How Hyperinflation Really Happens
By: Steve Saville
Tuesday, 28 September 2010
An article entitled “How Hyperinflation Will Happen” has garnered a lot of attention. According to this article:
“…hyperinflation is not an extension or amplification of inflation. Inflation and hyperinflation are two very distinct animals. They look the same — because in both cases, the currency loses its purchasing power — but they are not the same.
Inflation is when the economy overheats: It’s when an economy’s consumables (labor and commodities) are so in-demand because of economic growth, coupled with an expansionist credit environment, that the consumables rise in price. This forces all goods and services to rise in price as well, so that producers can keep up with costs. It is essentially a demand-driven phenomena.
Hyperinflation is the loss of faith in the currency. Prices rise in a hyperinflationary environment just like in an inflationary environment, but they rise not because people want more money for their labor or for commodities, but because people are trying to get out of the currency. It’s not that they want more money — they want less of the currency: So they will pay anything for a good which is not the currency.”