The Durk Pearson & Sandy Shaw®
Life Extension NewsTM
Volume 12 No.
2 • April 2009
When Money Dies
BOOK REVIEW: When Money Dies: The Nightmare of the Weimar Collapse (107 pp., available without charge from http://mises.org/resources/4016)
The Approaching Inflation
For those who are concerned about the severe inflation (possibly hyperinflation) to come as the trillions of new printing press dollars continue to flow and will soon drive down the value of the dollar, we give our highest recommendation to this book. Unlike conventional books on economic subjects, this one paints a portrait of life in the Weimar Republic as the mark became worth less and less, eventually resulting in the legendary “wheelbarrow” full of marks needed to buy a loaf of bread. It describes, often in their own words, how the lives of ordinary people were changed as this appalling inflation developed. “We haven’t had any fun since 1914. If you made any money it gets no good, and there is only to spend it. Last year I had enough money saved up to buy a Gasthaus at Hernberg,” says one man, a waiter, “now that money wouldn’t buy four bottles of Champagne.” (This was recorded by Ernest Hemingway, who was in Germany at the time, 1923.)
In another example, Lady Listowel (Judith, Countess of Listowel), whose father held a senior post in the Hungarian diplomatic service, commented on distress among the circle of her family’s friends in Budapest during their hyperinflationary period at about the same time as it occurred in Germany: “One used to see the appearance of their flats gradually changing. One remembered where there used to be a picture, or a carpet, or a secretaire. Eventually their rooms would be almost empty and on paper some people were reduced to nothing. In practice, people didn’t just die. They were terribly hungry, and relations and friends would help with a little food from time to time. . . . And some of them begged—not in the streets—but by making casual visits (one knew only too well what they had come for) . . . Everyone still tried to keep up appearances at first, early on, people looked around to see what economies they could make, what clubs to resign from, what luxuries to do without. Later it was a question of considering what necessities to do without.”
Paying Off Public Debt by Depreciating the Currency
Inflation is a way that government can pay off their debts (albeit with depreciated currency) without outright default or overt tax increases. In Weimar Germany, the initiating factor underlying the government’s unleashing of the printing presses was the required payment to the Allies of immense war reparations.
In the U.S., government debt has grown to impossible-to-pay levels. Yet the spending is accelerating. The immensely costly new programs being created on an almost daily basis by the Obama Administration and the Democrats (mostly) in Congress come at a huge price, most of which (along with the continuing burden of Medicare and Social Security, etc.) can only be paid for by continually increasing the money supply into hyperinflationary territory.
What It Is Like to Live Through Hyperinflation
This book is an incredible eye-opener! It reads almost like a thriller; you can’t stop turning the pages as money loses its value, people’s savings are destroyed, people buy tangible goods (almost anything) rather than hold marks when they do have them, the decline of social cohesion, widespread corruption, and it sucks you into the action so that you, too, experience what it is like living in a hyperinflation.
Hyperinflation is NOT Uncharted Territory
There is much that is eerily familiar about the current course of the U.S. economy, particularly the immense, endless expansion of the money supply accompanied by the falling value of the dollar and the decreasing willingness (both foreign and domestic) to hold U.S. debt instruments (IOUs), and the development of hyperinflation in the Weimar Republic and in Austria, Hungary, and Poland and, of course, we all know one end result of the ensuing economic chaos in Germany: Hitler.
Another of the eerily familiar processes reported in the book concerned taxes. As of August 1923 in Weimar Germany, the book reports, “[s]tatute books on taxation formed a mountain several feet high, and none could tell who was liable to pay what, when or to whom. . . . in human terms, the imposition of unpayable taxes to settle an impossible debt had at last destroyed tax morals at every level of society.”
What Lies Ahead for the U.S.?
Last summer, the U.S. monetary base was $800 billion. Last fall, the Federal Reserve more than doubled the U.S. monetary base to $2.1 trillion. This March, the Fed announced that they are more than redoubling the U.S. monetary base by adding an additional $2.55 trillion dollars. Because we have a fractional reserve banking system, the U.S. money supply is about 10 times the monetary base. It usually takes about 18 months for newly created money to work its way through the banking system to Main Street where consumer prices are bid up.
Historically, it has taken about 20 years to quadruple the U.S. monetary base, which has resulted in slow inflation. Back in 1968, for example, you could buy a new luxury car for $1,695. Quintupling the money supply in 6 months is not unprecedented—as shown in the case of Weimar Germany. Read this free (download it from the Website given above) book—it might help you to save your wealth and even your life.