In the last few years, Venezuela has witnessed one of the highest rates of inflation in the world. Prices of commodities in that country have increased so much so that they have become virtually unaffordable. But this is not the first country to experience hyperinflation. In history, some of the countries that have experienced hyperinflation include Germany, Hungary, Yugoslavia, and Zimbabwe. Life for people in these countries was virtually unbearable, with prices changing several times a day.
What Is Hyperinflation?
Hyperinflation is defined as a situation where commodity prices increase by at least 50 percent a month. In some jurisdictions that have experienced hyperinflation, the rate has been up to 98 percent a day. Thus, prices of basic commodities could more than double in a span of just 25 hours. Yet people in these countries have to survive.
How Do People Live and Use Money in A Country with Hyperinflation?
Living in a country with hyperinflation is all about survival. There are some things that people in such countries have to do, which they wouldn’t do under normal circumstances. They include the following:
1. Saving Money Is Impossible
In a country with hyperinflation, it makes no sense to save money in the bank using the local currency. If you do that, the value of your money would have changed the following day. Any savings that people make are done in major world currencies such as the US dollar.
2. Carrying Wheelbarrow Loads of Cash
Due to the quickly changing prices, commodities become virtually unaffordable. To buy what they need, people are forced to carry wads of cash on wheelbarrows so as to be able to pay for what they need. The situation is made worse by the central banks attempting to solve the situation by printing more currency notes.
3. Coveting Foreign Currency
To avoid ending up with wads of worthless currency notes, people look for ways to buy foreign currency. The US dollar becomes a must-have for such individuals. However, they hardly choose to buy from the mainstream forex market due to price restrictions and go for backstreet exchanges.
4. Thriving Black Economy
One of the reasons for astronomical rates at which prices increase in countries with hyperinflation is the scarcity of commodities. Because of that, the government tries to institute price controls. This leads to the formation of long queues outside the stores selling the goods. Those who manage to get in buy excess, only to come out and sell to others at the prevailing market prices. Some citizens even resort to smuggling in goods from other countries.
5. People Get More Creative
It no longer makes sense for you to stay in a white collar job that pays you a wage that won’t last a day. You have to survive. If you aren’t smuggling basic goods into the country, you are selling a toothpaste squeeze to your neighbor. You might also think of selling cigarettes as single sticks.
So, how do people live and use money in a country with hyperinflation? Well, people must try all they can to survive. Keeping and using the local currency becomes untenable, with the increasing preference for foreign currencies. The black market thrives as those with access to basic goods sell to those who do not have. Somehow, life goes on.