The article defines hyperinflation as an economic issue associated with a sudden increase in the prices of goods and services, causing pressure to the national budget. The author mentions some factors that lead to this phenomenon, including wars and post-war crisis, the collapse of export markets, and sociopolitical disturbances, among others. The article highlights that a sharp decline in income taxes and incapacity or reluctance to seek foreign aid can give rise to hyperinflation (Chambers, 2020). The author articulates the understanding of economic dynamics that have resulted from increased demand for social and medical services globally by providing an international issue that has led to hyperinflation.
A picture-perfect example included in the article is the dramatic changes that have resulted from the emergence of the Covid-19 pandemic, leading to the shutdown of global markets. The great lockdown is the worst economic scenario since the great depression in the 1930s. The novel virus has resulted in the loss of many lives across the globe despite efforts to control its spread through quarantine and social distancing measures. The effects of the current pandemic are far-reaching and are feared to collapse the international market in a few months. Keeping the global economy on track is becoming a daunting task as countries fight with the increased demand for limited therapeutic resources. Hyperinflation has been felt all over the world as governments strive to avail essential medical supplies and services to its citizens.
The article articulates the use of economic theories to explain hyperinflation. The author accentuates the importance of the new monetary theory as a novel convention in controlling taxes. Chambers (2020) attests that putting this economic model into practice helps in curtailing inflation. The author needs to explain this practice further using more theories such as the conventional demand-pull inflation model as it will provide the reader with more knowledge about the factors that lead to hyperinflation and approaches to maintain economic stability.
The author feels that “the goal of the government is to try and smooth a process that would otherwise be very rough and to minimize the damage” (Chambers, 2020, par. 4). While this statement may be true, the author needs to discuss primary roles that the government should play to actualize deflation processes in a bit to normalize the economy. For instance, a key point missing in the article is an examination of how an inflation gap or excess demand should be corrected through improved taxes and reduced national expenditure. However, this scenario should be handled with caution to avoid deflation, which may slow economic growth due to decreased consumer spending. Nonetheless, taxes can be improved through contradictory monetary policies aimed at reducing bond prices and increasing interest tariffs. This approach is a sure way of cutting spending in a bid to halt economic growth.
For instance, banks may increase interest rates to discourage people from borrowing money. This move results in decreased spending and plummeting prices, which slows down the rate of inflation. Overall, the article presents an outstanding discussion on the occurrence of hyperinflation. The phenomenon is not an ordinary economic slump but is a rare singularity that results from sharp monthly upsurges in the prices of commodities. With the current unforgiving Covid-19 pandemic, countries should expect more sapping of tax revenues, shuttering businesses, increased unemployment rate, and the effects of the increased cost of living.
Reference
Chambers, C. (2020). Hyperinflation: Will America dodge the bullet? Forbes. Web.