SYDNEY (BLOOMBERG) - The surge in costs for everything from fuel to computer chips, to houses and even spinach, has some people fretting over the spectre of "hyperinflation" - the phenomenon in which runaway prices destroy the value of a nation's banknotes and coins.

Google searches for the term have rocketed in recent days, after Twitter chief executive Jack Dorsey set the social media platform alight with a comment that hyperinflation is "happening" - spurring responses from the likes of Ark Investment Management's chief executive Cathie Wood and Tesla chief Elon Musk.

It is a term that conjures sepia images of cash-filled wheelbarrows and breadlines, yet rampant price gains remain an issue today for countries such as Venezuela. Less so for the United States and the world's other major economies, where talk of hyperinflation risks overshadowing a far more tangible concern: run-of-the-mill inflation.

While gradual price increases reflect a healthy, growing economy, the abrupt uptick as the world reopens from pandemic-induced lockdowns has prompted political angst, a dilemma for central banks, and a repricing of financial markets.

Here is why you should worry about inflation - but not hyperinflation.

So, how much inflation is there?

Annual changes in the cost of living are climbing the most in a decade, with a measure of global inflation compiled by the International Monetary Fund forecasting 2021 price rises to be the the steepest in a decade.

With nobody hitting the mall to buy goods in 2020, prices slumped or flatlined, so the recent increases versus a year ago appear larger and feel doubly painful for consumers. A US gauge is up more than 5 per cent this year for the first time since 2008, and Brazil's inflation has topped 10 per cent. Turkey may report a 20 per cent annual pace next week.

Still, we are a long way from the highs seen last century. American consumers saw inflation peak at just under 15 per cent in 1980, while the International Monetary Fund's global gauge topped out near 40 per cent in 1993 amid fallout from the collapse of the Soviet bloc.

What causes inflation?

This thorny question has tormented economists for decades.

One favoured theory centres on an imbalance between supply and demand. Too little supply of goods or services combined with too much demand from consumers is supposed to send prices spiking.

And too few workers to meet the demand for their services drives up wages, also known as the cost of labour - prompting companies to jack up their prices. This is what seems to be happening today as the world opens up from the pandemic lockdowns.

Another popular theory centres on money supply and the idea that too many banknotes in circulation eventually mean higher prices for the finite supply of goods and services; Milton Friedman famously said it is always and everywhere all about money.

The problem is that money can end up being saved, or inflation may mostly affect financial assets rather than costs in the real economy. Inflation has eluded Japan for years, for example, despite the nation's monetary base more than quadrupling since the start of 2013.

How is hyperinflation different?

Hyperinflation is when inflation becomes so rapid that ordinary households find it impossible to cope without their lives becoming substantially worse.

Weimar Germany is a classic example, where a wheelbarrow of cash was needed to buy a loaf of bread. Or, think of post-Soviet Russia, when the removal of price controls meant families' life savings barely covered a weekly grocery bill.

More precisely, the term is often used when consumer prices rise by 50 per cent a month or more. That is obviously a long way above the current situation in major economies.

One of the reasons for the current concern is that most episodes of hyperinflation over the last few centuries took off after governments or central banks printed massive amounts of money, either to finance wars, pay large indemnities after losing one or as a result of productive capacity being destroyed in the fighting.

While tackling Covid-19 is not a conventional battle, it has meant a huge increase for government spending. And central banks ran their (virtual) printing presses at breakneck speed to back those outlays. The central banks of the US, Japan and Europe have boosted their combined balance sheets by more than US$10 trillion (S$13 trillion) since the pandemic started to exceed US$24 trillion.

How worried should people be?

So far, the answer seems to be that inflation is perhaps a concern - hyperinflation, not so much.

The rapid growth in money supply is already slowing and the rate at which that cash moves around the economy has sagged to multi-year lows.

That is important because excess money will drive up prices only if it is being deployed to buy goods or services. Governments like those in the UK and US are also cutting, or preparing to cut, the amount of debt they sell to fund the pandemic recovery, further reducing excess liquidity.

And even the strongest sell-off for government bonds in more than a decade is coming with a silver lining for anyone fearful that inflation will get out of control. Pushed by spiking short-term yields, central bankers are considering boosting interest rates in an attempt to curb inflation by reducing demand, even if doing so means a slower economic recovery. That is why longer-term bonds are remaining relatively calm, with benchmark 10-year yields sitting way under 2 per cent.