Hyper-inflation Can Take Years to Make Itself Felt
Adam Ferguson wrote When Money Dies in 1975. I've been reading the 2010 update. The book recalls the German hyper-inflation of the early 1920s. It's a worthwhile read.
Hyper-inflation didn't just pop up out of nowhere. After World War I, the Germans were required to pay exorbitant reparations to France, England and Italy, their mortal enemies from 1914 - 1918. If you already knew about the reparations, the burden it placed on the German government, and the fact that the government wound up printing money to pay for the reparations, you'll still get a lot out of the book, because the book recounts how the hyper-inflation really occurred, and the effect it had on the people.
After the war, a number of countries experienced severe inflation. Austria was hit harder than Germany at first. But high inflation isn't the same as hyper-inflation and if you don't know the difference, this book will illustrate the difference clearly.
You also may see some comparisons to our situation today. For example, how many times have you heard that inflation is good for our economy. Indeed, the Federal Reserve considers 2% inflation the "ideal" rate. Well, the idea that inflation is good isn't a new idea. On page 74, the author writes this about the wealthiest German industrialist of the day:
Hugo Stinnes himself, the richest and most powerful industrialist in Germany, whose empire of over one-sixth of the country's industry had been largely built on the advantageous foundation fo an inflationary economy, paraded a social conscience shamelessly. He justified inflation as the means of guaranteeing full employment, not as something desireable but simply as the only course open to a benevolent government. It was, he maintained, the only way whereby the life of the people could be sustained.
I've had conversations with economists who insist that we must have inflation for our economy to function properly. We must have inflation or else the economy won't grow. We must have inflation so that the debts of the average person become worth less over time. Isn't that good for "the people"?
There are more such arguments, but in the end the point becomes that we must "inflate or die" as Richard Russell has put it many times. (He's not an inflation fan; he just understands this theme.)
There's more to this book I'll share as I work through it. But what's struck me so far is the fact that the hyper-inflation (that's the part most of us know, where people needed a wheelbarrow of money to buy a loaf of bread) only took hold after almost ten years of growing inflation.
When governments keep printing gobs of money - as the governments of the whole world are doing now - the consequences, especially the most severe consequences, can take time to manifest themselves. I think we're in the midst of such a process right now. There will be more to come.
Hyper-inflation didn't just pop up out of nowhere. After World War I, the Germans were required to pay exorbitant reparations to France, England and Italy, their mortal enemies from 1914 - 1918. If you already knew about the reparations, the burden it placed on the German government, and the fact that the government wound up printing money to pay for the reparations, you'll still get a lot out of the book, because the book recounts how the hyper-inflation really occurred, and the effect it had on the people.
After the war, a number of countries experienced severe inflation. Austria was hit harder than Germany at first. But high inflation isn't the same as hyper-inflation and if you don't know the difference, this book will illustrate the difference clearly.
You also may see some comparisons to our situation today. For example, how many times have you heard that inflation is good for our economy. Indeed, the Federal Reserve considers 2% inflation the "ideal" rate. Well, the idea that inflation is good isn't a new idea. On page 74, the author writes this about the wealthiest German industrialist of the day:
Hugo Stinnes himself, the richest and most powerful industrialist in Germany, whose empire of over one-sixth of the country's industry had been largely built on the advantageous foundation fo an inflationary economy, paraded a social conscience shamelessly. He justified inflation as the means of guaranteeing full employment, not as something desireable but simply as the only course open to a benevolent government. It was, he maintained, the only way whereby the life of the people could be sustained.
I've had conversations with economists who insist that we must have inflation for our economy to function properly. We must have inflation or else the economy won't grow. We must have inflation so that the debts of the average person become worth less over time. Isn't that good for "the people"?
There are more such arguments, but in the end the point becomes that we must "inflate or die" as Richard Russell has put it many times. (He's not an inflation fan; he just understands this theme.)
There's more to this book I'll share as I work through it. But what's struck me so far is the fact that the hyper-inflation (that's the part most of us know, where people needed a wheelbarrow of money to buy a loaf of bread) only took hold after almost ten years of growing inflation.
When governments keep printing gobs of money - as the governments of the whole world are doing now - the consequences, especially the most severe consequences, can take time to manifest themselves. I think we're in the midst of such a process right now. There will be more to come.
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