Brazil and Argentina Hyperinflation Experience at the Beginning of the Research Paper

brazil nut and Argentina Hyper fanfare Experience at the Beginning of the 1990s - Research make-up ExampleThe period of the relatively high level of inflation lasted for about 15 years i.e. from 1980 to 1994 and resulted in significant political, economic as well as a social crisis for the country. One of the key reasons for this hyperinflation in the country was the creation of capital supply to finance fiscal expenditure of the country. Government rather than development the taxes or borrowing started to created new money and hence the creation of money supply. During the 1990s, consumer price index ran into the factor of over 5 one million million million thus indicating the boilersuit severity of the inflation faced by the country. Argentine also faced the similar situation during the 1990s however, the reconciled increase in inflation lasted from 1975 to premature 1990s. during that period the overall value of Argentines Peso went down and the country introduced massive ch anges and reforms in the 1990s to initiate the process of recovery. Hyperinflation in Brazil Brazil was a case of chronic inflation which finally turned into hyperinflation and resulted in serious damage for the country. The key reason for this hyperinflation was the spendthrift creation of money to finance the expansion projects of the government. Rather than relying on the borrowing or improving tax collection, the government simply resorted to printing new money thus creating excessive money supply in the country. At the start of 1990, the consumer price index in the country was to the factor of 100 Million which reached to over 5 trillion by the end of 1997. Such sharp and abnormal increase in the level of consumer price index sustained for almost a decade and turn up detrimental to the overall economic future of the country. It is, however, circumstantial to note that the 1990s were the period during which the overall rate of inflation started to moderate owing to strict ref orms existence undertaken by the government. Since Brazil was facing higher episodes of inflation since the 1970s, therefore, 1990s was the period during which country started to take measures to arrest such trends. (Barbosa, Cunha, and Elvia,183 ) At the start of the 1990s, the rate of inflation was over 30,000% however, it gradually started to decline and reached a level of 16% in 1997. As discussed above, this was a period of relatively important reforms undertaken by the country which resulted in sharp decline in the hyperinflation and economy started to witness the relatively moderate level of inflation rates. (Samuels,547) During this period, saving rates were almost negative as flock continued to spend their cash due to the fact that its value was being crumble rapidly. Interest rates soared to a relatively high level in order to reduce the inflation and people who were already suffering from high inflation rates were forced to face higher interest rates also. It is, howev er, critical to note that the real GDP during the period remained at stagnant levels due to better agriculture output as well as a consistent increase in population during the decade. A real high level of hyperinflation affected the real incomes of the households as the consistent increase in inflation eroded the purchasing power of the individuals.