Inflation in Germany after World War One is considered by many historians to have been a cause for the popularity of the Nazi party in Germany after it promised to fix German economic woes. For this assignment you are required to do research on inflation. First, describe inflation, using easily understood terminology. Next, write on which countries have faced rapid inflation and what caused this. Why is inflation a problem? What can a government do to slow inflation? Check the homework plan for when this assignment needs to be posted.
Thursday, March 7, 2013
German Inflation
Inflation in Germany after World War One is considered by many historians to have been a cause for the popularity of the Nazi party in Germany after it promised to fix German economic woes. For this assignment you are required to do research on inflation. First, describe inflation, using easily understood terminology. Next, write on which countries have faced rapid inflation and what caused this. Why is inflation a problem? What can a government do to slow inflation? Check the homework plan for when this assignment needs to be posted.
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What is inflation? Inflation is not only the process of blowing up a balloon, but defined by the Oxford English Dictionary, it is also a great or undue expansion or enlargement; increase beyond proper limits; esp. of prices, the issue of paper money. A steady, low inflation is actually a good thing; however, too much inflation causes the currency value to skyrocket. If the currency value rises, then so do market item prices causing food and essential resources to be more expensive. This is very detrimental to the countries population as they are not able to sustain their own size. One country that is currently experiencing major inflation is Venezuela. Over the past couple of years, Venezuela has been experiencing an annual increase of about 25~30% inflation rate. This has been very detrimental to the people as a large amount of money is needed to buy items for living. The government of Venezuela insists that the inflation has been caused due to 'speculation' and 'monopolies', but the truth is that the government is printing too much money that can not be displaced throughout the country fast enough. This sudden increase in money printing has been caused by recent elections. The government has been using this new money to buy votes and overspending. However, with Venezuela's new president, Nicolas Maduro, hopefully new acts to stop this inflation will begin. There are several things Venezuela's government can do in order to stop this big of an inflation. The first thing Venezuela should do to lower inflation is to stop printing excess amounts of money. This would stop the cash flow and slowly lower the amount of money the government spends. To add on to this, the government should also increase tax prices so stores are forced to lower item prices. This would increase the currency value and also return money back to the government so they would not need to print as much as they already are. Of course, before all of this happens, Venezuela's corrupt government needs to reform. Venezuela's government is full of greedy wealth craving men who are overspending too much. It's time for them to realize what they are doing to the common people before it is to late.
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ReplyDeleteInflation is a general increase in prices and fall in the purchasing value of money. In other words, you can get less for your money than you used to be able to get. For example, maybe in one year a piece of pizza is 1 dollar. But then the next year, the price is 1.50, however you still only have 1 dollar. This is an example of a price being inflated. Many countries have faced inflation in the past, including Germany and Zimbabwe. In Germany, inflation happened after WWI because the government started to produce more and more money to pay off the debt that they owed to other countries to pay for repairs of the wars damage. This was a problem, because when this happened, the value of money went down. People would carry money around in wheelbarrows and suitcases. They would hoard items because they thought the prices were going to go up on them, which caused shortages. To stop inflation, the government dropped the hyperinflated currency and replaced it with a new currency that was more stable. Another country that has and still is facing inflation today is Zimbabwe. Inflation in Zimbabwe began right after the destruction of productive capacity in the civil war going on in the country, and the confiscation of private farms. To try and stop inflation, the government abandoned the countries currency, and today still has no defined currency. Zimbabwe currently uses currency from other countries because their currency was too inflated. The government also allowed people to cross off a certain amount of zero’s on certain notes in order to bring the inflation down. So as you can see, inflation is a big economic problem, and can be caused by many different factors. Governments also have ways of slowing inflation, however once a countries currency is inflated, it can be very difficult to fix the problem.
ReplyDeletehttp://www.joelscoins.com/exhibger2.htm
http://en.wikipedia.org/wiki/Inflation_in_the_Weimar_Republic
http://en.wikipedia.org/wiki/Hyperinflation_in_Zimbabwe
Put simply, inflation is when the value of goods or services is rapidly increasing while the currency or ability to purchase them is reduced. As a result, goods and services go unsold and damage the economy. Inflation and hyperinflation are common problems that various countries encounter during hard times. These countries from all around the globe from as early as 218 A.D. The cause of inflation can vary, as seen by the episodes of inflation from countries around the world. For example, Rome was thrown into inflation by it's lust for military power. Trying to increase the army's strength, the government increased taxes greatly, forcing many to lower their spending or more commonly, evade tax collection. Without sufficient tax collection the government was then forced to lower the value of the current currency, only worsening the economy. France underwent major inflation during the well known French Revolution. The Assemblee continuously issued more and more notes to the people. The caused the value to fall and prices to rise. And as the wages were unable to keep up with the prices, rationing and stealing became quite common, and the overall output of products greatly decreased. The United States of America, although arguable well known for its financial stability today, were victims of inflation during the Civil War. The Confederate government was unable to collect taxes or borrow money from anyone around them, and were forced to print their own form of currency excessively in order to finance the war. Overall, although the actions of the people greatly contributed to inflation, it would seem that bad decisions on the government's part are what bring a country to its knees. It is quite easy to see the inflation is quite a problem, as it makes life savings worth nothing, unevenly redistributes wealth, and affects everyone and everything. People are forced into a vicious circle, in which saving money will hurt the supplier, and making money will hurt the buyer. The only way to slow inflation is for the government to create policies to do so. These policies must make it possible for business and economy to continue, and make it possible for individuals to survive. Policies such as the Monetary and Fiscal Policies do just that in the United States by controlling the supply of money and credit, and controlling taxes.
ReplyDeleteWorks Cited
"Chapter 7: Inflation." Oswego.edu. N.p., n.d. Web. 13 Mar. 2013. .
"Inflation." Investopidia. ValueClick, Inc, 2013. Web. 13 Mar. 2013. .
"Monetary and Fiscal Policy." The Social Studies Help Center. N.p., 2001-2013. Web. 13 Mar. 2013. .
Thayer Watkins, and San José State University Department of Economics. "Episodes of Hyperinflation." Applet-magic.com. N.p., n.d. Web. 13 Mar. 2013. .
