4 ms·
Root cause yes, but that's not what sustains the inflation. Inflation is sparked by an increase in the money supply. Hyperinflation is what happens when risin
by nostrademons 5y ago
Root cause yes, but that's not what sustains the inflation. Inflation is sparked by an increase in the money supply. Hyperinflation is what happens when rising prices then trigger an increase in the velocity of money. The government has control of money supply but not velocity, which is why hyperinflation is essentially impossible to stop without abandoning the currency once it gets started.
The concrete manifestation of an increase in money velocity is things like people running out to the store to spend money as soon as they get paid; wages getting set month-to-month or even day-to-day rather than annually; prices not being posted, and instead being set as you walk in the store; and zeros being added to dollar bills. The wage/price spiral is not a separate thing; it's the concrete manifestation of the abstract model of money velocity increasing.