Hyper Inflation – causes and effects

The key cause of hyper inflation is the debasement of the currency, usually through massive money printing programs. Some economists think that we will reach hyper inflation as a result of the huge bailout programs that are currently being undertaken by bankers and politicians. This is how it works. Think of a British pound as a share in UK PLC. Think of printing more bank notes and creating more fiat currency as the company taking on more debt…financed by the tax payers. Once the company we takes on more debt, it can pay less to shareholders since it has to pay interest on the debt. The time comes when we have to pay more and more interest on the debt until eventually the debt interest repayment level eats all the earnings from the company.

Once that happens, the company will be unable to raise more capital and it won’t be able to repay its debt. Once it misses a few debt payments, it’s off to the bankruptcy courts and insolvency follows. The key difference between the debt level of a company and a country is that a country doesn’t disappear from existence.

The debts will still have to be repaid and tax burdens will be increased to do this to a level that makes citizens virtual slaves through forced saving schemes to suck up excess liquidity from the population. In China, this resulted in the rise of communism. Social unrest is never far away once hyper inflation takes control.

It results in an inflation rate measured monthly and in excess of 50% per month. At this rate, it takes 36 months for the price of goods to go up 133 times. It creates massively higher prices and destroys savings and the purchasing power of those on fixed incomes. All pensions get wiped out thanks to LPI, limited price indexation, which is the measure used to increase many private pensions in this country. LPI normally states that pension increases are capped at 5% per annum.

If the governments give a blank cheque to the financial institutions, inflation will be the result. Whether or not it becomes hyper inflation remains to be seen. 

• How Dave Ramsey Helped Me Pay Off My Debt Late last December I came across a post on Bargaineering...
• Inflation and Consumer Debt: Truth and Myth Personal finance writers frequently comment on how inflation will affect...
• Unmasking the debt lifestyle The debt lifestyle is all around us. Debt is insidious,...

Tags: British Pound, Debts, Financial News, Hyper Inflation