In simple terms, the number of items for sale equals the number of people who want to buy them. When economic equilibrium is out of balance which is pretty much all of the time , it's called disequilibrium. One possible cause of disequilibrium is inflation.
When disequilibrium is caused by inflation, prices for goods and services go up, reflecting the imbalance between supply and demand. The net result of inflation is a decline in the purchasing power of your money.
For most people, this is just the way things are. Hyperinflation is different. Hyperinflation is inflation on steroids.
One of the most striking examples of hyperinflation in history happened following World War I in the Weimar Republic of Germany. Source: Writer Calculation. Economists recognize two main causes of inflation: cost-push and demand-pull.
Cost-push inflation happens when the cost of production increases e. This results in an increase in prices for goods and services since manufacturers pass their price increases along to consumers. With cost-push inflation, prices are "pushed" up by rising production costs.
Demand-pull inflation happens when supply is limited compared to demand. Demand can go up due to a strong economy, a natural disaster, or an oversupply of money. In these instances, demand outpaces supply and "pulls" prices higher. The two primary causes of hyperinflation are 1 an increase in money supply not supported by economic growth, which increases inflation, and 2 a demand-pull inflation, in which demand outstrips supply.
The increase in money supply is typically caused by government action, such as what happened in Germany in When the government injects money into the economy, hyperinflation can result.
The demand-pull inflationary effect often happens primarily because people have more money, creating a willingness to pay higher prices, which increases demand. Hyperinflations, as illustrated above, can be fiscally catastrophic to a nation. Fortunately, they are very rare. Hyperinflation can happen when the government prints more money in response to a crisis, as during the Weimar Republic. The crisis doesn't have to be a war. It can be a poor economy, disease, natural disaster, or even a sense of panic that causes people to hoard.
This, of course, lowers supply, which increases demand. Any of these factors, when carried to an extreme, can result in hyperinflation. Inflation and hyperinflation happen only when prices in general go up. Despite the high bar to achieve hyperinflation, there are those who suggest that's exactly where the United States is headed. Here are samples from recent internet blog posts, displaying various approaches:.
Some members of the general public may think so. But most authorities say, "No. Economist Asher Rogovy attacks the persistent internet rumor that the U. Says Rogovy, "In the U. That stockpiling creates shortages. Hoarding can start with durable goods, such as automobiles and washing machines.
If hyperinflation continues, people hoard perishable goods, like bread and milk. These daily supplies become scarce, and more expensive, and the economy falls apart. People lose their savings as cash loses its value. For that reason, the elderly are often the most vulnerable to hyperinflation.
Soon, banks and lenders go bankrupt because their loans lose value. They run out of cash as people stop making deposits. Hyperinflation sends the value of the currency plummeting in foreign exchange markets. The nation's importers go out of business as the cost of foreign goods skyrockets. Unemployment rises as companies fold. Government tax revenues fall and it has trouble providing basic services. The government prints more money to pay its bills, worsening the hyperinflation.
There are two winners in hyperinflation. The first beneficiaries are those who took out loans and find that the collapsing value of the currency makes their debt worthless by comparison until it is virtually wiped out.
Exporters are also winners because the falling value of the local currency makes exports cheaper compared to foreign competitors. Additionally, exporters receive hard foreign currency, which increases in value as the local currency falls. The most well-known example of hyperinflation was during the Weimar Republic in Germany in the s.
Through World War I, the amount of German paper marks increased by a factor of four. By the end of , it had increased by billions of times. From the outbreak of the war until November , the German Reichsbank issued In that period, the value of the mark fell from about four to the dollar to one trillion to the dollar.
At first, this fiscal stimulus lowered the cost of exports and increased economic growth. When the war ended, the Allies saddled Germany with another billion marks in war reparations. Production collapsed, leading to a shortage of goods, especially food.
Because there was excess cash in circulation, and few goods, the price of everyday items doubled every 3. The inflation rate was Farmers and others who produced goods did well, but most people either lived in poverty or left the country. The most recent example of hyperinflation is in Venezuela. It is promoting a new cryptocurrency, the "Petro," because the bolivar lost almost all its value against the U. How did Venezuela find itself in such a mess? But mandated prices were so low it forced domestic companies out of business.
In response, the government paid for imports. In , oil prices plummeted, eroding revenues to the government-owned oil companies. When the government ran out of cash, it started printing more.
With the continued collapse of its economy, the country is facing a monumental problem of debt repayment. By late , Venezuela continues to suffer hyperinflation. Zimbabwe experienced hyperinflation between and The government printed money to pay for the war in the Congo. Also, droughts and farm confiscation restricted the supply of food and other locally produced goods.
