Inflation and the speed of inflation
Inflation and the speed of inflation
Depending on the speed, experts speak of creeping, trotting or galloping inflation.
We speak of creeping inflation when inflation and deflation are accompanied by price fluctuations of no more than 5 per cent. The economy is not at risk if inflation creeps up to a level that causes prices to rise above this threshold. Even a moderate rate of inflation may be desirable and is therefore no cause for alarm. A gradual decline in prices of up to 5 % does not pose a threat to trade forex-exness.net/downloadexness/ effectivelly.
Economists speak of galloping inflation when the price increase is between 5 % and 30 %. This range can be adjusted, so plodding inflation should always be backed up with figures. Economic instability is the result of deflation and trotting inflation. Economic stability is seriously threatened if the trend cannot be reversed in the long run.
Runaway inflation exacerbates this danger. Annual price increases are over 30 per cent. The economy is coming under increasing pressure. This is also true in the case of deflation.
Distinction: So when do we talk about hyperinflation?
Hyperinflation is a rapid rise in prices and a monthly inflation rate of over 50 percent. Galloping inflation is a condition where the monthly inflation rate increases rapidly (galloping) up to 20 per cent per month. 50 per cent. A crisis situation is often signalled by rapidly rising inflation, almost always due to an increase in government spending and an increase in the money supply.
Hyperinflation, which can lead to annual inflation rates in the five-digit percentage range, can quickly become uncontrollable. It can easily be eliminated by monetary reform.
What are the causes of hyperinflation?
The last hyperinflation in Germany took place in the 1920s. Political crises, wars and major upheavals within a country can be triggers for hyperinflation. In response, governments massively increase the money supply to compensate for sudden increases in spending (e.g. war costs). This increase in printed money is not matched by an increase in economic goods produced. Therefore, the price level rises, leading to demonetization.
What are the consequences of hyperinflation?
Hyperinflation is when more money flows into the economy but only a small number of economic goods are available to match this flow. The sharp increase or decrease in demand means that supply cannot keep up. The result is constantly rising prices and a huge loss of purchasing power. This can lead to hoarding and a sharp drop in the value of money within days or even hours.
Falling real wages and producers who can hardly produce goods and commodities and the resulting poverty of large parts of the population often lead to the economic collapse of the national economy.
Only drastic measures can end hyperinflation, such as the complete abolition or the exchange of the currency for one with a high exchange rate factor.