The baker can make 10 birthday cakes, and sell one to each of his customers.
Everyone pleased, everyone feeded - the value of one cake is 1 unit of the currency.
However, if 100 people want to buy a cake, the baker needs to make more cakes.
But maybe he only has one oven, or limited access to flower, milk, butter, staff, place ...
No problem, he can raise his price to 2 units per cake, he knows he will sell anyhow.
One currency-unit, now represents half of a cake, as the full cake costs double.
In normal situations, this is what happens to keep the economy going. There is a raise of prices as time goes by. People will earn more money, to keep up with the prices, prices go up again ...
This is what we call inflation. From a capitalistic point of view, a healty situation.
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| shoes in 1922 |
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| shoes in 2020 |
But what if prices double every year (100% inflation) or even faster ...
In that case we talk about hyperinflation.
It happened to Germany after the first World War in 1923, to Greece in 1944, Hungary in 1946, Yougoslavia in 1994 and more recently to Zimbabwe in 2008.
In my post on Venezolan notes I already posted some notes that were subject to hyperinflation.
How bad the situation in Venezuela might be, they don't even reach the top 10 of worst cases...
(https://rainbowstampsandcoins.blogspot.com/2016/01/currency-today-venezuela-01.html)
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| Venezolan Bolívar |
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| 500 bolívares soberanos |
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