In instances such as Zimbabwe or Argentina, where hyperinflation spirals out of control, how do people feed themselves and pay for the bare necessities? Does the government step in and provide the support needed to prevent mass starvation?
In: Economics
Prices can’t go up if people can’t pay them. Inflation is the increase of prices, and prices increase for numerous reasons but ultimately cannot overshoot people’s spending power.
High inflation generally happens when there’s a supply shortage. Like, there’s less stuff for some reason. So prices go up. But to make sure people survive, the government creates even more money to basically spread out the pain (and not just have the poorest get priced out). As less stuff + same money = inflation, less stuff + even more money = even more inflation. And until the stuff shortage gets solved, this process usually keeps going and prices get really high.
But during this process, wages get really high, too. Not relative to prices, but relative to before, and enough to keep up with prices.
Purchasing power, however, is usually dropping, as that’s related to the *root cause*. But the inflation itself, the numbers going up everywhere all at once is rarely the problem, but the reaction to the problem, and that reaction is intended to increase how well everyone survives the root problem.
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