the country's currency loses its value in the foreign exchange market.

If this situation develops, the economy may decline. Namely, hyperinflation destroys the country's economy and with it the standard of living decent people. Life insurance, pensions, savings, everything is destroyed, leaving huge losses for the inhabitants, especially the middle and lower class. This has been especially seen in the hyperinflation that occurred in Germany after the First War. World Cup, when the European country did not have to pay its reparation debt to the countries that faced. Hyperinflation is a threat to any government.

In Venezuela, likewise, very high hyperinflation terms have been reached that have produced a social catastrophe. But due to the regulations and the ideas of experts in economics, this situation has been reduced a little. As in Germany, hyperinflation destroys society and modifies the existing economic environment, because no one can buy a good or service. The markets are regulated to avoid situations like this and governments control every action that happens by third parties. Speculation created by third parties in the market increases inflation and its levels rise with it.