According to Investopedia, inflation is “the rate at which the general level of prices for goods and services is rising, and, subsequently, purchasing power is falling.” In other words, inflating means that a piece of money becomes worth very little. If there is severe inflation, money may become worthless overnight, causing basic needs such as food and water to cost a ridiculous amount. Consequently, inflation also represents a decline of the purchasing power of money, or the amount of goods or services one is able to purchase with one unit of money. Inflation is, however, beneficial if at a certain rate. The target rate for inflation is about two to three percent per year, which would be compensated to the workingman with the same percent of a bump in salary. For example, in Zimbabwe during the height of hyperinflation in 2008-2009, the money would become worthless overnight resulting in a struggling population. More money was needed to fund war in the DRC, causing the government to keep printing money. As more units of money are printed, each unit becomes worth less. During 2008, the year long inflation rate was 471,000,000%. In January of 2008 one dollar was equivalent to 10^10 ZWD and then the next January one dollar was equivalent to 10^51 ZWD. Overnight, money once worth something was becoming worthless. The money earned from hard work a month ago was not able to feed you now. Saving money was pointless. Other examples of hyperinflation include Greece in October 1944, Yugoslavia in January 1994, and Hungary in July 1946. In Hungary, at the height of hyper inflation, it took just fifteen hours for prices to double. The population would work for the going rate at that time, but the going rate would constantly change, meaning that the workers would not be able to keep up with the ever-changing rates. In terms of solutions, the most viable would be for the government to stop printing money. The rate would then finally remain the same. The government can also change currencies to that of a foreign, but more stable currency. Candidates for this solution would be the US dollar and the Euro. The government may be able to collect the old currency in exchange for a different, new currency, but this solution would prove difficult. In terms of prevention, the country could attach the value of the currency to a valuable physical commodity as the US did in the 70’s with silver.
ReplyDeleteNeema Majidishad
ReplyDeleteMr. Webber
History 10
3/14/13
In "English," inflation is when the value (price) of things such as common necessities, really any goods is increasing while the currency(dollar value) is decreasing. As a result of this, it makes purchasing things very difficult and makes it hard to support a family. This is clearly an inversely proportional curve, and is not good. According to the English Oxford Dictionary, inflation means "Great or undue expansion or enlargement; increase beyond proper limits; esp. of prices, the issue of paper money, etc. spec. An undue increase in the quantity of money in relation to the goods available for purchase; (in lay use) an inordinate rise in prices." This is clearly very for a country because it makes it difficult to sustain the population. As people start to leave, to country slowly starts to crumble. There are many countries that go through inflation but the one that will be discussed in this blog post will be on China. The past few months in China have been rough and is planned to get even worse. Consumer prices in China have risen 3.2 percent last month, which is up 2 percent from January of 2013. According to Bloomberg BusinessWeek, In the first two months of 2013, inflation averaged 2.6 percent, which is half a percent point higher than the average rate at the end of 2012. Fighting the inflation could effect the growth in the economy. According to Bloomberg BusinessWeek, GDP growth in the worlds second-largest economy shrank for 7 quarters in a row until the end of the year 2012. While the second-largest economy shrank, the Chinese government 7.9 percent. There are many causes for inflation in a country. For China, I believe some of those are the changes in economic structure and also the price reform. In my opinion, inflation is a big problem. It is a big problem because value in dollar decreases and common goods get more expensive. As Mr. Webber said in class, some people will not get the raise at work so they will not have enough money to support themselves, even worse their families. This also makes it difficult for people wanting to retire because they may not have the money to support themselves for the period of time that they expected to. Something the government can do to slow inflation is to basically make people "scared" to spend their money, which causes them to save their money. The government can also decrease the tax rate which is difficult, but can also be very effective in a countries survival.
Inflation is the rate at which the general price of goods and services rises. The price increase results in a decreased value of currency. Too much inflation can be detrimental to an economy, but a small 2 to 3 percent increase in prices does not have a negative effect and is the rate many countries attempt to sustain; slight inflation is beneficial to the economy when incomes rise at an equal rate. An example of high inflation’s devastating effects is Zimbabwe in 2008. The country suffered from annual inflation that was 500 billion percent at one point, which had enormous consequences on the economy. The number of zeros on money notes soared; a 100 trillion dollar note was printed. Zimbabwe was forced to give up their national currency in order to tame the rate of inflation. The hyperinflation (an inflation rate of over 1,000 percent) was brought about by the government’s orders to print more money. It used the money to fund its own needs. The excess of money caused its value to drop, thus incurring inflation. Germany also experienced high inflation in the 1920’s. In Weimar, prices quadrupled each month. Money became essentially worthless. Many elderly people had money saved up from their whole lives, but the inflation nullified those reserves, which left them poor and resourceless. The inflation was a result of the strict provisions that the Allies placed on Germany following the war. Inflation seriously harms the economy of a country. As prices rise, purchasing power drops. When rapid increase occurs, people no longer are able to afford simple products. For example, toilet paper became unaffordable in Zimbabwe. However, deflation and stagflation, when prices drop or stay the same, are harmful to an economy as well. Economic activity slows and stagnates; no forward progress can be made. To deal with inflation, a government can raise interest rates. This slows the aggregate demand and allows the economy to cool. The government can also slowly lower the prices of food or gasoline to level out the relationship between income and inflation rates.
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ReplyDeleteAccording to the Investopedia, inflation is the rate at which the general level of prices for goods and services rises, and, subsequently, purchasing power falling. Put in a clearer sense, inflation is when the price of every day essentials such as food or clothes or services such as plumbing or carpentry rises while to value of the money needed to purchase those goods and services decreases. This is a problem because the wages of the employed don't rise in correlation with the dramatic increase in inflation. As a consequence, it becomes harder to come up with the money needed to buy the overpriced goods which makes it harder to support and maintain families and lifestyles. However, inflation in a small amount is beneficial because it allows the labor markets to reach an equilibrium fast and more efficiently and also leaves room for cuts in interest rates if ever necessary. Most banks tend to want to sustain inflation rates of about 2-3%.
ReplyDeleteMany countries suffer from hyperinflation, China and Ethiopia being just two, but I am going to focus specifically on the hyperinflation that has plagued Venezuela for the past some-odd years. The figures have stayed between a rate of 25 and 30 percent despite the low GDP. In order to deal with the inflation, the government put in price controls but through the years the controls have stayed frozen which has led to poor business maintenance and the inability to hire new workers which has driven some into bankruptcy. Apparently the government claims the problems are caused by "monopolies" and "speculation" while denouncing their actions of printing off too much money for government spending. The excess money that they print to pay bills or buy votes gets sifted into the economy which increases the money supply without increasing the supply of goods which is the cause of the hyperinflation in the country. The governments fix for the problem is just to increase more price controls which sends the country deeper into the economic abyss.
Advice for slowing down inflation depends on the causes of hyperinflation in the first place, however most of the solutions revolve around the lowering the GDP. Government can reduce the amount of fund spending by consumers by increasing taxes, decrease government spending,or increase interest rates of the bank in order to force other interest rates up to increase borrowing money. For Venezuela, the suggestion needed to take would be to lower government spending and thus decrease the amount of excess money being printed. Money then wouldn't be as easily readable which would allow the value of the currency to lower back to its normal state and along with it, the inflation of the country.
