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Message:: [QUOTE="Tejas, post: 8213391, member: 84905"]We need to distinguish inflation from hyperinflation. Despite the name, these are very different phenomena. The US is currently experiencing inflation. At 7.5% the rate of inflation is the highest since the early 1980s. It means that the dollar is loosing 7.5% of its purchasing power per year. Since the inception of the Federal Reserve in 1913, the dollar has lost about 97% of its purchasing power. However, the dollar is still highly sought after in the US and worldwide. The reason for this is the balance sheet of the Fed. Money is on the passive side of the balance sheet and on the active side, backing the money, are bonds (mostly US Treasury bonds). As long as people believe that these bonds are good, the dollar will not experience hyperinflation. Hyperinflation is a situation, where the central bank balance sheet's active side consists of poor debt, i.e. debt that cannot be repaid by the debtor. This is the case of Venezuela. Their currency is backed by unpaid debt, which means that the debt and the money backed by this debt is more or less worthless. In the Roman empire, there was no central bank and no government bonds. The money was backed by its intrinsic value, i.e. the content of precious metal in the coin. The inflation can be calculated by the drop of the amount of intrinsic precious metal in a coin of the same denomination, i.e. a denarius.[/QUOTE]