Hyperinflation is a rapid and excessive increase in the general price level of goods and services in an economy, typically resulting in a significant loss of purchasing power for the people who own that currency. In a hyperinflationary scenario, prices can rise at an extremely rapid rate, often on a daily or hourly basis, making it difficult for people to plan their expenses, buy the needed goods or services or save money.
While there is no universally agreed-upon threshold for what constitutes hyperinflation, a common rule of thumb is that it occurs when inflation exceeds 50% per month. Hyperinflation is often the result of a collapse in the value of a country’s currency due to a variety of economic and political factors, such as excessive money printing, loss of confidence in the government, war or other significant disruptions to the economy.
Recent examples of hyperinflation include Zimbabwe in the late 2000s, where hyperinflation reached an estimated peak of over 79.6 billion percent per month, Venezuela in the 2010s, where inflation peaked at an estimated rate of 10 million percent per year, and more recently, Lebanon, where inflation reached an estimated 85% in 2021.
Hyperinflation can have significant social and economic consequences, including a breakdown in social and political order, loss of confidence in the national currency, and significant hardship for ordinary citizens who see their savings and wages eroded by the rapidly rising prices. As such, hyperinflation is generally considered to be a highly undesirable economic outcome that policymakers work to avoid.
The fear of hyperinflation is also a common reason some people hold precious metals as part of their assets. Since precious metals and bullion typically have held up well in those environments when the value of the fiat currency did not.
Common bullion purchased to protect in these situations is fractional sizes, smaller and varied sizes of bullion which can be great for trading for goods and services. For instance, if you want some milk and eggs, you not going to do much with a 1 ounce gold bar, but a ¼ ounce silver coin or perhaps a 90% silver dime or quarter may come in handy.