Inflation is the raise of price in goods or services in any economy. Inflation can also lead to a decrease in the value of an economies currency if not regulated at a steady rate. If inflation is increased by a few percent each year and kept under control it is actually healthy for an economy and the fluctuation of the currency along with ever-growing prices of services and goods make economies bigger and stronger. Inflation is also good for an economy if wages are also risen along with prices keeping products costing relatively the same amount. This can be a problem if there is a fixed amount of money such as a life savings or retirement account. These can be deemed worthless in the matter of days by inflation. Just a few years ago in Zimbabwe, there was a huge inflation issue. Zimbabwe's productivity was at an all time low because of a civil war and a global economy crash in 2008 and 2009, so the government took it into their hands to try and make up for this. The worst imaginable happened, they printed as much money as possible so they would be able to support their economy and fund their own affairs. They printed so much money that the value of their dollar became almost worthless. This destroyed the value of their economy and rendered large savings worthless. Zimbabwe ended up having a 100 trillion dollar note that was worth almost nothing. A government can't really fix inflation, on such a level as Zimbabwe, but they can prevent it by putting regulations on how much money is made and how much basic goods prices can actually inflate, not based on supply and demand.
ReplyDeleteInflation is an increase in price and a decrease in the value of money. This means that the price of something will go up and cost more, but your money is worth less. The increase of the price is due to the decreased value of money. Inflation can very much hurt a country’s economy when it is too high, but a small amount of inflation at a steady rate can be beneficial. Some countries that have faced rapid inflation, also known as hyperinflation, are Zimbabwe and Yugoslavia due to governmental mismanagement. Greece went through hyperinflation because of their debt after WWII. Also, Hungary’s prices doubled every 15.6 hours because of many different reasons. The United States has never gone through hyperinflation, but it nearly did during the Civil War and the Revolutionary War. Hyperinflation usually occurs during wars or because of bad fiscal policy decisions made by governments. Inflation is a huge problem when it gets out of hand because people are unable to buy necessary things. The rate of currency compared to the price changes so much that money soon becomes worthless during rapid inflation. Some ways that the government would be able to slow inflation would be by printing less money until the economy is able to level out. Also, the government could create limits to slow and decrease inflation.
ReplyDeleteSources:
http://en.wikipedia.org/wiki/Inflation
http://www.cnbc.com/id/41532451
Inflation is the rise in price of goods and services because of a decline in purchasing power. The decline in purchasing power is often caused by an increase in the money supply. When the government prints more money, the value of each unit of currency decreases. For example, if a pack of gum costs $1 this year, and the rate of inflation is 2%, the gum will cost $1.02 next year.
ReplyDeleteDeveloped countries want to sustain a 2-3% level of inflation. This level is low enough that people won’t worry incessantly about the value of their assets and is high enough that supply and demand will be offset. With inflation, there is more money chasing too few goods. When the demand surpasses supply, prices will rise. Most economists agree that 2-3% inflation is a sign of a growing economy.
The most recent example of hyperinflation, 50% and above inflation, would be Zimbabwe in 2008. The monthly inflation rate was 7.96 × 10^10 %, meaning prices would double every 24.7 hours. The Zimbabwean government was printing money to finance its involvement in the Democratic Republic of the Congo. Corruption was rampant, as was lack of confidence in the government. As a result, many corporations engaged in self-dealing. The large increase in money supply was not accompanied by an increase in goods and services. Also, the people had no confidence in their government’s ability to demonstrate financial self-control. There was too much money to spend on too few goods.
Each year, as inflation increases prices, the value of the dollar decreases by a certain amount. Therefore, if your income does not increase, you will be able to buy 2-3% less product than you were the year before. The uncertainty regarding future inflation rates makes corporations and people unwilling to spend money on production and consumption. People and corporations focus on shorter-time horizons and are more unlikely to build 10-year plans or invest in 30-year mortgages. Overall, inflation causes production to slow, which results in a decline in goods and services. As a result, people have less to buy and will begin to hoard their money in preparation for a severe fluctuation in inflation.
The United States Federal Government uses monetary policy to manipulate liquidity. Liquidity a measure of capital available for consumption. Banks are required by the Fed to maintain a cash reserve. The Fed rate is the rate banks charge each other for storing excess cash overnight. When the rates increase, then interest rates for bank loans and mortgages also increase, decreasing liquidity. When rates decrease, other interest rates decreases, making it easier for people to borrow and loan money, thus increasing liquidity. Another way the US Government can decrease inflation is by having banks buy Treasury notes. When banks buy the notes, they will have less money to lend. As a result, interest rates will rise, less borrowing will occur, business growth will slow, prices will stop rising, and inflation will stop.
Sources:
http://en.wikipedia.org/wiki/Inflation
http://www.investopedia.com/university/inflation/inflation1.asp#axzz2NZM1OlVY
http://www.cato.org/zimbabwe
http://www.newzimbabwe.com/pages/inflation180.17386.html
http://useconomy.about.com/od/monetarypolicy/a/fed_funds_rate.htm
http://useconomy.about.com/od/glossary/g/liquidity.htm
http://useconomy.about.com/od/glossary/g/Contractionary.htm
http://www.oswego.edu/~edunne/200ch7.html
Inflation is when the price of goods rises at a certain rate, and because of this, the amount of goods able to be purchased by a unit of currency goes down. On the contrary, deflation is the exact opposite and causes the price of goods to lessen. In addition, the more money a government prints, the value of this money decreases. A good example of inflation is seen in everyday life. If a country has an inflation rate of 3%, and a candy bar costs $1.00 one year, it will cost $1.03 the next year. A country hopes to avoid severe inflation or deflation, and an ideal inflation rate is around 2-3% a year. This is ideal because there is a perfect amount of money and goods, and the rate is just high enough for a balanced supply and demand.
ReplyDeleteSevere inflation is also called hyperinflation, and there have been many examples of hyperinflation throughout the years, but the most recent was in Zimbabwe. The last recorded inflation rate was 2,600.2%, and this was recorded in July of 2008. The inflation rate in Zimbabwe had only been considered hyperinflation since it went above 50% in March 2007, just a little more than a year before the last recorded rate. Zimbabwe stopped recorded the inflation rates because they were too high, and will only start when the situation betters. This hyperinflation occurred because the government of Zimbabwe tried to resolve their problems and debts by printing more money, but this just decreased the value of their dollars. Hard-earned savings had less and less value, and the price of goods soared. Zimbabwe is just one country out of many that have gone through hyperinflation.
Inflation is a problem because people are not able to buy the goods they used to to be able to, and can not maintain their previous lifestyles. In addition, salaries and contracts do not account for severe inflation, which means that if hyperinflation occurs, salaries are virtually unusable, and can not buy anything. This means that every time the inflation rate rises, you are able to buy less and less goods.
Governments try to avoid hyperinflation as best they can, and there are a few methods to do so. If a government can use fiscal policy to control inflation, it can manage the demand through government spending. On the other hand, fiscal policy is very unpopular and is rarely used. Money policy is also used to control inflation rates. Money policy controls interest rates, but will collapse once any pressure is put on it, so it is not very effective. Yet another strategy is direct intervention. Direct intervention restricts wages and earning, but is often confronted by unions.
