When the functions of money break down: Hyperinflation | AP Macroeconomics | Khan Academy

To illustrate what the functions of money are, it can help to look at circumstances where those functions break down. Hyperinflation, in which prices of things increase really really fast, is one such example. Created by Grant Sanderson.

AP Macroeconomics on Khan Academy: Welcome to Economics! In this lesson we'll define Economic and introduce some of the fundamental tools and perspectives economists use to understand the world around us!

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[andnetseifugebre]

After 7 years I’m still learning by ur video 🎉

[elisadgm]

My parents and grandparents have lived through that in Brazil. They've told me many wild stories about running in the supermarket before the prices could be readjusted with those sticky things (which used to happen at least once a day). The houses built around that time usually have at least a small storage room, because families would buy a month's worth food the day their salaries were paid. It sounds crazy.

[manu]

Ty 3Blue1Brown. This topic fits perfectly for the challenges ahead of this situation in 2020.

[kevinbyrne]

8:36 -- When hyperinflation occurs, often people will start using a different, more stable currency (oftentimes, the U.S. dollar).
Desperate governments (which are trying to pay their bills with their own worthless currency) then ban the use of such alternative currencies.

[jawbone]

this is so cool, that approach is ingenious

[laomark]

good itelligente and didactical work...goodvlob, thanks!

[kevinbyrne]

I agree with other commenters: hyperinflation is not due to people's greed (people are always greedy, so hyperinflation should always occur); rather, it's due to the government's printing too much currency.

When a government's revenues don't pay its operating costs, the government sometimes (instead of raising taxes or cutting expenses) simply prints more currency. Since the supply of currency increases, its value in terms of other goods and services decreases, so the price of everything rises.
In countries where hyperinflation is occurring, you see people carrying bundles of bills to pay for goods and services. Since people don't normally carry bundles of bills, someone (namely, the government) must have created all of those new pieces of paper. When the government stops printing new bills, the hyperinflation stops.

[kalinsimovski]

my family has lived trough hyperinflation. I was too young and I don't remember much, but I've heard stories. What I do remember is that we had to exchange our money with a new currency with the same name but more stable, but that's just at the end. My dad tells me even the price of coffee could change while you were drinking it, so everybody prepaid their bills at bars and restaurants. Insane to think about..

[phantomfacefinal]

Universal Lesson Number 1- The more of something there is, the less value it has
Universal Lesson Number 2- Too much of anything isn’t good for anyone

[Rob-fxdw]

Thanks for that explanation of what happened in Brazil. I was unaware of the actual operational aspects of UAV while I was aware at the time of the falling value of the Cruzeiro. It made international trade very difficult at the time.

[dolltron]

Inflation is NOT price increases, price increases are the effect. Inflation is expansion in money supply so there is more currency chasing fewer goods and services. Inflation=cause, price increases= effect. It's an important distinction because some price increases are due to demand vs supply of that particular good/service and have nothing to do with more currency circulating. By simply observing price increases as inflation it totally ignores what the money supply is doing. Hyperinflation is a government created problem, this video plays the propaganda line that its peoples fault (businesses increasing prices or people anticipating price increases). No it's caused by governments trying to print their way into prosperity or print their way out of debt.

[Taserx]

Inflation is expanstion of currency supply, higer pricers R only the symptom of inflation.

[SaraCarvajal]

I understand what you say about the unit of value, but was the currency switch as smooth as you make it sound??
They were used to see prices in URV, but what about the salaries? were they earning enough money equivalent to URV to cover their expenses? Because in hyperinflation prices go up but your salary does not.

[sumayya]

oh hey Grant didn't expect to see you here!

[felipeangel]

Could this apply to fiat currencies in a possible substitution with crypto currencies?

[ThePeterDislikeShow]

Silver is my URV that I measure prices with.

[Tarafairytaleflowers]

A variable I think could be addressed in this video which some commenters who experienced hyperinflation brought up is the buying habits of citizens change. If buyer A knows prices will be increasing and prepares to increase his products then he will also buy more of the products he needs right away and store them because buying before the increase means he is getting them on sale. If buyer A does this then in the beginning he profits from the upcoming inflation but also further triggers it due to supply demand issues. Another area to address is the money printing and fractional change. More money put into a system means the value of that dollar decreases in relation to the goods. It isn't that the goods cost more but the fiat currency is worth less. Would taking money out of the system and reducing supply not stop inflation?

[samjoned]

Dammit if i had you people back when i was in college i probably wouldnot have failed economics

[dompi]

having my country as an example for this makes it much easier to understand lol

[Farhadahmed]

Okay, tell me how an economy falls into hyperinflation ?