What is Inflation?
Inflation is literally at the center of the entire world of finance!
A stable and moderate rate of inflation is the most important mandate of Central Banks around the world. As long as inflation is stable in a growing economy, you will hear the word “Goldilocks” being thrown around a lot. But if inflation spirals up out of control into hyper-inflation or turns negative into deflation, governments and central banks all around the world will scamper to bring the situation back under control!
#1. Let us start with an easy one. Inflation means the prices of products going ….
Inflation means rising prices of goods and services
#2. If prices of products increase, but at a decreasing rate, it is called…
Disinflation is the phenomenon of rising prices, but at a decelerating rate.
#3. Which country experienced inflation rates, in excess of 29,500% per month in the 1920s
A super high inflation rate was one of the reasons why Adolf Hitler was able to capitalize on the public discontent and rise to power in Germany in the 1920s.
#4. Which country has experienced the highest hyperinflation rate in the 20th century?
Hungary has experienced a monthly inflation rate of 41.9 quadrillion percent!!!
During July of 1946, after WWII, prices doubled about every 13.5 hours in Hungary.
#5. US$100 in 1970 is equal to how much money in 2020?
In simple words, this means that if a young person like you in the 1970s did not invest US$100 at a return of approx. 3.5% per annum, he/she would have lost real value in the years gone by since the original US$100 are worth far less!
#6. Which country presently has the highest inflation rate in the world (2021)?
Current annual inflation rate in Venezuela is approximately 700% (2021).
#7. What level of inflation rate is usually regarded as the threshold for calling it hyperinflation?
50% per month is usually regarded as the unofficial threshold of hyperinflation. If rates exceed this threshold, the economy is said be in a hyper-inflationary environment.
#8. What was the denomination of the largest banknote ever printed in the world?
100 quintillion! That’s basically 10 to the power of 18 (short scale). A dizzying number of zeros..
#9. Inflation rate at the start of 2022 is approximately 7%. How much do you think your bank account in USD roughly earns (in early 2022)?
A paltry sum of 0.2%! Do you now see what loss of purchasing power means?
#10. Is a mild and stable amount of inflation, eg. 2-3% annually, good for stock prices?
A small amount of stable inflation is good for companies and their stock prices since increasing selling prices translate into higher profits!
#11. A loaf of bread in Germany, cost 250 marks during January of 1923. What was the price for the same loaf of bread in November of 1923?
In 1923 hyperinflation in Germany became so bad that workers were often paid twice a day because their wages basically became worthless from the morning to the afternoon!
By autumn 1923 it cost more to print a note than the note was worth.
#12. Which country holds the record for the largest number of zeros shown on a banknote?
Although Zimbabwe holds the record for the largest number of zeros on a banknote (100,000,000,000,000), Hungary actually printed (but never issued) the largest banknote ever for one sextillion pengő.
#13. Historians believe inflation led to the downfall of which ancient civilization?
By 265 CE there were no more precious metals left for the Romans to plunder in the countries they had conquered. They tried to make up for this shortfall by debasing more money, levying more and more taxes on their people, leading to hyperinflation so severe that it paralyzed the Roman economy.
#14. What led to rampant inflation in Europe during the 1300’s?
The 80% mortality rate of the bubonic plague increased the supply of available currency which led to inflation. Even though workers were paid more for their services after the plague, they lost much purchasing power because of it.
#15. Which US president declared inflation “public enemy number one” in 1974?
President Ford even release “WIN”-buttons, standing for “Whip Inflation Now.” These buttons were ridiculed and often worn upside down, with people claiming that it stood for “No Immediate Miracles,” or “Need Immediate Money.”
#16. Adjusted for inflation, which movie was the highest grossing movie of all time?
In today’s (2022) terms, Gone With the Wind would’ve grossed about $1,606,254,800!
#17. Printing more money is an effective solution to curb inflation. True or False?
Printing more money only worsens the problem, as it can cause a rise in demand for certain goods and services. The increased demand generally leads to price increases, as there isn’t sufficient supply to cover the increased demand.
#18. What was Brazil’s monthly inflation rate during the 1990’s?
Each morning shoppers would race to the supermarkets, trying to buy their items before supermarket employees had time to put new price stickers on.
#19. How many currency collapses has the United States suffered due to inflation?
The first collapse was that of the Continental Currency during the Revolutionary war. The second was that of the Confederation notes during the Civil War.
Continentals, which is what the newly minted colonial paper currency was called, were issued from 1775 to 1779 to finance the cost of the war. The currency quickly lost value, partly because it was not backed by a physical asset like gold or silver, but also due to the fact that too many bills were printed. These two factors contributed to the coining of the disparaging term “not worth a continental.”2
Super! You know your basics well !
Better luck next time !