Sources:
http://www.investopedia.com/terms/i/inflation.asp#axzz2NZz2Oihu
http://www.investopedia.com/terms/f/fiscalpolicy.asp#axzz2NZz2Oihu
http://www.siilats.com/docs/keskkoolECON/INFLAT.htm
http://conversableeconomist.blogspot.com/2012/03/hyperinflation-and-zimbabwe-example.html
In the dictionary inflation means the continuous rise of the price for all kinds of payments in the whole society. Technically, when inflation is happening badly, it means the value of your money is decreasing every single minute. However, inflation is not always a bad thing. Inflation will also happen simply when the purchasing ability of the society is increasing. Accordingly, if the inflation rate is either too high or too low (0%-6%), it can even show that the economy of the society is advancing. If the inflation rate is too low it even means anther problem called deflation. However, inflation is not a good thing over all. If the inflation is too high it can be a real problem. Imagine that, you bought a bag of rice yesterday for 1$, but when you bought a same bag of rice as yesterday, you need to pay for 3$ or more. This is a good example of a serious inflation, it’s still happening in a lot of countries such as Zimbabwe, Venezuela, and Congo nowadays. Inflation can hurt the economy really badly. The biggest victim of the inflation is the populace; the leader of the country can exploit the people by producing more paper money to increase the inflation rate. Inflation can be caused by several reasons. First one is demand-pull, which is demand being more than the available supply. Second is cost-push, Cost-push inflation occurs when manufacturers and businesses raise prices as a result of shortages, or as a measure to balance other increases in production costs. Third is build-in which happens as a result of previous increases in prices caused by demand-push or cost-pull. Forth is Quantity, which is simply having too much money in the society. There are a lot of ways to control the inflation, such as producing less money, encouraging people to make investment abroad, limit other countries to invest in this country and raising interest rate.
ReplyDeletehttp://www.wisegeek.com/what-causes-inflation.htm
http://en.wikipedia.org/wiki/List_of_countries_and_territories_by_inflation_rate
As defined by the Oxford English Dictionary, inflation is great or undue expansion or enlargement; increase beyond proper limits; esp. of prices, the issue of paper money, etc. spec. An undue increase in the quantity of money in relation to the goods available for purchase; (in lay use) an inordinate rise in prices. In simple terms, this means the ratio between the amount of money and the amount of goods go out of sync. Value of an item is relative, and when more money is added to a system and the goods available to purchase doesn’t increase, the currency is valued less.
ReplyDeleteOne country facing high inflation rates is Afghanistan. Due to the war, citizens of Afghanistan live in an environment of fear and little infrastructure. This causes inflation to rise.
Another country facing high inflation is Guinea. They have a wealth of natural resources, but lack the infrastructure to support it causing them to be a poor country with high inflation rates.
Finally, Mexico has a high inflation rate due to mismanagement in government. While trying to fix the economy, the government ruined it and caused the value of the peso to drop rapidly.
Inflation is a problem because the power of money is lowered. For workers whose salary isn’t raised to compensate for inflation are in lots of trouble because they can no longer afford what they used to be able to afford because the price went up, but their income didn’t. This leads to poverty because no one can afford food and goods, so stores don’t stock them. Then the economy begins to collapse because no one can afford to buy things.
In order to combat inflation, governments raise interest. A higher interest rate makes it more costly to borrow money. By slowing down the transfer of money, the value of currency goes back up to combat inflation. The trick is finding a middle ground where interest rates are low enough that employment is high, prices are stable, and growth is at a good level. When interest is too low, consumers spend more and this stimulates economic growth. If it grows too fast, inflation rates will go up.
Sources:
http://www.rediff.com/business/slide-show/slide-show-1-10-countries-with-highest-inflation
http://oed.com/
http://www.dailytelegraph.com.au/money/why-high-inflation-is-a-problem/story-e6frezc0-1111115845285
http://www.investopedia.com/university/inflation/inflation3.asp#axzz2NaayuJuF
ReplyDeleteIn is the decreasing of value in currency causing increasing prices in goods. This is a very common economic trend. It reveals how artificial currency truly is in keeping its value compared to solid currencies such as gold and precious resources. A low amount of inflation is healthy. It shows that the economy is adjusting to its neighbors and its value is adjusting accordingly. However, too much inflation, such as that of Zimbabwe’s, can cause (and/or be the cause of) a collapsing economy.
http://www.oswego.edu/~edunne/200ch7.html
http://public.econ.duke.edu/~grohe/teaching/econ153/How%20Bad%20Is%20Inflation%20in%20Zimbabwe%20-%20New%20York%20Times.htm
Many countries throughout the past and present have experienced. However, one of the worst cases by far of inflation is Zimbabwe, which I’ll be focusing on. Zimbabwe has an extreme case of Hyperinflation, which was 89,700,000,000,000,000,000,000% in the year 2008 before they literally ran out of currency paper to print on for a period of time. There are many factors behind this mess. When the new President of Zimbabwe, Mugabe, came into office, he turned over many of the productive agricultural powerhouses which supplied food to South and East Africa, to his own workers who were extremely incompetent. On top of this, there was not enough With this, there was no economic backing to support the currency Mugabe printed out. As Mugabe printed out more and more money, (until he ran out of paper), the value of the currency decreased so much it became theoretically (not practically) more economical to burn the currency then to buy firewood.
One of the best ways to reduce the inflation rate of a country is to print out significantly less money. This would increase the value of the money. The problem is that many governments require large amounts of temporary, artificial value to support their massive budgets and debts at the cost of its own private sector.
Inflation is a key component to having a good economy. A small increase of inflation once a year is very good as this means the standard of living is rising, which therefore rises the expenses of products around the country. If a rapid increase of inflation happens it can tear a countries economy apart. The name of this type of inflation is called hyperinflation. This was seen very well in Germany after world war 1 . During the war salaries stayed the same or rose a bit with the predicted inflation. No one expected though that in just ten years the prices of food would triple. An example was in 1914 when 1 loaf was 13 pefnigg compared to in 1924 when 35 pefnigg was the price for the same loaf. This meant that a factory worker who was earning 150 pfennig a week would go from being able to eat a good meal everyday to barely being able to feed himself enough food. This factory worker would not have gotten a significant increase in pay as he had already signed a contract before he started working.
ReplyDeleteInflation has not only happened in Germany, but also in many other places in the world. An example is in Ecuador in 2000.The economy of ecuador was very dependent on oil. When oil prices suddenly dropped in 2000 it caused its currency to lose value, which therefore caused inflation. In the end of the crisis 25,000 ecuadorian dollars were equal to 1 U.s dollar. The economy was heavily damaged in this conflict as many Ecuadorian citizens could no longer buy the necessary goods to live a pleasant life as they were too expensive. As hyperinflation started to happen the ecuadorian currency was exchanged to the U.S dollar.
