“Instead, take those steps necessary to protect yourself and your family to prepare for the dollar’s inflationary collapse. Buy gold. Buy silver. Avoid the US dollar.” – James Turk
Probably almost everyone is familiar with the hyperinflationary episode that engulfed Germany after the First World War. That nation’s economy was crippled by monetary problems that resulted in dreadful personal hardships, even though up to that time Germany had achieved one of the highest living standards in the world.
The newly formed German government, named for the city where their constitution was drafted after the Kaiser’s abdication in 1918, kept pumping up the money supply. The process started relatively slowly, but quickly the pace of money creation accelerated.
The Weimar government was paying its bills on credit – just like Zimbabwe is now doing. The Weimar government was issuing currency in exchange for valuable goods and services that it was receiving, and the vendors of those goods and services accepted the newly issued currency in the expectation that they would be able to exchange it for goods and services of like value. However, they soon realized that they were deluding themselves. Prices were rising rapidly, with the consequence that a flight from the currency into commodities and other tangibles began.
There was no discipline on the creation of new currency, with the result that it was being issued to excess. Within a few short years, the German government eventually destroyed the Reichsmark, the currency it had been issuing, making the words Weimar Germany synonymous with hyperinflation, economic collapse, deprivation and personal hardship. All the wealth saved in Reichsmarks was wiped out.
For example, in his classic book, “Paper Money”, penned three decades ago under the pen name of Adam Smith, George J.W. Goodman recounts the story of Walter Levy, an internationally known German-born oil consultant in New York. Levy told him: “My father was a lawyer, and he had taken out an insurance policy in 1903. Every month he had made the payments faithfully. It was a 20-year policy, and when it came due, he cashed it in and bought a single loaf of bread.”
The following photo is from an insightful book by Bernd Widdig entitled “Culture and Inflation in Weimar Germany”. This photo shows one way in which people coped with rising prices.
As the inflation worsened, people sold whatever they could to survive. Widdig succinctly describes it in the caption to the above photo as follows: “The impoverished middle class has to sell its cherished possessions.”He should have correctly stated though that it was the “newly impoverished middle class”. They only became destitute after the inflation had destroyed their savings and ability to maintain their standard of living.
Sadly, the problems of Weimar Germany are now appearing in the US. To survive the impact of rising prices, Americans today – like Germans did eight decades ago – are selling cherished possessions, as explained in a recent story by Associated Press entitled “Americans unload prized belongings to make ends meet”. The full article is available at the following link: http://abcnews.go.com/Business/Economy/story?id=4750846&page=1
Read moreWeimar Inflation in America