Hyperinflation

Written By Michael Reign on Friday, January 9, 2015 | 7:47 PM

 
There are numerous definitions relevant to the fiscal standard of which all should be familiar before venturing forth in explanation of the current financial crisis confronting future generations. They are as follows:

Hyperinflation is defined as an inflationary cycle devoid of tendencies toward the establishment of economical equilibrium relevant to the current market trend. Definitions used by the media vary from a cumulative inflation rate over three years approaching 100% to “inflation exceeding 50% a month.” Although there remains a great deal of speculation in reference to the root causes of hyperinflation, it often attains precedence when there is an unchecked/ unmitigated increase in the principal monetary supply (or drastic debasement of currency through marked increase of circulation), this is usually accompanied by a widespread unwillingness within prevailing financial circles to house such assets for an extended period of time in an effort to barter these fiscal commodities for tangible economic resources to stave off impending loss. Hyperinflation is often associated with military conflicts/ wars (or their aftermath), economic depressions, and political or social upheavals.

Hanke Hyperinflationary Index (HHI) - a Geopolitical/ Fiduciary Model devised by Stephen H. Hanke (A professor of Applied Economics at the Johns Hopkins University in Baltimore, a Senior Fellow of the Cato Institute, a director of the Democratic Century Fund, chairman of the Friedberg Mercantile Group in New York, on the Advisory Board of the Acton Institute, and since 1993 a columnist for Forbes. Professor Hanke also advises governments on currency reform, privatization and capital market development) in an effort to calculate/ ascertain the true scope and severity of a hyperinflationary potentate relevant to the current fiduciary period.

Hyperinflationary Models - Fiscal Determinants Relevant to Inflationary Degrees of Severity

Hyperinflation attains a degree of precedence as a residual monetary effect, models of such inflationary cycles center on the principal demand for money. Economists see both a rapid increase in the monetary supply and an increase in the velocity of money (the average or median frequency with which a unit of exchange is exhausted in a specific period of time) should inflationary tendencies remain unchecked. Either, one, or both of these together, are the root causes of inflation and hyperinflation. A dramatic increase in the velocity of money as the cause of hyperinflation is central to the “crisis of confidence” model, where the risk premium that sellers demand for fiat currency over the nominal value grows at an almost exponential rate. The second theory is that there is first a precipitous increase in the amount of circulating medium, which can be called the “monetary model” of hyperinflation. In either model, the second effect precedes the first as a resultant fiscal outcome — either too little consumer confidence forcing an increase in the cumulative monetary supply, or an overabundance of such assets yielding the destruction of consumer confidence in the prevailing economic standard.
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