One can stop inflation in numerous ways . A basic way to slow down inflation is to increase the interest rates. The reason why this increases the value of the currency is because it makes consumers borrow less money, which therefore causes less money to be distributed in the economy.
Inflation is when prices of goods or services are raised and the value of money decreases. This means that most of the goods and services are not used or not sold, because people cannot afford them anymore. This is what happens to most of the countries. It goes back from the really early ages to right now in the present. A country that went through inflation during the 18th century was the United States during the Civil War. It started at the beginning of the war, when before the war one dollar paid for one Gold Dollar. Then one month later one dollar and twenty-five cents paid for one Gold Dollar, this increased in 25% in just one month. Two years later one Gold Dollar was three dollars, this increased in 200%. From he beginning of the war to two years later was about 140% inflation. From the beginning of the war the inflation had increased 10% a month. This really did affect the people, because by the end of the war he living cost was about 100 times more than when it stared. This of course was caused all because of the dramatic increase of money supply. At the end of the war the congress had made a currency reform. This helped the United States become economically stable again. A more modern example of inflation affecting countries was in Zimbabwe, which occurred in 2008. This got really bad really fast; at one point their inflation was more than 100 billon percent. This is an example of hyperinflation, which is an inflation rate that is over 1,000 percent. It was so bad that the government kept printing out bills that had too many unnecessary zeros. Some of the bills had more than 6 zeros, and there was a 100 trillion bill. The country had printed out too many bills that the value of them was decreasing, which made more inflation. It got to a point that people couldn’t even have good hygiene or afford a cup of water. This inflation had real consequences for this nation. The nation had to let go of their currency, because of how high it got to. The nation is currently trying to go back to its economic status. Inflation is bad, because the value of a bill decrease and the currency increases. This then makes the people become economically unstable and end up losing a lot, whether it is money, values, or family members. Some thing countries can do to slow inflation is to slowly increase rates. This helps both the government and people to accustom to the new changes. If a country increases prices up to a most five percent then this will be good for the country and still be economically stable. A little bit od inflation is good for a country to keep on building, but a country cannot make drastic changes in a sudden moment.
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ReplyDeleteAccording to the Oxford English Dictionary, inflation means an undue increase in the quantity of money in relation to the goods available for purchase; an inordinate rise in prices. However, in simpler terms, inflation is when a government produces so much money that it loses its original worth, and as a result, makes prices for products and goods skyrocket.
ReplyDeleteThere have been many examples from history where inflation has occurred, and at times, totally defeats the country’s economy. For example, after World War I and the Treaty of Versailles, the German mark was worth so little that they began to burn money in their fireplaces because wood was more expensive than the money itself. In fact, Ernest Hemmingway had described that because 1 dollar was equivalent to 800 German marks, people could not afford even simple necessities like food. To add to this dire situation for the Germans, many of the neighboring Frenchmen often came over to Germany to buy products at such low prices. Because they were so cheap, the French often cleared out bakeries and cafes, leaving the shops empty for those Germans who could have used their life savings to buy a loaf of bread.
More recently, major inflation occurred in Zimbabwe in 2006. This was a major crisis because although simple products like a roll of toilet paper cost over $100,000 dollars, the citizens of Zimbabwe were not earning a raise, and could not afford any of the skyrocketing costs, which increased by about 400% over the course of one year. This is always a major concern with inflation, but in this situation, the economy and the national government were practically destroyed. Some suggested raising the wages for workers in Zimbabwe, but it was probably not a viable solution since the government had already printed over 21 trillion dollars in one year.
In Zimbabwe’s situation, they were able to fix this outrageous inflation by converting to the dollar. However, the other main solution is to increase tax rates, which would be in attempt to reduce the amount of money in circulation. Overall, inflation can get out of hand very quickly and should be prevented at all costs, as it is very difficult to every recover from the inflation that both Germany and Zimbabwe experienced. The only way to really prevent high inflation though is to not print all of that money in the first place because it can lose its value rapidly.
Sources:
Primary Source: German Inflation by Ernest Hemmingway
http://www.nytimes.com/2006/05/02/world/africa/02zimbabwe.html?pagewanted=all&_r=0
Inflation is defined as a sustained increase of prices by which the worthiness of money decreases. This fundamentally means that the government produces so much money that it loses its original value. In Germany, after World War One, the government had overprinted new money to meet the demands of the Treaty, which led rapid inflation and the eventual collapse of the German economy. This led to a collapse because if money was worth as much a fire wood then how would the Germans be able to buy needs for their families such as food, water, shelter, and other necessities if the prices increased majorly. "The American dollar was quoted at 4.2 trillion marks, the American penny at 42 billion marks." This put German's in a rough position. They would work for months just to afford a loaf of bread. With inflation, there is no doubt that the country will suffer in immense pain wether mentally or physically.
ReplyDeleteZimbabwe had some major inflation over the past years. Shortly after destruction of productive capacity in Zimbabwe's civil war, hyperinflation kicked in. " From 1999 to 2009, the country experienced a sharp drop in food production and in all other sectors. Food output capacity fell 45%, manufacturing output 29% in 2005, 26% in 2006 and 28% in 2007, and unemployment rose to 80%" They blamed it on the economy. In a news article, "The Epoch Times", goes on to talk about Zimbabwe's economy now by starting off the article with a title, "Zimbabwe Has Only $217 in Its Public Bank Account". Reading though the article author Alex Johnston explains how, "The government of Zimbabwe only has $217 in its public account after paying public workers last week." He was comparing the US dollar to the "sextillion", "at one time included dollar bills ranging from 10 billion to 100 billion". The last words in the article state, "The United Nations previously said that Zimbabwe will need at least $131 million in food aid this year, as around 1.7 million people could go hungry." This is a great example to see that inflation kills. It kills lives, families, and countries.
Thinking about it, inflation mostly goes with Supply and Demand. If there is a high demand, the prices will increase, low demand, prices will decrease. In most cases with inflation, the demand is high, so to price is high. But if the money they make for years turns into enough to buy a loaf of bread, then thats when the problem happens.
http://mises.org/daily/2347
http://en.wikipedia.org/wiki/Hyperinflation_in_Zimbabwe
http://www.theepochtimes.com/n2/world/zimbabwe-has-only-217-in-its-public-bank-account-342017.html
Inflation is most commonly defined as the steady increase of prices on goods. Or in other words, the value of the dollar does not stay consistent during a period of inflation. This results in food, clothes, water, and other basic necessities to rise. In recent years countries such as Zimbabwe have experienced a type of inflation called hyperinflation. Hyperinflation basically means that inflation has gone out of control and the paper dollar’s value has skyrocketed. In 2008, if you wanted to buy a bottle of beer in Zimbabwe, it would cost you roughly half a billion dollars. Possible causes for inflation in Zimbabwe was the recession and the fact that the military officials in Zimbabwe were under reporting their military spending by around twenty two million dollars a month to the International Monetary Fund. The Mugabe government was also printing money to finance their involvement in the Democratic Republic of the Congo. A little bit of inflation is actually a good thing for countries. Inflation prompts people to put their money into working investments so that the company can grow along with their savings. Too much inflation however prompts people to take their money out of investments and into other investments that are “inflation proof.” Such investments are gold, jewelry and other collectables. When a country is going through a period of rapid inflation, people take their money out of investments because they don’t want to lose all their money. They could lose a majority of their money if not all by simply receiving 10% on an investment if inflation was at 12%. Unfortunately, one of the ways a country can slow inflation is by the increase of taxes. The government can also decrease government spending, and increase the interest rates at the national bank, causing the country’s currency to gain value. The longest way is just to wait it out and let the flow of the market take its course.
