Move over Zimbabwe: Venezuela has replaced you as the poster child for monetary disaster. Citizens of that country are carrying backpacks of cash to buy their daily necessities. Prices there are expected to rise by 720 percent this year, making Venezuela’s hyperinflation the most severe on planet Earth.
But what is hyperinflation, anyway? Although economists traditionally set the threshold at 50 percent annual inflation, I prefer Investopedia’s definition:
There is no precise numerical definition to hyperinflation. Hyperinflation is a situation where the price increases are so out of control that the concept of inflation is meaningless.
That is brilliant, because it captures the abnormality of the phenomenon. What Americans think of as high inflation -- for example, the 12 percent or 13 percent annual rates in late 1979 and early 1980 -- just seems like a fundamentally different animal from the 1,000-plus-percent rates seen in the past in countries like Zimbabwe, Argentina or Weimar Germany.
The rest of this at Bloomberg View - http://www.bloombergview.com/articles/2016-02-10/hyperinflation-paranoia-guides-the-federal-reserve
But what is hyperinflation, anyway? Although economists traditionally set the threshold at 50 percent annual inflation, I prefer Investopedia’s definition:
There is no precise numerical definition to hyperinflation. Hyperinflation is a situation where the price increases are so out of control that the concept of inflation is meaningless.
That is brilliant, because it captures the abnormality of the phenomenon. What Americans think of as high inflation -- for example, the 12 percent or 13 percent annual rates in late 1979 and early 1980 -- just seems like a fundamentally different animal from the 1,000-plus-percent rates seen in the past in countries like Zimbabwe, Argentina or Weimar Germany.
The rest of this at Bloomberg View - http://www.bloombergview.com/articles/2016-02-10/hyperinflation-paranoia-guides-the-federal-reserve
