Saifedean Ammous on hyperinflation

Hyperinflation is a form of economic disaster unique to government money.  There was never an example of hyperinflation with economies that operated a gold or silver standard, and even when artifact money like seashells and beads lost its monetary role over time, it usually lost it slowly, with replacements taking over more and more of the purchasing power of the outgoing money.  But with government money, whose cost of production tends to zero, it has become quite possible for an entire society to witness all of its savings in the form of money disappear in the space of a few months or even weeks.

Hyperinflation is a far more pernicious phenomenon than just the loss of a lot of economic value by a lot of people; it constitutes a complete breakdown of the structure of economic production of a society built up over centuries and millennia.  With the collapse of money, it becomes impossible to trade, produce, or engage in anything other than scraping for the bare essentials of life.  As the structures of production and trade that societies have developed over centuries break down due to the inability of consumers, producers, and workers to pay one another, the goods which humans take for granted begin to disappear.  Capital is destroyed and sold off to finance consumption.  First go the luxury goods, but soon follow the basic essentials of survival, until humans are brought back to a barbaric state wherein they need to fend for themselves and struggle to secure the most basic needs of survival.  As the individual's quality of life degenerates markedly, despair begins to turn to anger, scapegoats are sought, and the most demagogic and opportunistic politicians take advantage of the situation, stoking people's anger to gain power.  The most vivid example of this is the destruction of the Weimar Republic in the 1920s, which not only led to the destruction and breakdown of one of the world's most advanced and prosperous economies, but also fueled the rise of Adolph Hitler to power.

Even if the textbooks were correct about the benefits of government management of the money supply, the damage from one episode of hyperinflation anywhere in the world far outweighs them.  And the century of government money had far more than one of these calamitous episodes.

As these lines are written, it is Venezuela's turn to go through this travesty and witness the ravages of the destruction of money, but this is a process that has occurred 56 times since the end of World War I, according to research by Steve Hanke and Charles Bushnell, who define hyperinflation as a 50% increase in the price level over a period of a month.  Hanke and Bushnell have been able to verify 57 episodes of hyperinflation in history, only one of which occurred before the era of monetary nationalism, and that was the inflation in France in 1795, in the wake of the Mississippi Bubble, which was also produced through government money and engineered by the honorary father of modern government money, John Law.

~ Saifedean Ammous, The Bitcoin Standard, pp. 66-67