ReplyDeletehttp://www.investopedia.com/university/inflation/inflation1.asp#axzz2NozrzR4b
http://www.investopedia.com/terms/h/hyperinflation.asp#axzz2NozrzR4b
http://www.economist.com/node/11378439?story_id=11378439
http://en.wikipedia.org/wiki/Hyperinflation_in_Zimbabwe
-Inflation is when the price of good and services rise. When this happens the value of a country's currency decreases. For instance one person who is used to buying food for 200$ a week may be able to do this with their yearly salary, inflation may rise the cost to 400$ a week and the person would no longer be able to afford food. Venezuela is on example of a country that experienced one of the highest inflations in the world recently. This amount was roughly 26% in 2011 and 21% in 2012. The government of Venezuela blamed this on monopolies; however, they don't mention the fact they are printing a lot of money. When more money is printed, there is an increase in the supply of goods and services. When more money is floating around, they have more demand, so then the prices rise. Though there is more money in the country, many of the average citizens keep the same pay. This means that food/supply prices would be too expensive for the common people to afford. In Venezuela, inflation is reflected in the poverty rate. Over 30% of the country lives bellow the poverty line. A government can control inflation by changing its monetary policy. This means a government would raise the central bank's (national bank's) interest rates. This can would the value of the national currency and allow for more money available for investment. This would lead to a higher exchange rate making: imports cheaper, reducing demand for exports and increasing incentive for exporters to cut costs. The government can also change is fiscal policy which means that it could increase taxes and cut spending to improve the countries budget situation.
ReplyDeletehttps://www.cia.gov/library/publications/the-world-factbook/geos/ve.html
http://www.bbc.co.uk/news/world-latin-america-19649648
http://www.economicshelp.org/blog/2269/economics/ways-to-reduce-inflation/
DeleteAccording to investopedia, inflation is defined as a sustained increase in the general level of prices for goods and services. It is measured as an annual percentage increase. Inflation causes the price of goods and services to dramatically rise while the value of one’s money dramatically decreases. During inflation, the value of the country’s currency constantly changes. When inflation goes up, there is a decline in the purchasing power of money. For example, if a gallon of milk was $3.00 on Saturday but rose to $4.00 a week later, your money depreciates. You will lose $1.00 more every time you purchase milk from now on. As the milk rose, the value of money stayed the same. This is a perfect example of inflation. One country that has recently been greatly affected by hyperinflation is Zimbabwe. Hyperinflation is unusually rapid inflation. Hyperinflation in Zimbabwe began shortly after Zimbabwe’s civil war. The height of the inflation occurred from 2008 to 2009. Zimbabwe’s peak month of inflation is estimated at “6.5 sextillion” percent in mid-November of 2008. During 2009, Zimbabwe abandoned their national currency due to how little the value of money was worth. Today, Zimbabwe still doesn’t have a national currency. Instead, they use several currencies from several countries. Zimbabwe was a strong, thriving nation up until 1999 when food production dropped dramatically. Food output fell 45 % and unemployment rose to nearly 80%. This caused the average life expectancy of Zimbabwe to drop dramatically. In 2008, a bottle of beer cost approximately 500,000,000 dollars!
ReplyDeleteInflation has caused countries all over to suffer. Inflation has corrupted entire nations such as Zimbabwe and Venezuela. Poverty severely rises during inflation as well.
One way governments can try to slow inflation is by raising taxes on goods and services. The government can also decrease government spending and increase interest rates at national banks, which may cause the worth of the country’s currency to go up. The longest most difficult way would be to let the flow of the market heal the problem on its own.
http://www.economist.com/node/11378439?story_id=11378439
http://en.wikipedia.org/wiki/Hyperinflation_in_Zimbabwe
http://www.investopedia.com/university/inflation/inflation1.asp#axzz2Np6u0zke
In layman’s terms, inflation is the rising in cost of goods and services within a certain economic system. For example, the price of gas has been steadily rising in the United States (as well as the rest of the world). This could be qualified as inflation. Inflation becomes a problem for the people in an economy when the money that they are paid loses value due to the fact that it takes more to pay for the goods that they need. This means that long term investments that people make also lose their value.
ReplyDeleteThere have been many countries throughout the course of history that have suffered from inflation, often in extreme cases. One such case is the African country of Zimbabwe, which suffered from extreme inflation after the Zimbabwean civil war, where much of the production of the country was destroyed. At the peak of the inflation in Zimbabwe, the inflation percentage equaled 6.5 sextillion percent. The currency included 100 trillion dollar bills, the highest value bill circulating in Zimbabwe during their inflation. It was at this point that Zimbabwe stopped using the official currency in favor of currencies from other countries.
Another case involves post World War 2 Hungary, which has the highest recorded inflation the world has ever seen. Hungary had two currencies, the pengo, used for civil debts, and the adopengo for taxes. Each day, the values of the currencies were updated, with respect to each other. By July of 1946, one adopengo was valued equal to 2 sextillion pengo.
Central banks are generally given the responsibility of controlling the inflation in an economy. They can accomplish this by keeping their lending rates low. Alternatively, the government can set a “fixed exchange rate” which pegs the currency of a certain country to that of another. This means that the inflation rate of a certain currency is determined by the inflation rate that the currency is connected to. Similar methods can be used with gold or other precious metals. In very extreme cases, the government may be forced to abandon the currency altogether, as has happened with Zimbabwe and Hungary.
http://en.wikipedia.org/wiki/Hyperinflation
http://en.wikipedia.org/wiki/Hyperinflation_in_Zimbabwe
http://en.wikipedia.org/wiki/Inflation#Controlling_inflation
Inflation is a general increase in prices and fall in the purchasing value of money. A few countries that have faced extreme rapid inflation are: Zimbabwe, Burma and Guinea. In Zimbabwe's case, "one reason the currency continued to lose value, causing hyperinflation, is that so many people expected it to." This self-perpetuation played a big role in inflation because the government felt that they were too deep into inflation and that there was no hope of them getting out of it. Everyone gave up hope, and accepted inflation and the loss of the value of their money. A leading factor as to why their money lost its value was because they were over creating it. They were printing too much money and the value of it was continuously decreasing. The money that they were creating could not hold value because, "the people holding the money lack confidence in its ability to retain its value." There is not much that the Zimbabwe government could have done after letting the rapid inflation get so out of hand, but "the most direct solution is a credible promise to stop printing unlimited amounts of money. However, Zimbabwean inflation has lasted for five years and the credibility of any promise is problematic." Inflation is a huge problem because the more money that is printed the more the value decreases. This is a serious issue because the government is using this newly printed money to pay off debts and other problems of the government. While this can seem good because the government is escaping things like debt, it causes the money of the citizens of the country to go down. People are losing money and prices of goods and usually things they can afford go sky rocketing. This causes many people to lose homes, not being able to provide for their families, and ultimately dying. It's similar to the domino effect, because the simple act of printing more money can destroy the credibility of an entire country.
