Hyperinflation can obliterate financial stability, wipe out savings, and stoke civil discontent. In economic instability, few spectres loom as menacing as hyperinflation. It is a financial nightmare where the value of money falls quickly, pushing prices up in a seemingly inexorable rise, in contrast to its more moderate counterpart, inflation.  

The intricate mix of economic, psychological, and political elements that causes this financial upheaval frequently ends in a crisis that rocks a nation to its foundation. To understand hyperinflation, it is essential to comprehend its idea, examine its causes, and consider historical examples where economies were on the point of collapsing due to its crippling consequences. 

What is hyperinflation? 

A severe and sudden increase in the average price of necessary products and services within an economy is hyperinflation. Hyperinflation entails extremely high and frequently unmanageable price increases, unlike typical inflation, which is a modest price rise. Consumers become trapped in a vicious loop of hasty spending that worsens the situation as the value of the local currency plummets. Inflation rates above 50% per month typically indicate hyperinflation, which can cause prices to double or even triple in days.

Understanding hyperinflation 

Hyperinflation is the most severe symptom of fiscal instability. Here, the prices of products and services grow exponentially at startlingly quick intervals, violating accepted economic principles.  

Understanding the complex network of reasons that feed hyperinflation is essential. This understanding centres on the precarious relationship between the money supply and economic output, in which the expansion of goods and services is outpaced by an excessive inflow of money, frequently resulting from unrestrained money creation.  

The psychological component is equally important because a decline in public confidence in the currency can spark increased expenditure and further devaluation. A profound change occurs amid this upheaval, changing not just the financial but also the societal landscapes. 

Causes of hyperinflation 

  • Excessive money printing 

The reckless printing of money by governments or central banks, which significantly outpaces the actual expansion of economic goods and services, is one of the main causes of hyperinflation. A currency devaluation results from this excess of money, which starts hyperinflation. 

  • Loss of confidence 

The public tends to quickly transfer their money into physical assets or foreign currencies when they lose faith in the soundness of their currency owing to economic mismanagement, political unrest, or other circumstances. This decline in confidence accelerates the value of the local currency. 

  • Supply disruptions 

Economic sanctions, natural calamities, or war can hamper the supply chain, causing a shortage of necessities. Prices rise due to scarcity when combined with excessive money production can cause hyperinflation. 

  • External debt 

Large foreign debts may motivate some nations to print money to pay off their debts. However, this strategy worsens hyperinflation because it floods the market with more currency without equivalent economic growth. 

Effects of hyperinflation 

  • Eroded purchasing power 

The purchasing power of consumers is drastically diminished by hyperinflation. Savings practically lose all their value, and people’s capacity to purchase essentials is severely constrained. 

  • Savings wipe-out 

Traditional bank savings lose value, which causes people to have less faith in financial institutions. To maintain some appearance of worth, people turn to barter systems or alternative forms of payment. 

  • Economic collapse 

Foreign investment is discouraged by hyperinflation, and long-term economic progress is hampered. Due to tremendous volatility, businesses need help to set prices and make financial decisions. 

  • Social unrest 

As individuals become more frustrated by rising prices, social unrest, and political instability appears. As protests and civil unrest increase in frequency, the country becomes even more unstable. 

Examples of hyperinflation 

  • Weimar Republic, Germany (1921-1924) 

One of the most notorious instances of hyperinflation occurred in Germany at the beginning of the 1920s, where prices doubled every few days. Then, wheelbarrows of cash were dragged around to pay for necessities, almost devaluing the currency. 

  • Zimbabwe (2007-2009) 

The Zimbabwean dollar became so devalued due to political unrest and land reforms that trillion-dollar notes were printed. The economic collapse caused by this catastrophe forced the nation to use foreign currencies. 

  • Venezuela (2016-present) 

Venezuela experienced hyperinflation due to economic mismanagement, declining oil prices, and political unrest. The value of the dollar fell, leaving the populace in great distress. 

Frequently Asked Questions

Prudent actions are required to tackle hyperinflation. Asset diversification should include tangibles like precious metals and basic commodities. To protect against currency devaluation, invest in foreign currencies and open offshore accounts. Emphasise developing self-sufficiency  and lessen your dependency on conventional banking institutions. Keep track of economic indicators, keep money set aside for emergencies, and think about consulting a financial expert. 

Prices would rise quickly and uncontrollably in the event of hyperinflation. Savings would lose all their value. There would be civil unrest, a decline in confidence in financial institutions, political instability, and economic uncertainty, weakening the economy and destabilising society. 

Zimbabwe saw the worst hyperinflation in recorded history in the late 2000s. The Zimbabwean currency nearly lost value due to poor economic management, land reforms, and political instability. Prices doubled every few hours, causing the printing of trillion-dollar bills and a collapsed economy. This crisis had a long-lasting effect on the economy and society of the nation by causing widespread poverty, unemployment, and the breakdown of critical services. 

Societies and economies are seriously threatened by hyperinflation. It quickly reduces purchasing power, wiping out savings and making even the most basic needs unaffordable. Economic planning becomes impossible, resulting in failing firms and social instability. Political stability is at risk due to the erosion of public trust in financial institutions. Hyperinflation can destroy livelihoods, destabilise countries, and threaten the structure of society. 


