When folks talk about hyperinflation, they often think it is just a case of governments printing too much money. And while that's of course part of it, nearly all cases (maybe all?) of hyperinflation are marked by
supply destruction - the economy is no longer able to produce the goods and services needed by the population, so you have the same amount of money chasing fewer goods, and from there things can spiral. Cases in point:
1. In the Weimar Republic, Germany's productive capacity was devastated by WWI.
2. In Zimbabwe, which was "the bread basket of Africa", farm productivity famously plummeted due to the land redistribution policies of Robert Mugabe.
3. Looking at the current crisis in Sri Lanka, the forced switch to organic farming similarly destroyed farm productivity.
4. Though I wouldn't call it "hyperinflation", the COVID pandemic clearly caused shortages throughout the economy.
My point is that hyperinflation is rarely just caused by governments living beyond their means - the trigger is nearly always a supply shock, and then it's what governments do in the face of that supply shock that gives you hyperinflation.
1. In the Weimar Republic, Germany's productive capacity was devastated by WWI.
2. In Zimbabwe, which was "the bread basket of Africa", farm productivity famously plummeted due to the land redistribution policies of Robert Mugabe.
3. Looking at the current crisis in Sri Lanka, the forced switch to organic farming similarly destroyed farm productivity.
4. Though I wouldn't call it "hyperinflation", the COVID pandemic clearly caused shortages throughout the economy.
My point is that hyperinflation is rarely just caused by governments living beyond their means - the trigger is nearly always a supply shock, and then it's what governments do in the face of that supply shock that gives you hyperinflation.