High inflation means you can't get loans and have to spend money immediately.

Also, those salaried workers have rights. If you can't pay them, the government shuts you down.

aah.. sort of like the credit crunch then.. it kind of feels counter intuitive because the usual cycle would be: a) credit crunch with loss of demand leading to deflation b) governments pump money c) money loses value pushing inflation higher.. d) Governments try hiking rates and pull back money..

But some how in this case it seems the order is all jumbled up..

Yup. Problems materialize faster.

Deflation is different -- basically everyone gets scared and stops spending money. As a result, the "velocity" of money slows down and prices drop in a race to the bottom. (The best example of this was the car market in 2009. If you had cash, you could get unbelievable deals on cars.)

With inflation, there is plenty of money out there, but evaluating risk gets difficult. High inflation tends to have a snowball effect, so you don't want people owing you money -- think of it as compounding interest in reverse. So you end up with informal contracts... "Give me a car today, and you get 15 goats or hunks of aluminum in July."

A creditor wants informal contracts, because like in the US, paper money is "Legal Tender for All Debts, Public and Private." But to have informal contracts, you need a personal/trust connection... and that encourages corruption and nepotism.

That's when it's "normal" levels of inflation (less than say 10%/year).

At higher levels of inflation everything breaks because of the lack of predictability.

With inflation you're constantly bargaining salaries.

Also, the unions push hard for yearly increases in salaries.