What Is Hyperinflation?

Hyperinflation is an extreme and typically accelerating form of inflation where prices rise so rapidly that money becomes virtually worthless. The commonly cited threshold is 50% per month (which compounds to over 12,000% per year), though some economists use lower thresholds. During hyperinflation, prices can double every few days or weeks, and people rush to spend money immediately because it loses value by the hour.

Hyperinflation is always caused by a combination of excessive money printing and a loss of confidence in the currency. When governments print money to fund spending (because they cannot raise taxes or borrow), the currency floods the system. As people realize the money is losing value, they spend faster, pushing prices higher, which prompts more money printing -- a vicious cycle that feeds on itself.

Famous examples include: Weimar Germany (1923, prices doubling every 3.7 days), Zimbabwe (2008, prices doubling every 24 hours at peak, with 100 trillion dollar bills), Venezuela (2018-2019, over 1 million percent annual inflation), and Hungary (1946, the worst ever recorded -- prices doubling every 15 hours). In all cases, the root cause was government money printing to cover fiscal deficits.