How Hyperinflation Happens

Sep 6 2013 @ 6:13pm

Syria Inflation

Matthew O’Brien highlights Syria’s hyperinflation:

It turns out you can’t have much of an economy when your country is a war zone, and the regime is attacking civilians. But functioning economy or not, the government still has to pay its bills. So what does it do when there’s nothing to run or tax? Easy: It prints what it needs. That’s what the pariah Assad regime has done to cover the difference between what it has to pay, and what its few remaining patrons have paid it. The predictable result of all this new money chasing fewer goods has been massive inflation.

This is in keeping with the history of hyperinflation:

Hyperinflations tend to happen following wars or revolutions. Now, Weimar Germany and Zimbabwe look like exceptions to this rule, but they’re not really – the former’s resistance to reparations, and the latter’s botched land reform halted economic activity as much as any conflict.