Austin Whitton

Mr. Pearson

Economics

29 February 20

When Money Becomes Worthless

Hyperinflation is somewhat rare but has happened to many countries throughout history.

Hyperinflation is something that can destroy a country and its economy if nothing is done to stop

it. Hyperinflation happens when prices go up over fifty percent in one month. It is as if you

bought a shirt for fifty dollars and the price kept going up to one hundred and twenty-five dollars

due to hyperinflation (Kenton). Since everything is extremely expensive during hyperinflation,

most people would not be able to afford common items which would lead to poverty. What

causes hyperinflation? Some big examples of hyperinflation would be Germany and Venezuela.

Hyperinflation makes businesses and consumers need more money to buy products

because of the product's inflated price. The United States tries to keep inflation to less than two

percent per year. When hyperinflation takes place, prices rise to over fifty percent in just one

month (Kenton). Hyperinflation happens incredibly fast and can be very damaging. There are

countless negative effects when it comes to hyperinflation. People might and try and take up as

much food as possible which would lead to a shortage of food. Money could become close to

worthless because it is not nearly enough to buy something. Most people would likely go

bankrupt. If most people were bankrupt the government would also lose a considerable amount

of money. Hyperinflation is usually caused by an ineffective government.

Hyperinflation can occur in many different ways. One of the most common ways is too

much money. If a government is in a period of depression often they might print more money to
help boost the economy, but if the economy does not go up it will likely lead to hyperinflation.

Another way for hyperinflation to occur is an incapable government. If people lose confidence in

the government and the banks, then the money will be perceived as worthless and people will

begin to hoard things (Kenton). Hyperinflation has impacted many big countries throughout

history.

One big example of hyperinflation would be Germany in the 1920s. The German

government kept printing money to pay for their World War One debts. This is the first bad step

towards hyperinflation. The amount of money in circulation nearly quintupled in just a few

years. Not only was the government printing more money, but it was also printing government

bonds. The government debt quickly grew from 5 million to over 150 million dollars. At the

beginning of all the money and bond printing it helped the economy, but when the war ended

Germany went into even more debt to pay the people who had defeated them. The economy

collapsed and since there was excess money in circulation, it became almost worthless. The price

of everyday items doubled around every four days, making everything incredibly expensive. This

period of hyperinflation ended when the government established a new currency that was backed

by the central bank (Amadeo). Hyperinflation quickly crippled the large country of Germany.

The next example is more recent. Venezuela prices soared from over 40 percent in 2013

to over 3,400 percent in 2019. Venezuela got into this mess buy putting cap prices on items

which led to failing businesses and a collapsing economy. Venezuela is trying to switch to a

cryptocurrency since the government can no longer afford the cost of printing any more money.

Venezuela’s money is also almost worthless. Unemployment is incredibly high because of the

state of the economy and people started using eggs as currency because they held more value
than the actual paper money (Amadeo). Venezuela has still not pulled out of the Hyperinflation

state. Hyperinflation is currently destroying the country of Venezuela

Overall, Hyperinflation can wreck a country and have lasting effects. Even though it is

rare, it is still going on today with Venezuela. Hyperinflation happens when prices soar to very

high prices in a very short amount of time. Hyperinflation can be the result of a poor economic

state and can make things even worse for that country. We know that printing excess money can

lead to hyperinflation. Some big examples of hyperinflation would be Germany and Venezuela.

Since the United States is a very strong country with well-equipped leaders, the country should

not have to worry about something like hyperinflation.

 Works Cited

Amadeo, Kimberly. “Hyperinflation, Its Causes and Effects with Examples.” The Balance, The

Balance, 18 May 2011, www.thebalance.com/what-is-hyperinflation-definition-causes-and-

examples-3306097.

Kenton, Will. “Hyperinflation.” Investopedia, 2019,

www.investopedia.com/terms/h/hyperinflation.asp.