{"id":38875,"date":"2022-10-26T21:00:00","date_gmt":"2022-10-26T19:00:00","guid":{"rendered":"https:\/\/www.11onze.cat\/?p=38875"},"modified":"2022-10-27T09:19:47","modified_gmt":"2022-10-27T07:19:47","slug":"hyperinflation-digital-currencies","status":"publish","type":"post","link":"https:\/\/www.11onze.cat\/en\/magazine\/hyperinflation-digital-currencies\/","title":{"rendered":"From hyperinflation to digital currencies?"},"content":{"rendered":"<div class=\"component text\">\n  <div class=\"container\">\n\n\n    <div class=\"row\">\n      <div class=\"col  col-lg-8  offset-lg-2\">\n        <h3><b>Despite high inflation, we are still far from hyperinflation. Such a scenario would multiply the effects of the crisis and could open the door to the replacement of physical money by digital currencies controlled by central banks.<\/b><\/h3>\n<p>&nbsp;<\/p>\n<p><span style=\"font-weight: 400;\">Annual inflation stood at 8.9% in September, after three consecutive months above 10 per cent, a rate not seen in almost four decades. With limited wage increases, <\/span><b>purchasing power in the last year is estimated to have fallen by 7.5% in Spain<\/b><span style=\"font-weight: 400;\"> and 6.2% in the euro area as a whole.<\/span><\/p>\n<p><span style=\"font-weight: 400;\">Although the situation in each country is nuanced, there are a number of common factors that have contributed to the rise in inflation. <\/span><b>Energy and fuels are the main culprits<\/b><span style=\"font-weight: 400;\">. And the secondary luxury in this drama would be food and commodities, whose prices have also soared.<\/span><\/p>\n<p><span style=\"font-weight: 400;\">A recent World Economic Forum <\/span><a href=\"https:\/\/www3.weforum.org\/docs\/WEF_Chief_Economists_Outlook_2022.pdf\" target=\"_blank\" rel=\"noopener\"><span style=\"font-weight: 400;\">report<\/span><\/a><span style=\"font-weight: 400;\"> indicates that in addition to high inflation, real wages and consumer confidence are in free fall, adding headwinds to growth and even raising the prospect of social unrest. As the agency&#8217;s survey of leading economists makes clear, <\/span><b>&#8220;painful months lie ahead&#8221;<\/b><span style=\"font-weight: 400;\">.<\/span><\/p>\n<p><span style=\"font-weight: 400;\">The effect of rising interest rates on mortgage repayments and the fact that the global economy is still convalescing from the pandemic will also contribute, so the perfect storm is brewing.\u00a0<\/span><\/p>\n<p>&nbsp;<\/p>\n<h3><b>The threat of hyperinflation<\/b><\/h3>\n<p><span style=\"font-weight: 400;\">Despite the severity of the inflation rates experienced so far, the current crisis can only be considered a minor setback compared to what would happen in the event of an inflationary spiral.<\/span><\/p>\n<p><span style=\"font-weight: 400;\">In general, hyperinflation occurs when prices increase by at least 50 % per month. This usually happens when central banks print a lot of money to service their debts or to counteract the effects of a depression, as has been the case in recent years, and this extra money is not offset by corresponding economic growth. <\/span><b>By putting much more money into circulation, the real value of the currency can plummet<\/b><span style=\"font-weight: 400;\">.<\/span><\/p>\n<p><span style=\"font-weight: 400;\">Hyperinflation can also occur when individuals lose confidence in the currency in use or when demand for goods and services far exceeds supply.\u00a0<\/span><\/p>\n<p>&nbsp;<\/p>\n<h3><b>A vicious circle<\/b><\/h3>\n<p><span style=\"font-weight: 400;\">As explained in another <\/span><a href=\"https:\/\/www.11onze.cat\/en\/magazine\/hyperinflation-history-runaway-inflation\/\" target=\"_blank\" rel=\"noopener\"><span style=\"font-weight: 400;\">article<\/span><\/a><span style=\"font-weight: 400;\">, perhaps the best known example of hyperinflation occurred in the 1920s. After the First World War, <\/span><b>Germany experienced a monthly inflation rate of close to 30,000%<\/b><span style=\"font-weight: 400;\">.<\/span><\/p>\n<p><span style=\"font-weight: 400;\">In such situations, the value of savings vanishes and <\/span><b>people tend to spend money quickly because it depreciates rapidly<\/b><span style=\"font-weight: 400;\">. The latter forces the central bank to put more banknotes into circulation, thus entering into a vicious circle that further accelerates the rise in prices.<\/span><\/p>\n<p><span style=\"font-weight: 400;\">The impact on people&#8217;s lives is devastating. <\/span><b>Purchasing power plummets and access to basic necessities becomes increasingly difficult<\/b><span style=\"font-weight: 400;\">: prices of essential goods such as bread can rise daily. In addition, shortages can occur, as part of the population tends to hoard basic goods in fear of further price increases.\u00a0<\/span><\/p>\n<p>&nbsp;<\/p>\n<h3><b>A step towards digital currencies?<\/b><\/h3>\n<p><b>Various remedies have been applied in the past to deal with hyperinflation<\/b><span style=\"font-weight: 400;\">, ranging from drastic tax reforms and public spending cuts to the introduction of new currencies.<\/span><\/p>\n<p><span style=\"font-weight: 400;\">Hence, some are already warning that <\/span><b>the plausible hyperinflation scenario could facilitate the deployment of digital currencies<\/b><span style=\"font-weight: 400;\"> promoted by various central banks. Given the crisis of confidence that fiat money would generate among the population due to its accelerated devaluation, receptiveness to a new currency could be greater.