Tuesday, 26 July 2011

History Recap - Hyperinflation in 1923

Looking on the news today, not much of progress after all. Let's take a look back in time and search for any similar situation we faced before. Hyperinflation is the word i will choose to look at.

Hyperinflation in layman term is defined as "inflation that goes out of control".

The main cause of hyperinflation is a massive and rapid increase in the amount of money  that is not supported by a corresponding growth in the output of goods and services. This is caused by the imbalance created between the supply and demand of money, which resulted in the money losing its true value, and over time causing a lost of confidence and hope; similar with bank run scenario.

The biggest example of hyperinflation we can trace back to Germany during 1923 when their currency hyper inflated to a ridiculous value. Below is a clip that summaries the crisis.

Hopefully that people in our generation can learned from history and not repeat the mistake again.


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