Read the case and respond to the prompt below:
When Money Loses its Meaning
When money decreases in value because of inflation, people tend to place less trust in it as a method of storing value, and look for alternative means of storing their wealth that would be more efficient. Hyperinflation—extremely high inflation that can range from 100% to 10,000% annually—makes money particularly unstable. In fact, hyperinflation makes money meaningless. That is what happened in Germany during the 1920s. A pack of cigarettes, for example, had a price tag of 200 trillion marks. As a result, people ceased to use the official, but worthless, currency and resorted to using other objects as money (such as clothes, appliances, jewelry, antiques, diamonds, silver, and gold). These objects effectively became money. Subsequently, the German economy collapsed, setting the stage for the rise of Nazism.
Hyperinflation in post–World War I Germany is one of the worst such cases in this century. Nevertheless, there are numerous recent examples of hyperinflation. In the South American country of Bolivia, for example, prices during 1984 rose at an annual rate of 10,000%. A hamburger cost 1 million pesos, a loaf of bread sold for 300,000 pesos, and one night’s lodging in a good hotel cost 35 million pesos. Hyperinflation in Bolivia skyrocketed to the point where the peso was virtually worthless.
The most severe known incident of inflation was in Hungary after the end of World War II when prices rose at a rate of 4.19 x 1016.% per month (prices doubled every 15 hours). More recently, Yugoslavia suffered 5 x 1015% inflation per month (prices doubled every 16 hours) between October 1993 and January 1994.
Is the United States at risk of hyperinflation? Why or why not?
