Hyperinflation: Why Governments Lose Control and People Seek Bitcoin

Inflation is normal, but there is a breaking point: when prices rise more than 50% in a month, it is no longer economics, it is chaos. That is hyperinflation, according to economist Philip Cagan.

To visualize the absurd: imagine a sack of rice at $10 that costs $15 the following month and $22.50 after that. In six months it's at $114, in a year it exceeds $1,000. And that is just the beginning. Once unleashed, hyperinflation accelerates so much that prices skyrocket in hours, not days.

The Most Extreme Cases

Germany (Weimar, 1923) After World War I, Germany abandoned the gold standard and was forced to pay reparations in foreign currency. The solution: printing money uncontrollably. The result: inflation of more than 20% daily. The German currency depreciated so much that citizens burned banknotes to keep warm; it was cheaper than buying firewood.

Venezuela (2016-2019) The rates went from 69% per year (2014) to 800% (2016), 4,000% (2017), and reached 2,600,000% in early 2019. In 2018, Maduro changed the currency from 100,000 bolívars to 1 sovereign bolívar, eliminating zeros. But economist Steve Hanke was clear: “reducing zeros is cosmetic, it changes nothing without real economic reforms.”

Zimbabwe (2008) The worst of modern history. Annual inflation reached 89.7 sextillion percent in November 2008 (equivalent to 98% daily). Zimbabwe was the first country of the 21st century to experience hyperinflation and the second worst historical episode after Hungary. The country abandoned its currency in 2008.

The Boss: Crisis → Money Printing → Collapse

Governments follow the same script:

1. Political/Economic Crisis → Loss of confidence in the currency
2. Answer: Print money to “solve” the problem
3. Result: Accelerates devaluation
4. The vicious circle never stops by printing more

Here Comes Bitcoin

As fiat currencies collapse, cryptocurrencies emerge as an alternative. Bitcoin and other cryptos operate without centralized control: the supply is fixed, programmed, immutable. The blockchain ensures that it cannot be duplicated or arbitrarily manipulated.

This is why Venezuela and Zimbabwe are seeing a boom in P2P cryptocurrency payments. When your government destroys your money, people look for an escape.

The Central Bank Experiment

Central banks in Sweden, Singapore, Canada, China, and the U.S. are experimenting with CBDC (central bank cryptocurrencies). But there’s a catch: they will likely have an unlimited supply, defeating the purpose. Without scarcity, there is no defense against inflation.

Conclusion

Hyperinflation is rare but devastating. A short period of political instability can destroy a currency in months. The traditional solution (print more) is a historically proven failure. Meanwhile, Bitcoin and cryptos attract citizens with failed currencies. The question is not whether this will change the future of money, but when.