Posted on 10/14/2009 5:30:09 PM PDT by moneyrunner
One of my clients called today to ask what he could do to protect himself against hyper-inflation. With the Democrats in congress and Team Obama using trillions as counters and billions as rounding errors, that concern is spreading. And it's a very good question. Let's use the experience of Germany during its experience during the early 1920s. Germany was a first-world country that was dealt hyper-inflation as a deliberate policy. Here’s Art Cashin:
Originally, on this day (-2) in 1922, the German Central Bank and the German Treasury took an inevitable step in a process which had begun with their previous effort to "jump start" a stagnant economy. Many months earlier they had decided that what was needed was easier money. Their initial efforts brought little response. So, using the governmental "more is better" theory they simply created more and more money.
But economic stagnation continued and so did the money growth. They kept making money more available. No reaction. Then, suddenly prices began to explode unbelievably (but, perversely, not business activity).
So, on this day government officials decided to bring figures in line with market realities. They devalued the mark. The new value would be 2 billion marks to a dollar. At the start of World War I the exchange rate had been a mere 4.2 marks to the dollar. In simple terms you needed 4.2 marks in order to get one dollar. Now it was 2 billion marks to get one dollar. And thirteen months from this date (late November 1923) you would need 4.2 trillion marks to get one dollar. In ten years the amount of money had increased a trillion fold.
(Excerpt) Read more at moneyrunner.blogspot.com ...
Gold and silver.
Wheelbarrows.
There isn’t going to be hyperinflation, because these devalued dollars won’t ever make it into real wages. Consumers simply will not have wheelbarrows full of dollars to support the demand side of hyperinflation.
Food and energy prices will of course go up, but I think demand will simply collapse as the middle class is wiped out of existence.
The answer? Lumber, firewood, farmable land, tools & equipment, guns & ammo, chickens, etc.
Doesn’t this guy understand the fundemental reality that for every mark generated by the German economy two had to go to france and the french army was stationed on the entire west bank of the Rhine? Of Course you would destroy the Mark. DEBT PAID.
What do you think happens when cap & tax triples everyone’s energy bill, and everyone who doesn’t work for a living gets a couple grand subsidy/handout?
And then socialized medicine triples everyone’s medical bills, and everyone who doesn’t work for a living gets another couple grand subsidy/handout?
And then ridiculous mileage standards add 10k or so to the price of a car, and everyone who doesn’t work for a living gets another subsidy/handout?
Ditto for food and every other commodity they can grab control of. Then you kick up income, property, sales, and Social Security taxes, maybe institute a VAT tax, all with kickbacks for anyone living on a government check.
It may not be HYPER inflation, but you’ve still made everyday life two or three times as expensive for anyone who works for his money, while also dumping billions into the laps of the deadbeats who produce nothing and consume every subsidized cent they get the second they get it.
That’s a recipe to continually shove prices up further while destroying the independence of anyone who’s ever saved a dollar. The bluebloods and hoodrats won’t care; the middle class will be destroyed, just like in Chicago/NY/DC/Philly and all the other urban gutters.
Please cite your sources for your assertion. And committing financial suicide seems to be a little extreme.
But that's just me.
Bookmark.
The US isn’t Germany and the American people are a different stock. I have no doubt things will get tough when and if hyperinflation occurs (I say if because we still have a chance to stop it), but no Hitler-wannabe will be able to take over as easily as Shickelgrueber did.
One thing we have to keep in mind is that the Founding Fathers intended for the government to be a protector of rights, not a nanny. Even if the government screws itself through economic incompetence, the only people who will be hurt to a great degree are those who’ve leaned on it their whole lives, whereas those of us with work ethic and the knowledge that man must earn his living will only suffer minor hardships (meaning we’ll be able to recover).
I have no idea what you just said. Do you mean to tell me that during the last bout of inflation (see Carter, Jimmy, era) wages did not increase? Of course wages will go up. It's the value of cash, pensions and existing bonds that will decline.
The purpose of my post was to discuss ways of avoiding being wiped out of - God forbid - we get hyperinflation. You don't have to be a victim.
Just you, Read. Study, Work.
Just You wants a what , Wiki link?
Read, Study, Work.
RWB Patriot,
First of all, lots of us are Germans, English, Italian, Greek, Dutch, Swahili and other nationalities. That is not what makes us different. We can be seduced by a would-be dictator if the right conditions are met.
The people who get screwed during periods of hyper-inflation are not the people who are on the government dole. It’s the elderly savers, the pensioners, the frugal people who get wiped out. People with mountains of debt make out, so do speculators and government employees. And the one who makes out best is the government that has lots of debt outstanding. Of course that creates other problems, like no one willing to lend you money, but that’s another post.
Got it. You made it up.
I know, the point of my post was to counter with what I see as a more realistic threat.
A lot of people see hyperinflation as some far off impossibility that can only happen in total dictatorships. And they’re right—all pretenses of the Republic and the Constitution will be gone by the time we’re printing money that fast.
But it isn’t a choice between 0-5% inflation and a million. We could very easily hit 70s/80s inflation levels (10-15%) trying to spend our way out of deflation, and it’s not a stretch to envision much higher levels than that without hitting hyperinflation.
500% inflation wouldn’t entail wheelbarrows full of money, but would destroy our economy. Even 25% would be absolutely devastating—and far more likely than a change-prices-every-hour scenario.
the gummit can hike YOUR property taxes so you have to leave your home and property.....it can hike YOUR income tax so high that you have little discretionary income....
and medical bills....the way I see it, everything will be indexed and those of us who have a couple of pennies will be taxed higher and higher because the govt can do whatever it wants to do....
He didn’t make it up, it’s asserted in just about every history I’ve read on pre-WWII. Whether it’s a fact (I’m assuming you’re questioning whether Germany intentionally hyperinflated), I don’t know. And no, I don’t have time to chase down an example right now, sorry.
How are they gonig to enforce their will? They can pass all the laws they want, but it won’t mean anything if they can’t back them up.
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