As a result, hyperinflation was worse than in Germany. It finally ended when the country retired its currency and replaced it with a system that used multiple foreign currencies, predominantly the U. The only time the U. If hyperinflation were to reoccur in the U. The current inflation rate shows that the U. In fact, inflation may be too low, as mild inflation can be good for economic growth.
The Federal Reserve prevents hyperinflation in America with monetary policy. The Fed's primary job is to control inflation while avoiding recession. We visit relatives up there. Do you think the mess spread to their country? My husband is a nothing bad is ever going to really happen so getting him to do something different is like pulling teeth. These are all great steps we can take to secure or improve our situation and finances. We have passports but they will be expiring next summer so we need to move on renewing them; still trying to add some sources of income as mentioned in It is easy to start feeling down with all the bad news around, thanks for reminding us to stay positive!
Last week our local news reported the possible rise in sugar prices. I intentionally went to our local Neighborhood Walmart and bought 25 lbs. I've since bagged it in Mylar. After I picked my jaw up off the ground, I took a picture and emailed it to my husband.
It just reinforces the instability of our economy! Prepare for price explosions on ANY made with sugar! I'll check on sugar prices around here, RWM. Maybe the Honeyville store has some insight into what is happening and whether or not I should be worried.
A while back I asked their manager about rising wheat costs. He said that Honeyville buys their wheat in massive amounts a year ahead of time, so they aren't affected by current pricing conditions. Costco would be another good place to do some research about rising prices. I do know that a number of commodities have been increasing in price over the past couple of weeks.
Two things I've learned: 1. Poor growing season caused by bad weather and uncertainty in the commodities market. America imports its sugar!!! But a lot, probably most, of our sugar is imported and grown on land that poorer countries have taken from their own people and given to us to grow our sugar.
Sugar is cheap for us but is often a poverty-maker for other countries. That is way some countries hate the US so much. But it is hard to get the information from anyone. Lisa and all, I have located a new for me site. I think I may purchase the 6 gallon pail of banana slices honey coated, yum , I think the shipping charges are reasonable. I don't usually think buying in pails pays off, but 6 gallons of banana slices for Thinking I may give them a try. Bought some of their Bisquit Mix of the "Deal of the Day".
Very good and quick service. That's all I've purchased, but I check the deal of the day everyday. I was, however, very happy with my one purchase from Augusen Farms. How to weld. How to use a ham radio and then get your ham license, too! It can be done in about 3—5 days? Get your private pilot's license or at least take ground school, plus enough flights to learn to take-off, and land.
You only pay for pro-time when the motor is running when you rent a plane. So, if you fly four hours away e. You only pay for the four hours of flight time and the four hours back, of course. Heck, in the event of a hurricane or such, they might allow you to take it for FREE?!!! Plus, learning to fly also teaches you basic or semi-advanced navigation skills. Learn diesel mechanics.
If Peak Oil hits critical-mass, or truckers stop delivering fuel, or whatever — you CAN make a diesel motor run via veggie fuels. Gasoline motors will be useless. Learn CPR. I've seen fisherman fish all day — and catch nothing.
Plus, when you SCUBA dive, you can collect all the snagged lures that the fisherman left behind on the underwater stumps. My hubby grew up in the South Pacific and can spear fish far better than with a rod and reel.
Thanks for a great list of must-have practical skills. As some of my readers have pointed out, no one can take away your skills and knowledge. What a great idea to educated yourself in mechanics for at least your own car! My husband is a chaplain so is not always that most practical skill set, although they should be! The value of the dollar will decrease in order to compete with China and Americans will have to work for less. Things will be less cushy from now on no matter who is in government.
You will have to work longer hours with less pay and less perks. You'd better get used to it folks. The US is in decline as a world power and may even break up into several countries when the Federal government loses the respect of the people outside washington. He-he I am already out of Dodge. Live in a small town in New Mexico with the Rio Grande is my back property line. Have a small group of friends that will band togather if things head south.
Their prices include shipping and insurance and have the lowest over spot markup I've found. And best of all…. No reports to 3rd parties are made. Anyone know about that? Before you had to had it in or face a huge penalty and sometimes prison time.
I think it had to do with having our currency being backed up by gold which they gave up a little later. I meant you had to hand it in or end up with a large monetary penalty or jail time. Prepare now, Matthew. It may not be an all-out collapse, but if you can stock up on what you need to stay alive, it will buy you time until society settles into some sort of order. You need to have food stored — at least three months worth.
You need water stored. The guns and ammo are fine, but make sure you're getting range practice at LEAST twice a month, preferably ever week. Stock up on things like toiletries, toilet paper, soap, and be sure you can survive if the power ever goes out for more than just a few hours. Pay off debt, save money, but also buy some silver and gold, if you can afford it.
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