What are the dangers of hyperinflation? Use a historical example to support your answer.
Answer (1)
Hyperinflation is when prices increase extremely fast—often more than 100% per year. It is one of the most dangerous problems any economy can face because it destroys the value of money. People lose trust in the currency, and the economy can collapse.ZimbabweA historical example is Zimbabwe in the 2000s. The government printed too much money to pay for war and public programs, but production did not increase. As a result, prices doubled every few days. At its worst, prices in Zimbabwe rose by millions of percent per year. People carried bags of money just to buy bread. Eventually, the Zimbabwean dollar became worthless.Post-World War II ChinaIn Asia, post-World War II China also experienced hyperinflation. After the war, the Chinese Nationalist government printed large amounts of money to pay deb-ts and fund recovery. Prices rose so fast that people stopped using càsh and started trading in goods like rice or silver. It caused severe poverty, hunger, and political unrest.Hyperinflation is dangerous for many reasons.First, it destroys savings. If you saved ₱10,000 and prices double every week, your money becomes worthless quickly.Second, businesses cannot plan. If they don’t know what prices will be tomorrow, they can’t set prices or pay salaries correctly.Third, people lose trust in the government and currency, which can lead to chaos or even revolution.PhilippinesIn the Philippines, we have never experienced hyperinflation, but during times of high inflation (like during the 1970s oil crisis), people felt the pressure. Transport strikes, higher food prices, and unrest are possible outcomes when inflation is not managed.To avoid hyperinflation, governments must be careful not to print too much money and should ensure production keeps up with spending. This is why the Bangko Sentral ng Pilipinas has strict controls on money supply and inflation targets.
