Examples throughout History of Hyperinflation

Chapter 4

Hyperinflation has occurred in the USA a couple of times. Examining the history is a great way to learn from what was taking place and to strive to prevent it from happening again.

During the Revolutionary war a printing of a type of currency called Continental Currency was introduced. However, they were very simple to counterfeit and that was a huge devastating from the economy. As a result they quickly become just about worthless.

During the Civil War the value of the dollar went from very high to almost nothing in the period of time from 1861 to 1865. It isn’t just in the USA though where this has been a part of history. That means it can happen just about anywhere regardless of the stability of the country. Many of them haven’t been too long ago in history either.

The biggest lesson in history to observe if you want to take on the perspective and the power of hyperinflation is to evaluate Germany in 1945. By 1946 the costs were increasing at a rate of about 19% per day. What is very scary is that in 2008 hyperinflation was out of control in Zimbabwe and reached an increase of 231,000,000%!

When you carefully look at all of the examples of hyperinflation that have occurred around the world you will recognize some constant themes. It usually accompanies something along the lines of a war, a depression relating to the economic state, and even drastic changes in political leadership.

When the public worries about the presence of the dollar and the value of it they are less likely to invest their money too. They will avoid placing it in the stock market, in savings, and more. This is why so many lenders drop interest rates at this time… they need to encourage people to borrow and to get the economy moving in the right direction again.

Right now in the USA you have mortgage rates for homes at the lowest they have been in a very long time. So why aren’t first time buyers and even those that want to have investment property rushing to get such loans? Why aren’t businesses buying property to get an established location?

When you also look at the fact that foreclosures for homes and businesses are also at record highs it tells you that things aren’t in balance. No one wants to borrow money for their first home and then lose it. The same is true for those that have rental properties or that want to own their own business. The risk is just too high for them to take the leap in most instances.

While such thoughts about investing being risky, the problem only continues to get worse and worse. When the public can’t find faith in the system then recovering from inflation and avoiding hyperinflation isn’t possible.

 

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