Categories:
Monetary Policy
One of the most misused terms nowadays, even by economists, is the term “hyperinflation.” People have actually referred to the high inflation of the late 1970s as hyperinflation. It wasn’t even close. Here’s what Michael Salemi wrote in his article “Hyperinflation” in the Concise Encyclopedia of Economics:
Although the threshold is arbitrary, economists generally reserve the term “hyperinflation” to describe episodes when the monthly inflation rate is greater than 50 percent.
I had been meaning to write this post for the last few weeks and, interestingly, what reminded me was a question on Jeopardy last night in which Philip Cagan was identified as the person who defined hyperinflation the way Michael Salemi did above.
READER COMMENTS
R. Pointer
Jul 17 2010 at 9:11pm
I would like to see a citation of someone referring to 1970 inflation as hyperinflation.
david
Jul 17 2010 at 9:38pm
@R. Pointer
Here you go.
Lori
Jul 18 2010 at 2:39pm
Yah credit card gotcha clauses are to American 1970’s inflation as payday lenders are to real hyperinflation.
Moopheus
Jul 18 2010 at 6:45pm
A common theme I’ve seen on the Intertubes is that the government is “hiding” hyperinflation by manipulating the official inflation figures. Again, despite their being no real definition, one of the salient features of historical examples of hyperinflation is that while it was happening, it was pretty apparent to all affected, no matter what the official figures said.
jsalvatier
Jul 19 2010 at 9:02am
I frequently hate your posts, but thank god you’re speaking out on this. I think Kling is guilty of this.
Yancey Ward
Jul 19 2010 at 3:39pm
Hyperinflation should be defined as the self-reinforcing rise in velocity caused by the inflation itself- an upwards spiral out of control. At what level of inflation does this happen? Depends on the society.
Lori
Jul 19 2010 at 3:55pm
At any rate, it must be quite impossible to hide hyperinflation.
Yancey Ward
Jul 20 2010 at 12:52pm
Lori,
I think that is the key to the definition. Once people become aware of inflation to the extent that, let’s say, half the population wants to hold only real assets rather than any paper ones, then you have hyperinflation. The rest soon follow in abandoning holding cash/bonds of any kind.
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