Sunday School: Hyperinflation
Last week I taught you why inflation is good.
But too much of this good thing called inflation is called hyperinflation. Hyperinflation is typically defined as occurring when prices rise over 50% in one month. This is not good because it makes people too poor too quickly, unlike inflation which just makes them poor slowly.
The cause of hyperinflation can vary, but when the money supply is increasing faster than the rates of good and services for long enough that citizens lose faith in the currency, the typical end result would be hyperinflation.
The supply of United States Dollars has been increasing by 7.5% annually for the last five years, yet GDP is only increasing by about 2% per year.
But don’t hold your breath waiting for hyperinflation. Ben Bernanke is a genius and would never let hyperinflation occur in the United States.