ReplyDeletehttp://visualeconomics.creditloan.com/inflation-by-country/
http://en.wikipedia.org/wiki/Hyperinflation_in_Zimbabwe
Inflation, as defined by Wikipedia, is “a rise in the general level of prices of goods and services in an economy over a period of time.” As prices rise, purchasing power falls because the same amount of money can pay for less of a product. This is detrimental to the people. Their salaries do not increase at the same rate prices do, making it more and more difficult to buy the same everyday necessities (i.e food, water, gas, clothes, etc.).
ReplyDeleteThere is not one universal cause for inflation. It varies. However, there are two theories. The first, being “demand-pull inflation,” is when there is a high demand for a product and not enough of that product. As a result, prices increase. The second, being “cost-push inflation,” is when the cost of companies go up and they have to increase prices in order to profit. As I said, though, these are two “theories.” It isn’t the same in every case. On the other hand, hyperinflation, which can be thought of as severe or unstoppable inflation, is most often caused by “rapid money creation,” because when there are large amounts of paper money, it loses value.
Many countries (including Argentina, Austria, Brazil, Chile, China, France, Germany, Greece, North Korea, Philippines, Zimbabwe, Iraq, Mexico, the United States, and more) have experienced inflation or even hyperinflation, but the most severe case of inflation to ever be recorded happened in Hungary during 1945 and 1946. At one point, prices were doubling every 15 hours. Hungary’s economy was ruined by WWII, and similar to Germany, they were ordered to pay for reparations. The central bankers saw that printing too much money would not result in good things for the country, but the Soviets forced them to. As stated above, “rapid money creation” is a cause of hyperinflation, and that is exactly what happened in Hungary.
Inflation can have a negative effect on individuals and on a country as a whole. As explained, as prices rise, it becomes harder for people to compensate when they are earning the same amount of money as before. Over time, this cripples the economy. However, inflation, though it is always thought of as a bad thing, can sometimes be good. If you expect prices of products to rise, you are more likely to purchase sooner or invest in a company sooner, and you will eventually benefit more.
There are several ways for a government to slow down inflation, one of them being raising interest rates. As interest rates are increased, people are more hesitant to borrow money. Therefore, the transfer of money will be slower and less money will be dealt out in a country’s economy.
http://en.wikipedia.org/wiki/Inflation
http://www.investopedia.com/university/inflation/inflation1.asp#axzz2Nq3OIgfJ
http://en.wikipedia.org/wiki/Hyperinflation
http://www.businessinsider.com/9-hyperinflation-horror-stories-2012-9?op=1
3-14-13
ReplyDeleteGerman inflation
Inflation
Inflation according to Google is “a general increase in prices and fall in the purchasing value of money.” When the prices increase, it causes each unit of currency to buy less goods and services. This affects the purchasing power of money. Oddly Inflation can be both good and bad. It is bad because of the difficulty of holding money, the increased prices and can result in shortages of goods as buyers begin to hoard out of fear. On the positive side, banks often benefit because they can adjust real interest rates. Lets now look to were we see inflation most in the world today. The country with the worst inflation in the world is probably Zimbabwe, with and inflation rate of more that 2,000,000% and it is said that Robert Gabriel Mugabe, president of Zimbabwe since December of 1987, caused the outstanding inflation rate. In 28 years he was able to take one of the richest countries in sub-Saharan Africa and destroy its wealth. He did this through poor decision-making and extensive use of government, yet he refuses to give up his position. Inflation is such a problem for countries like Zimbabwe and others because as the inflation rate goes up, you purchasing power lowers. with a 2.5% inflation rate, your purchasing power will halve in 30 years, so now imagine the purchasing power in Zimbabwe. Now inflation is not bad so long as the workers pay wages match inflation, but for those who don’t or those who are retired or looking to retire, inflation can be disastrous. Even those who are savers are affected by the inflation rates. The interest rates can be widely offset by inflation that pushes rates up. So how can governments slow inflation? There are a few ways that our government can help. The first would be to stop printing money. With more money floating around, the purchasing power drops. Another way would be to tighten money supply or the total amount of credit allowed into the market. This makes loans more expensive slowing economic growth and demand pushing prices down. Another way is to raise the reserve requirements, which is the amount banks, must keep on reserve at the end of each day. The result of this is to slow the circulation of money. The list goes on but these actions must be applied while inflation rate are not already out of control. For countries like Zimbabwe, serious work must be done.
Sources:
http://en.wikipedia.org/wiki/Inflation
http://en.wikipedia.org/wiki/Robert_Mugabe
http://money.cnn.com/2008/08/13/news/international/worlds_worst_inflation_spiers.fortune/index.htm
http://www.dailytelegraph.com.au/money/why-high-inflation-is-a-problem/story-e6frezc0-1111115845285
http://online.wsj.com/article/SB10001424052970203686204577116521286547832.html
http://wiki.answers.com/Q/What_can_a_government_do_to_slow_inflation
Inflation is defined as the undue increase in the quantity of money in relation to the goods available for purchase and the inordinate rise in prices by the Oxford English Dictionary. Basically, the amount of money produced increases causing the value of your money to decrease. In inflation, the prices of goods and services increases with increased costs to produce them. Inflation can be caused by a higher demand than supply of products causing prices to rise. It can also be caused by companies increasing the prices of their services due to the increased cost of production. Inflation can cause uncertainty, making companies and consumers less likely to spend money, a decrease in purchasing power, especially for those with a fixed income like retirees, and can make a country less competitive if the nation’s inflation rate is higher than others. Inflation is not always bad, and if anticipated, stable and at a low level (usually 2% or less a year) can be a sign of a healthy economy. Hyperinflation means rapid inflation, and is usually unanticipated and bad for a country’s economy. An example of hyperinflation is Germany after World War I. Germany faced heavy demands and as a result increased the supply of money. The people became afraid of rising prices and started hoarding goods. This assured a raise in prices. The inflation rate got so high that prices would double every two days. The high prices made it so that Germans could not afford basic necessities, and those who were not working saw their life savings become less and less valuable every day. Hyperinflation in Germany is widely believed to have led to Hitler’s rise to power and World War II. The most extreme example of hyperinflation is Hungary in 1946 where the daily inflation rate reached 207.19%.