Related Terms

    Read the Latest Market Journal

    Financial Sectors Thriving: Top Traded Counters in April 2024

    Published on May 21, 2024 31 

    At a glance: The Federal Reserve (Fed) held interest rates steady at 5.25% to 5.5%...

    One Dollar at a Time: The Potential of Fractional Shares

    Published on May 20, 2024 48 

    Table of contents 1. Introduction 2. Dollar-Cost Averaging 3. Popularity of Dollar-Cost Averaging 4. Small...

    Unit Trusts vs Exchange Traded Funds (ETFs) – Which is better for your portfolio?

    Published on May 20, 2024 46 

    Imagine you are dining at a nice restaurant, feeling overwhelmed by the variety of seemingly...

    Weekly Updates 20/5/24 – 24/5/24

    Published on May 20, 2024 18 

    This weekly update is designed to help you stay informed and relate economic and company...

    What is CFD? With 2 Practical Examples

    Published on May 15, 2024 102 

    In this article, you will learn what CFD (Contract for Difference) is, the costs and...

    What is ESG investing, and why is it important?

    Published on May 15, 2024 96 

    Over the last five years, Environmental, Social, and Governance (ESG) investing has evolved from being...

    What are fixed-income funds?

    Published on May 15, 2024 51 

    In the diverse world of unit trusts, various funds employ distinct investment strategies aligned with...

    Hong Kong Value Stocks Q2 2024

    Published on May 14, 2024 124 

    After a long period of sluggishness, Hong Kong market has begun to pick up. The...

    Contact us to Open an Account

    Need Assistance? Share your Details and we’ll get back to you


    This material is provided by Phillip Capital Management (S) Ltd (“PCM”) for general information only and does not constitute a recommendation, an offer to sell, or a solicitation of any offer to invest in any of the exchange-traded fund (“ETF”) or the unit trust (“Products”) mentioned herein. It does not have any regard to your specific investment objectives, financial situation and any of your particular needs. You should read the Prospectus and the accompanying Product Highlights Sheet (“PHS”) for key features, key risks and other important information of the Products and obtain advice from a financial adviser (“FA“) pursuant to a separate engagement before making a commitment to invest in the Products. In the event that you choose not to obtain advice from a FA, you should assess whether the Products are suitable for you before proceeding to invest. A copy of the Prospectus and PHS are available from PCM, any of its Participating Dealers (“PDs“) for the ETF, or any of its authorised distributors for the unit trust managed by PCM.  

    An ETF is not like a typical unit trust as the units of the ETF (the “Units“) are to be listed and traded like any share on the Singapore Exchange Securities Trading Limited (“SGX-ST”). Listing on the SGX-ST does not guarantee a liquid market for the Units which may be traded at prices above or below its NAV or may be suspended or delisted. Investors may buy or sell the Units on SGX-ST when it is listed. Investors cannot create or redeem Units directly with PCM and have no rights to request PCM to redeem or purchase their Units. Creation and redemption of Units are through PDs if investors are clients of the PDs, who have no obligation to agree to create or redeem Units on behalf of any investor and may impose terms and conditions in connection with such creation or redemption orders. Please refer to the Prospectus of the ETF for more details.  

    Investments are subject to investment risks including the possible loss of the principal amount invested. The purchase of a unit in a fund is not the same as placing your money on deposit with a bank or deposit-taking company. There is no guarantee as to the amount of capital invested or return received. The value of the units and the income accruing to the units may fall or rise. Past performance is not necessarily indicative of the future or likely performance of the Products. There can be no assurance that investment objectives will be achieved.  

    Where applicable, fund(s) may invest in financial derivatives and/or participate in securities lending and repurchase transactions for the purpose of hedging and/or efficient portfolio management, subject to the relevant regulatory requirements. PCM reserves the discretion to determine if currency exposure should be hedged actively, passively or not at all, in the best interest of the Products.  

    The regular dividend distributions, out of either income and/or capital, are not guaranteed and subject to PCM’s discretion. Past payout yields and payments do not represent future payout yields and payments. Such dividend distributions will reduce the available capital for reinvestment and may result in an immediate decrease in the net asset value (“NAV”) of the Products. Please refer to <www.phillipfunds.com> for more information in relation to the dividend distributions.  

    The information provided herein may be obtained or compiled from public and/or third party sources that PCM has no reason to believe are unreliable. Any opinion or view herein is an expression of belief of the individual author or the indicated source (as applicable) only. PCM makes no representation or warranty that such information is accurate, complete, verified or should be relied upon as such. The information does not constitute, and should not be used as a substitute for tax, legal or investment advice.  

    The information herein are not for any person in any jurisdiction or country where such distribution or availability for use would contravene any applicable law or regulation or would subject PCM to any registration or licensing requirement in such jurisdiction or country. The Products is not offered to U.S. Persons. PhillipCapital Group of Companies, including PCM, their affiliates and/or their officers, directors and/or employees may own or have positions in the Products. Any member of the PhillipCapital Group of Companies may have acted upon or used the information, analyses and opinions herein before they have been published. 

    This advertisement has not been reviewed by the Monetary Authority of Singapore.  


    Phillip Capital Management (S) Ltd (Co. Reg. No. 199905233W)  
    250 North Bridge Road #06-00, Raffles City Tower ,Singapore 179101 
    Tel: (65) 6230 8133 Fax: (65) 65383066 www.phillipfunds.com