Hyperinflation is that transition period when a paper money is clearly failing as a store of value but has not yet died as a medium of exchange. This blog is to look at this and any other interesting economic issues. Vincent Cate
Tuesday, November 6, 2012
Gradually and then Suddenly
"How did you go bankrupt?" Bill asked. "Two ways," Mike said. "Gradually and then suddenly". -Ernest Hemingway, The sun also rises (1926)
When a government goes bankrupt it is after long period where finances gradually get worse and worse and then suddenly nobody wants to loan it any more money. If it does not print money, then it will have to cut back the size of government to match taxes without borrowing, possibly after defaulting. If it prints money, then the gradual part can go on a bit longer, and the suddenly part is hyperinflation. This second scenario is much harder on the citizens.