ReplyDeletehttp://www.investopedia.com/university/inflation/
http://www.oed.com/view/Entry/95476?redirectedFrom=inflation#eid
http://en.wikipedia.org/wiki/Hyperinflation#Germany
Inflation can be defined as the rise in the prices (general level) of services and goods in an economy over a certain period of time. In earlier days, the term inflation was used to refer the increases in supply of money, but these days the “inflation” is purely used to refer the increase in levels of prices. On the other hand inflation can also be defined as decrease in the value of money (or loss of the purchasing power in some medium of the commodity exchange). Most accurate measure of the inflation is known as “inflation rate”. Inflation rate is defined as percentage change in the price index over a certain period of time. Many countries have faced inflation. The more severe cases exist in Venezuela, Guinea, Zimbabwe, and Burma. These countries faced rapid inflation due to two given theories. (1) Demand-pull inflation- caused by increases in demand. Demand inflation encourages economic growth since the excess demand and favorable market conditions will stimulate investment and expansion. (2)Cost-push inflation- caused by a drop in supply. This may be due to natural disasters, or increased prices of inputs. Producers can then increase the product's prices. Inflation is a problem because it devalues the money that's in circulation. The dollar has less buying power, leading to the rise of costs which further increases the cost of living. This increase is usually not matched by annual increases in wage. Therefore, this is a huge problem for families trying to make ends meet. To slow down inflation a government could go multiple routes. A government taking a classical economics approach would do nothing, since this approach is based on the idea that the market will naturally work itself out and get back to normal without government influence. A government taking a Keynesian approach would become involved in the economy by breaking up monopolies, regulating commodity prices, or controlling wage levels. A monetarist government, or one that believes in the quantity theory, would make changes in policy to control the amount of money in an economy.
ReplyDeletehttp://www.thegeminigeek.com/why-does-inflation-occur/
http://visualeconomics.creditloan.com/inflation-by-country/
http://en.wikipedia.org/wiki/Inflation
http://answers.bloglines.com/Finance/Why_is_Inflation_a_Problem
http://www.wisegeek.com/what-causes-inflation.htm
Inflation is an increase of price over time, of everything in a country from goods to services. Inflation in caused by one of two sources, either everyone has money and people can afford more or because the government of a country has outstanding debts and must print money which makes more currency exist driving the price of the currency drop dramatically. In the first case most of the population is not affected by inflation because most of them have more money to pay for more expensive items but if minimum wage were to remain unchanged a chunk of the population would have a poorer quality of life. The second situation is worse because everyone has the same money as they did before but then that money is worth near nothing because of the governments debts.
ReplyDeleteThe first example of inflation I would like to look at is an example of hyperinflation, which is an inflation that exceeds a rate of 50% per month. This example is the one of Zimbabwe from 2008 to 2009 were the rate of inflation peaked at 6.5 sextillion percent. This as you can tell now shatters the term of hyperinflation and goes into a category of its own. It was caused by the complete annihilation of production by the civil war and the confiscation of privately owned farms by the government. This made everything and anything more valuable because nothing was being produced. Have nothing being produced makes everything exponentially more valuable making "starving billionaires".
Another example is of the hyperinflation of Hungary after World War II. The Adópengő was introduced to Hungary on the first of the year 1946 as a currency solely used for taxes. But, on July 8 of the same year it was the tenderized and made therefore made if able to be used for buying use. This made the Pengő nearly worthless. In the end of the inflation 100 million pengő was basically worthless and the pengő was fazed out completely august of the same year for the forint.
There aren't very many ways to combat the first version of inflation that I described because this is more of something that is needed for a countries economy to grow because everyone is becoming more wealthy. One way that the second version that I mentioned would be is to keep the currency to a standerd of sorts like the gold standerd like the US was on for a while which said that for every dollar you had you were entitled to a certain amount of gold that was held by the government.
http://en.wikipedia.org/wiki/Hyperinflation_in_Zimbabwe
http://en.wikipedia.org/wiki/Hyperinflation
http://www.3833.com/node/1125
http://www.econlib.org/library/Enc/GoldStandard.html
Inflation is a steady rise of prices on goods. During the time of inflation the value of money does not stay the same during the time. The prices on goods increase due to the value of the money currency decreasing. Inflation can destroy an economy because during the time of inflation people may not be making enough money to keep up with the prices of goods rising. Inflation is when a government produces lots of money to where it loses its original worth which then effects the products and causes the price to increase dramatically. Inflation is makes it more difficult to buy basic necessities such as food, water, clothes, ect. One example of a modern country facing high inflation is Zimbabwe in 2008. At one point in time Zimbabwe had an annual inflation of 500 billion percent. Zimbabwe is an example of how inflation ruined the government and economy tremendously. The government continued to print out bills with many zeroes. Bills contained sometimes more than six zeroes and some bills were printed as 100 trillion dollars. This is an example of hyperinflation and the country printed out too many bills to where the value of the bills were decreasing, which made the inflation worse. To tame the inflation Zimbabwe lost their national currency and convert to dollars. The inflation got so bad to where at one point people could not afford a cup of water. In the 1920s Germany also experience an inflation. Money became worthless when the prices were four times the original amount.Germany after World War I face lots of demand which led to and increase in prices. People who saved their entire lives were effected because their money became instantly worthless. The Germans could not afford basic necessities. Inflations can cause damage to a country's economy. When prices rise the amount of people buying the goods lowers due to lack of money. People can no longer afford products when a rapid increase of price occurs. To slow down inflation a government must decrease the rate of which prices increase. This allows the people to adjust to the change of prices and the value of a dollar to not decrease dramatically. A government can lower the prices of food and basic necessities and increase taxes.
ReplyDeleteThe increase of prices on goods over time is defined as inflation. Oftentimes, a country finds itself in this awful and problematic situation for one of a few possibilities. Possibility number one is that the majority of the country's population is in fairly good wealth an therefor can afford to pay more. Possibility number two, the more problematic cause, happens when the country begins to print more money due to debt or absolute lack of funds, giving their own currency a lesser value.
ReplyDeleteHyperinflation is a deadly type of inflation in which a country's monthly inflation rate exceeds the fiftieth percentile. Essentially, the economy goes downhill rapidly.
After World War 1 ceased, Germany faced unfortunate hyperinflation. Germany was blamed for almost all damages in the war, including things like destroyed buildings, bridges, land, etc. Germany was forced into paying off a huge debt to other European nations.Germany was also forced to pay their debt off in German owned business, trade material, and more valuables belonging to the German nation. The debt triggered the hyperinflation, and the people of Germany became poor and underprivileged. Germans couldn't afford simple things like food and shelter.
http://en.wikipedia.org/wiki/Hyperinflation
http://en.wikipedia.org/wiki/Hyperinflation#Germany