What Factors lead to hyperinflations and what can be done to eliminate Essay

What Factors lead to hyperinflations and what can be done to eliminate them - Essay Exampleral cause of hyperinflation may be described as follows an unprecedented rise in money supply that is bereft of any growth in output or services creates a disparity between the demand and supply of money. This imbalance leads to a sledding of bureau in the protect of the money and finally, hyperinflation. The situation becomes such gruesome that any kind of legal stonecutter laws, price controls, fail to return the confidence on the value of the paper money, which is without any intrinsic value to the consumer. If the government resorts to excessive printing of money and if it gets a friendly environment to foster inflation, hyperinflation keeps on sustaining and in a cumulative manner, erodes the economy day by day. The government in such case ofttimes fails to match the pace of its coin printing mechanism with that of the devaluating currency (the rate at which the currency is losing i ts value). (Hyperinflation causes, cures)The sequent of hyperinflation is almost always associated with the paper form of money. This is because it is the simplest way to increase money supply. In most of the cases afterward experiencing hyperinflation, an economy reverts to hard money. An investigation into the basic causes of hyperinflation will offer more questions than answers. According to the monetarists and the classical economists, a hyperinflation is always led by irresponsible borrowing of money by the government in do to pay all of its expenses. The monetary and classical theory regarding the hyperinflation center on the untamed seignorage on behalf of the monetary authority and the gains they can reap off the inflation tax. The neo liberals, on the other hand, explain hyperinflation in terms of the confidence crisis. The neoliberal theory of hyperinflation is known as the quantity theory of hyperinflation. According to them loss of confidence of the mass on the capab ility of paper money to readily transform into hard currency like gold, silver or other form of