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In economics, hyperinflation is inflation that is very high or "out of control", a condition in which prices increase rapidly as a currency loses its value.
Definitions used by the media vary from a cumulative inflation rate over three years approaching 100% to "inflation exceeding 50% a month."  In informal usage the term is often applied to much lower rates. As a rule of thumb, normal inflation is reported per year, but hyperinflation is often reported for much shorter intervals, often per month.

The definition used by most economists is "an inflationary cycle without any tendency toward equilibrium." A vicious circle is created in which more and more inflation is created with each iteration of the cycle. Although there is a great deal of debate about the root causes of hyperinflation, it becomes visible when there is an unchecked increase in the money supply (or drastic debasement of coinage) usually accompanied by a widespread unwillingness to hold the money for more than the time needed to trade it for something tangible to avoid further loss. Hyperinflation is often associated with wars (or their aftermath), economic depressions, and political or social upheavals.

Characteristics

In 1956, Phillip Cagan wrote The Monetary Dynamics of Hyperinflation, generally regarded as the first serious study of hyperinflation and its effects. In it, he defined hyperinflation as a monthly inflation rate of at least 50%. International Accounting Standard 1 requires a presentation currency. IAS 21 provides for translations of foreign currencies into the presentation currency. IAS 29 establishes special accounting rules for use in hyperinflationary environments, and lists four factors which can trigger application of these rules:

1. The general population prefers to keep its wealth in non-monetary assets or in a relatively stable foreign currency. Amounts of local currency held are immediately invested to maintain purchasing power.
2. The general population regards monetary amounts not in terms of the local currency but in terms of a relatively stable foreign currency. Prices may be quoted in that foreign currency.
3. Sales and purchases on credit take place at prices that compensate for the expected loss of purchasing power during the credit period, even if the period is short.
4. Interest rates, wages and prices are linked to a price index and the cumulative inflation rate over three years approaches, or exceeds, 100%.

Hyperinflation is regarded as a complex phenomenon and one explanation may not be applicable to all cases. However, in both of these models, whether loss of confidence comes first, or central bank seigniorage, the other phase is ignited. In the case of rapid expansion of the money supply, prices rise rapidly in response to the increased supply of money relative to the supply of goods and services, and in the case of loss of confidence, the monetary authority responds to the risk premiums it has to pay by "running the printing presses."

As noted, in countries experiencing hyperinflation, the central bank often prints money in larger and larger denominations as the smaller denomination notes become worthless. This can result in the production of some interesting banknotes, including those denominated in amounts of 1,000,000,000 or more.

* By late 1923, the Weimar Republic of Germany was issuing two-trillion Mark banknotes and postage stamps with a face value of fifty billion Mark. The highest value banknote issued by the Weimar government's Reichsbank had a face value of 100 trillion Mark (100,000,000,000,000; 100 billion on the long scale).  At the height of the inflation one U.S. dollar was worth 4 trillion German marks. One of the firms printing these notes submitted an invoice for the work to the Reichsbank for 32,776,899,763,734,490,417.05 (3.28×1019, or 33 quintillion) Marks.

* The largest denomination banknote ever officially issued for circulation was in 1946 by the Hungarian National Bank for the amount of 100 quintillion pengő (100,000,000,000,000,000,000, or 1020; 100 trillion on the long scale). image (There was even a banknote worth 10 times more, i.e. 1021 pengő, printed, but not issued image.) The banknotes however did not depict the numbers, "hundred million b.-pengő" ("hundred million billion pengő") and "one milliard b.-pengő" were spelled out instead. This makes the 100,000,000,000,000 Zimbabwean dollar banknotes the notes with the greatest number of zeros shown.

* Other different opinion about largest denomination banknote ever issued in the world: mil-pengo, B-Bengo shall be treated different monetary (currency) unit in hungary in 1946. 1,000,000 pengo denominated 1 mil-pengo, 1,000,000 mil pengo denominated 1 B-pengo, and 2,000,000,000 B-pengo denominated 1 adopengo (July 8, 1946), finally 200,000,000 adopengo denominated 1 forints. (Aug.1 1946).

1 billion pengo, 1 billion mil-pengo, 100 million B-pengo, and 100 million adopengo banknote is exist in 1946 hungary. Therefore largest amount of hungary currency is only 1 billion. The largest denomination banknote is stil 100 trillion mark in german 1923 (100 billion mark. german billion are 1,000 times bigger than American billion), and 100 trillion dollar in Zimbabwean.

* The Post-WWII hyperinflation of Hungary held the record for the most extreme monthly inflation rate ever — 41,900,000,000,000,000% (4.19 × 1016% or 41.9 quadrillion percent) for July, 1946, amounting to prices doubling every thirteen and half hours. By comparison, recent figures (as of 14 November 2008) estimate Zimbabwe's annual inflation rate at 89.7 sextillion (1021) percent. which corresponds to a monthly rate of 5473%, and a doubling time of about five days.

Early in the 21st century Zimbabwe started to experience chronic inflation. Inflation reached 624% in 2004, then fell back to low triple digits before surging to a new high of 1,730% in 2006. During that time, the Reserve Bank of Zimbabwe revalued its currency on 1 August 2006 at a ratio of 1 000 ZWD to each second dollar (ZWN). In June 2007 inflation in Zimbabwe had risen to 11,000% year-to-year from an earlier estimate of 9,000%. On 5 May 2008 the Reserve Bank of Zimbabwe issued bank notes or "bearer cheques" for the value of ZWN 100 million and ZWN 250 million.  Ten days later on 15 May, new bearer cheques with a value of ZWN 500 million (then equivalent to about USD 2.5) were issued. Five days later on 20 May a new series of notes in the form of "agro cheques" were issued in denominations of $5 billion, $25 billion and $50 billion. An additional agro cheque was issued for $100 billion on 21 July.  Meanwhile inflation officially surged to 2,200,000%[31] with some analysts estimating figures surpassing 9,000,000 percent.  As of 22 July 2008 the value of the ZWN fell to approximately 688 billion per 1 USD, or 688 trillion pre-August 2006 Zimbabwean dollars.

On 1 August 2008, the Zimbabwe dollar was redenominated at the ratio of 1010 ZWN to each third dollar (ZWR).  On 19 August 2008, official figures announced for June estimated the inflation over 11,250,000 percent.  Zimbabwe's annual inflation was 231,000,000% in July  (prices doubling every 17.3 days). For periods after July 2008, no official inflation statistics were released. Prof. Steve H. Hanke overcame the problem by estimating inflation rates after July 2008 and publishing the Hanke Hyperinflation Index for Zimbabwe.  Prof. Hanke’s HHIZ measure indicated that the inflation peaked at an annual rate of 89.7 sextillion percent (89,700,000,000,000,000,000,000%) in mid-November 2008. The peak monthly rate was 79.6 billion percent, which is equivalent to a 98% daily rate, or around 7× 10^108 percent yearly rate. At that rate, prices were doubling every 24.7 hours. Note that the last figure is mostly theoretic, since the hyperinflation did not proceed at that rate a whole year.

At its November 2008 peak, Zimbabwe’s rate of inflation approached, but failed to surpass, Hungary’s July 1946 world record.  In February 2009, the dollar was redenominated for the fourth time at the ratio of 1012 ZWR to 1 ZWL, only three weeks after the $100 trillion banknote was issued on 16 January,  but hyperinflation waned by then as official inflation rates in USD were announced and foreign transactions were legalised,  and on 12 April the dollar was abandoned in favour of using only foreign currencies. The overall impact of hyperinflation was 1 ZWL = 1025 ZWD.