Hyperinflation in Argentina Essay Example | Topics and Well Written Essays - 1500 words

Hyperinflation in Argentina - Essay Example This is explained with relevant data and pictorial graphs in order to bring out a clear understanding of the concept. Hyperinflation in any country is the result of careless monetary policies and the balance of imports and exports, and the mismatch of demand and supply factors. A country that slips into a period of hyperinflation experiences a rough economy in addition to heavy economic downturn and in the end resulting in currency devaluation. According to the banking dictionary Hyperinflation is explained as an "Economic condition characterized by rapidly rising prices of freely traded goods, and declining purchasing power, threatening economic stability and ability to repay External Debt the term usually is applied when consumer prices are rising at rates in excess of 50% per month, particularly in developing countries. While we do have many definitions and perceptions about hyperinflation let us first understand the term Inflation. In an article published by the department of Economics Wilfred Laurier University of Canada, "Inflation is generally defined as a sustained increase in the cost of living. While there exist a myriad of indicators of the cost of living in most countries, inflation is usually thought of in terms of a consumer price index (CPI)." Moreover is further explains inflation as "An understanding of inflation and its causes is vital since continuous increases in some indicator of the cost of living imp lies a concomitant fall in the purchasing power of money. In other words, a given quantity of currency is able to command fewer quantities of goods and services as prices rise."(Pierre 2000) Finally inflation is the rise in the consumer prices and the percentage of this rise if exceeds over 50% a month is hyperinflation. Most of the hyperinflationary conditions have risen across the Globe after the Second World War. Brazil and Argentina had an average monthly increase of 68.6% and 66% respectively. However, economists commonly agree that Germany's economy was the worst affected due to Hyperinflationary conditions during the Second World War. The recent Global financial meltdown has given rise to many questions about hyperinflation across the Globe and how long it would last and whether this would give rise to another Great Depression 2. In an article by Global Research, the International forecaster of Bob Chapman predicted Inflation rates; US at 12.5% ,China 8.5% The Gulf an average of 12% ,Russia at 14%, India at 8%, Indonesia 12%, Brazil at 5%, Chile 8.3%, and Argentina at 23%.(Lendman 2008) The figures are just a global forecast of which Argentina the highest note that Brazil has managed to emerge out of its hyperinflationary condition and is well on the road to recovery. History of Argentina's Inflation: Just to give glimpse of the Argentine Inflation picture. Hyperinflation picture rather news from the Argentine post the average annual inflation rate in Argentina between 1965 and 1989 was 284%, according to a 1992 research paper archived by the National Bureau of Economic Research. According to this