<\/span><\/p>\n<p><span style=\"font-weight: 400;\">As we explained in another <\/span><a href=\"https:\/\/www.11onze.cat\/en\/magazine\/governments-embrace-digital-currencies\/\" target=\"_blank\" rel=\"noopener\"><span style=\"font-weight: 400;\">article<\/span><\/a><span style=\"font-weight: 400;\">, <\/span><b>several central banks are working on the development of digital currencies<\/b><span style=\"font-weight: 400;\">. A country such as China is well advanced in the testing process and more than 200 million people have already used the digital yuan.<\/span><\/p>\n<p><span style=\"font-weight: 400;\">In this context, <\/span><b>the European Central Bank (ECB) is accelerating the development of its own electronic currency<\/b><span style=\"font-weight: 400;\">. The initial idea is that the digital euro should not replace physical money but complement it, although the approach could change depending on circumstances. The study phase should be completed by October 2023 and the currency could be operational by 2025.<\/span><\/p>\n<p><span style=\"font-weight: 400;\">Countries such as the United States, Sweden and Uruguay are also experimenting with centralised digital currencies. <\/span><b>It is a trend that is gaining momentum in the face of the risk of their physical currency losing ground<\/b><span style=\"font-weight: 400;\"> if hyperinflation triggers distrust of fiat money. This is why many central banks are considering issuing a more stable digital currency to rebuild lost confidence among the population.<\/span><\/p>\n<p>&nbsp;<\/p>\n<p><b>If you want to discover the best option to protect your savings, enter <\/b><a href=\"https:\/\/serveis.11onze.cat\/en\/preciosos-11onze\" target=\"_blank\" rel=\"noopener\"><b>Preciosos 11Onze<\/b><\/a><b>. We will help you buy at the best price the safe-haven asset par excellence: physical gold.<\/b><\/p>\n\n      <\/div>\n    <\/div>\n  <\/div>\n<\/div>\n\n\n<div class=\"component cards\">\n  <div class=\"container\">\n    <div class=\"row\">\n      <div class=\"col col-xl-8 offset-xl-2\">\n        <h1>If you liked this article, we recommend you read:<\/h1>\n        <div class=\"cards__wrapper\">\n          <div class=\"card\">\n            <a href=\"https:\/\/www.11onze.cat\/en\/magazine\/hyperinflation-history-runaway-inflation\/\" class=\"card-link\" target=\"_self\"><\/a>\n            <div class=\"card-img\">\n              <img decoding=\"async\" src=\"https:\/\/www.11onze.cat\/wp-content\/uploads\/2022\/03\/HEROIMAGE_HIPERINFLACIO_EXEMPLES-800x325.jpg\" class=\"card-img-top\" alt=\"\">\n                <span class=\"card-category\">Culture<\/span>\n            <\/div>\n            <div class=\"card-body\">\n              <p class=\"card-title p2\"><strong>Hyperinflation<\/strong><\/p>\n              <span class=\"card-time\">3 min read<\/span>\n              <p class=\"card-text small\">The latest data provided by the National Statistics Institute (INE) shows that in July.<\/p>\n            <\/div>\n          <\/div>\n\n\n          <div class=\"card\">\n            <a href=\"https:\/\/www.11onze.cat\/en\/magazine\/governments-embrace-digital-currencies\/\" class=\"card-link\" target=\"_self\"><\/a>\n            <div class=\"card-img\">\n              <img decoding=\"async\" src=\"https:\/\/www.11onze.cat\/wp-content\/uploads\/2022\/03\/THUMBNAIL_GOVERNS_MONEDES_DIGITALS.jpg\" class=\"card-img-top\" alt=\"\">\n                <span class=\"card-category\">Economy<\/span>\n            <\/div>\n            <div class=\"card-body\">\n              <p class=\"card-title p2\"><strong>Governments embrace digital currencies<\/strong><\/p>\n              <span class=\"card-time\">3 min read<\/span>\n              <p class=\"card-text small\">The digitalisation of the economy has spurred the<\/p>\n            <\/div>\n          <\/div>\n\n\n          <div class=\"card\">\n            <a href=\"https:\/\/www.11onze.cat\/en\/magazine\/inflation-weighs-household-consumption\/\" class=\"card-link\" target=\"_self\"><\/a>\n            <div class=\"card-img\">\n              <img decoding=\"async\" src=\"https:\/\/www.11onze.cat\/wp-content\/uploads\/2022\/05\/THUMBNAIL_INFLACIO_ESPANYA.jpg\" class=\"card-img-top\" alt=\"\">\n                <span class=\"card-category\">Economy<\/span>\n            <\/div>\n            <div class=\"card-body\">\n              <p class=\"card-title p2\"><strong>Inflation weighs on household consumption<\/strong><\/p>\n              <span class=\"card-time\">3 min read<\/span>\n              <p class=\"card-text small\">Spain seems to be one step ahead of Europe in terms of<\/p>\n            <\/div>\n          <\/div>\n\n              <\/div>\n              <br>\n              <br>\n              <div class=\"cards__wrapper\">\n\n        <\/div>\n      <\/div>\n    <\/div>\n  <\/div>\n<\/div>","protected":false},"excerpt":{"rendered":"","protected":false},"author":71,"featured_media":38870,"comment_status":"open","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"content-type":"","footnotes":""},"categories":[1],"tags":[172,175],"class_list":["post-38875","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-uncategorized","tag-economy","tag-technology"],"acf":[],"yoast_head":"<!-- This site is optimized with the Yoast SEO plugin v27.8 - https:\/\/yoast.com\/product\/yoast-seo-wordpress\/ -->\n<title>From hyperinflation to digital currencies? 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