We now know a little bit
about inflation and deflation. And now I want to introduce
you to hyperinflation. And as the word implies,
it's inflation gone wild. How hyperinflation,
or at least the cases that we've seen in modern times,
how they've happened is you have some type of a
government just going wild with the printing press. They're just printing
a ton of money. So the general cycle
is they print money, they print like mad,
usually because they don't have any other
way of getting revenue. They print like mad. That leads to prices going up. And then because
prices go up, they have to print more
in order for them to be able to get the
same goods and services or pay the government
workers what they wanted to pay the government workers,
or pay the soldiers what they wanted to pay the soldiers. This by itself would probably
drive the hyperinflation in and of itself. But on top of this, we're used
to thinking high inflation is 5% or 10%, but you
could imagine what happens when inflation
is 5% or 10% per hour. Because then
there's no incentive to be actually holding currency. Every second that
you hold currency it becomes worth less
and less and less. And so what happens in a
scenario like this is people want to hoard hard assets. So if the price of bread
is going up by the minute or by the hour, or
the price of shoes are going up by the
minute or by the hour, the increase in prices is going
to make people hoard things. Hoarding goes through the roof. And you can imagine if
hoarding goes through the roof, if the shoe seller doesn't
want to sell his shoes anymore, or he wants the hold
them a little bit longer, then the supply of shoes
are going to go down, and the prices are going
to go up even higher. So hoarding leads
even to higher prices. When people go to
the bread market, and there's five loaves of
bread, they buy all of them. And then the next
person can't buy any because they know that
the price of bread is going through the roof. So it just keeps
getting worse and worse. And it's all started
by the government just going nuts with
the printing press. Now, the three most
famous examples of this happening--
probably the most famous one is what happened
in Weimar Germany after World War I. They had
huge reparations to pay. That's what the
Weimar government would have argued
was their main cause. But they just printed
money like crazy. Some people said
that they were almost trying to destroy the economy
so that they wouldn't have to pay reparations for what
they did in World War I. But this just gives you a
sense of how crazy it was. Here's the end of World
War I. And they just printed money like mad. And isn't the rate of inflation. This is how much it was
relative to a gold mark. So this is one gold
mark over here. So only after about 2 and a
half years it was over tenfold. And this is a logarithmic scale. Each slash year, this
is a factor of 10. So after by the
end of 1923, you're looking at-- This is what? Not 100,000, not a
million, not a billion. This is a trillion. It had gone up a trillion fold
in the span of one, two, three, four, five, six years. The other famous
examples of this, Zimbabwe from 1980 until 2009. Once again, printing
money like mad. And some of their productive
capacity went away. This right here is a 100
trillion Zimbabwe dollar. And this shows you
the Zimbabwean dollar relative to the US dollar. And once again, is
a logarithmic scale. This is 10 to the 30th power. And then the largest or the
most extreme hyperinflation ever was Hungary
after World War II. And this right here
is a 10 million pengo note, just to give
you an idea of what people were carrying around
in their pockets.