Hyperinflation

• Inflation may be defined as the steady increase in average prices over time. It is commonly measured by the consumer price index (CPI), which uses a basket of goods commonly bought by the average family by gauging its price. A moderate amount of inflation is generally considered normal and healthy for an economy. This healthy level, 2 percent or below, often reflects the increase in buying power of an economy's consumers. Hyperinflation, however, is an inflation rate of 20 percent or more.
  
  

Causes of Hyperinflation

• Hyperinflation is the result of a large difference between an economy's supply and demand. Specifically, this is the supply and demand for money. Governments tend to enact monetary policies, which is the printing of bank notes, to influence economic expansions and contractions. Printing too much money will decrease its value. A lack of a central bank, which oversees an economy's interest rates and currency production, is often a cause of bad monetary policy. Assets that suffer under hyperinflation are influenced by the value of currency. These include bonds and stock. Hard assets such as commodities offer an alternative to these.
  
  

Minerals

• One type of hard asset is minerals. Minerals include gold, silver, iron, platinum, copper or any metal that has a use in an economy. Gold tends to perform well when economic times go bad, as gold is often viewed as a safer alternative to currency. When economic times are uncertain, the price of gold tends to go up. The opposite is true during times of economic expansion, when the value of gold goes down. Gold and other precious metals are traded on the international markets and their price is not influenced by the domestic hyperinflationary currency. Thus, minerals do well during hyperinflation.
  
  

Food

• Food is another form of hard asset. It is traded on the commodity markets in the form of options and futures. One aspect of food is that it is finite. It cannot be created immediately and it will always be in demand. When food is in short supply, its constant level of demand pushes up its price. Like minerals, food is traded on the international markets. During hyperinflation, food, and specifically agri-food, tends to remain steady in price as a result.