Hyperinflation is the out of control inflation of prices, this is when the price of goods are uncontrollably increasing that even the concept of inflation loses its meaning. Although hyperinflation happens rarely, it has occurred as many as 55 times in many countries like China, Germany, Hungary and Russia.
What is Hyperinflation?
Inflation, in general is the increase in prices and the fall in the purchasing value of money. So it is only understandable that hyperinflation occurs when the rate of inflations is out of control, and prices increase rapidly as the currency of a certain country loses its value. Although there are many factors that can lead to hyperinflation, but one main reason the unmonitored increase in the supply of money, this causes the prices of goods to increase as the currency loses its value.
Hyperinflation often occurs when there is a significant amount of increase in the supply of money that is not supported by the Gross Domestic Product (GDP) growth, with results to an imbalance between the supply and demand for money. The country would then be left with no choice but to increase the price of good because the currency is losing its value.
Another reason for hyperinflation is when the country is associated with a collapse in the economy.
While the occurrence of hyperinflation is rare it is still one thing investors must be mindful of investing safe haven funds like precious metals and multiple currencies can help hedge against inflation.