Hyperinflation is the worst type of inflation characterised by rapid and out of control price increases. The monthly inflation rate generally surpasses 50%. The main cause of hyperinflation is an excessive and prolonged increase in money supply.

The central bank can increase money supply in response to different problems like servicing debt or increasing economic output, but if it’s done without addressing the main causes of the problems it can lead to just an inflation spiral.

Hyperinflation Explained

Zimbabwe had recently experienced hyperinflation with an inflation rate that reached 79,600,000,000% in 2008. Prices were doubling every day and the unemployment rate reached 80%.

This is just one example of how hyperinflation destroys an economy. There are also developed economies that experienced hyperinflation like Germany in 1923 or Yugoslavia in 1993. Hyperinflation can lead to such a big loss of confidence in the monetary system that people can switch to a barter economy.