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Published: Nov 11, 2022 8 min read

Hyperinflation

Definition

Hyperinflation is a quickly accelerating, out-of-control rise in inflation that occurs when the price of all consumer goods increases at unbelievable rates and speeds. This causes the value of currency to erode and the global cost of goods to increase across the board. Inflation spiking at a rate of 50% per month or more is the standard measure by which an economy acquires the label "hyperinflated."

With inflation hovering around a 40-year high, hyperinflation is a term that is being tossed around by economists and politicians alike. Hyperinflation may sound like something new, but its roots go back to the 1600s.

Though rare, it has occurred several times throughout history and in countries such as Germany, Russia and China. Many underdeveloped countries have also had to contend with hyperinflation, usually as a result of corrupt governments, poor financial policies and lack of economic stability.

How is inflation measured?

Inflation refers to the change over time in the price of goods and services commonly used by consumers. To measure inflation, the Bureau of Labor Statistics (BLS) measures the purchasing power of the dollar using the Consumer Price Index (CPI).

The BLS compares the current prices with previous prices for the same goods and services. The CPI compiles data based on prices of over 94,000 commodities and services as well as other consumer prices on items such as rental costs, travel, clothing, used cars and prescriptions.