Hyperinflation is a different beast

Martin Kabrt

A chapter in CNB Global Economic Outlook - October 2022, 2022, pp 14-19 from Czech National Bank, Research and Statistics Department

Abstract: "The new 100,000 note was issued just two weeks ago, and now the million note is about to be issued. When will we count to billions?" asks gravestone seller Georg Kroll in Erich Maria Remarque's The Black Obelisk. The novel is set in the hyperinflation of 1920s Germany, which gave birth to the nation's well-known aversion to unstable prices. As most advanced economies today are witnessing inflation highs not seen in decades, this memory has resurfaced and the spectre of uncontrollable price growth has been conjured even beyond the German media. This article considers how real the danger is. Reviewing the causes of historical hyperinflations, it argues that the current cost-of-living crisis in advanced economies should not be seen as a harbinger of such a disastrous collapse of money. Hyperinflations have their own causes that are distinct from those of "ordinary" inflation and in 2022 are relevant to only a handful of emerging economies. Nevertheless - after briefly introducing some heretical thoughts on the benefits of inflation - the article emphasises the costs of entrenched price growth and cautions against irresponsible monetary and fiscal adventures.

Date: 2022
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