hyperinflation

hyperinflation

Hyperinflation of Argentina and Germany
Introduction:
Hyperinflation has been broken down into various different views, according to The Ends of Four Big Inflation by Thomas J. Sargent, “… inflation has a stubborn, self-sustaining momentum…” that are not susceptible to changes in monetary and fiscal policy.   This momentum that Sargent speaks of has been argued over by economists with questions as to how susceptible and cooperative it will be to drastic changes in policy.   Through the understanding of this momentum Sargent concludes that to fix inflation is to change the policy regime, “…there must be an abrupt change in the continuing government policy or strategy for setting deficits now and in the future…(2).”   All hyperinflation accounts to date do not compare to the drastic and quick increase in wholesale prices that Germany experienced after World War I.   Figure 4 from Thomas J. Sargent shows the astronomical levels to which prices rose until December of 1923 when the price level hit a plateau.   When comparing the hyperinflation of Germany to the Argentine hyperinflation economist, Miguel A. Kiguel refers to older accounts of hyperinflation as “classical accounts” or “classical hyperinflation” and states that “…deficits, while large did not reach enormous proportions while seiniorage levels were not higher than in the previous two decades(Kiguel 1)”.   Sargent and Kiguel present convincing hypotheses and great amounts of data as well as analysis, and the bulk of our analysis was based upon the two essays Stopping Three Big Inflations, by Miguel A. Kiguel and The Ends of Four Bing Inflation by Thomas J. Sargent.   This essay will introduce first the Argentine hyperinflation and then hyperinflation of Germany with background information that leads up to the respective explosions in price level, high powered money supply, and enactments of changes in policy regime.   After exploring the background information each member has formed a...