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Thread: The mechanism of double-exponential growth in hyper-inflation

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    Join Date
    Nov 2006

    Default The mechanism of double-exponential growth in hyper-inflation

    In ordinary markets prices fluctuate up and down fairly randomly as typically observed in foreign exchange markets or in stock markets. Inflation is the special economic situation in which prices apparently move monotonically upward and the value of money decreases rapidly. There are many examples of inflation not only in the history [1] but even now some countries are facing with the fear of inflation. Especially so-called the hyper-inflation is a kind of breakdown of currency system devastating the whole society. Detection of hyper-inflation in its early stage might contribute to avoid the tragedy, however, no such tool exists at present as scientific description of inflation has not been established yet.


    It is known that the inflation phenomenon is mainly caused by widespread of so-called ”inflation mind” which is the expectation of general people that prices will rise in the near future [3].The central bank’s excess supply of money can contribute to inflation, however, hyper-inflation can not be realized without general people’s inflation mind because the effect of cash supply is limited in the whole economy.In fact, in the case of Austria (1921-1924), the price index stabilized automatically although the central bank was keeping an excess money supply policy [4].
    Last edited by Sapiens; 11-03-09 at 06:02 AM.

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