Inflation and Hyperinflation

Inflation is a sustained rise in the general price level, and moderate, predictable inflation of around 2 percent is the goal of many central banks. When governments finance large deficits by printing money, inflation can spiral into hyperinflation, often defined as prices rising more than 50 percent a month. In Weimar Germany in 1923, reparations, a collapse in production and money printing drove prices so high that by November a US dollar cost about 4. 2 trillion marks.

Hungary in 1946 suffered the worst recorded case, and Zimbabwe's hyperinflation in 2007–08, following a collapse in farm output and heavy money creation, led it to issue a 100-trillion-dollar note before abandoning its currency. Hyperinflation wipes out savings, redistributes wealth from creditors to debtors and destroys trust in institutions. Ending it usually requires a new currency, fiscal reform and credible limits on money creation.