Will The Reichsmark Example Of  Hyperinflation Damage Be Repeated?

“Inflation is the one form of taxation that can be imposed without legislation.”   Milton Friedman

The German Reichsmark was a victim of runaway hyperinflation during the Weimar Republic era.  You may not be fully familiar with it, so I put this page together to give you a little history. 

Weimar Republic was the general name given to the governing body during this period.  It was named for a particular region of Germany.

With words like inflation, deflation and stagflation being used quite often, this seemed like a good time to bring in some perspective.

Destruction Of The Reichsmark Currency

The most notable and one of the most extreme examples of hyperinflation would have to be the experience of the Weimar Republic in Germany following World War 1.  There have been worse cases, such as Zimbabwe and Hungary, along with Argentina, but Germany represents a different case study.

"In the simplest terms, inflation occurs when there's too much money in the system.  On the flip side, deflation occurs when there are too few dollars in circulation."   Robert Kiyosaki

Germany was a manufacturing leader.  Their gross domestic product numbers were among the leaders in Europe prior to the first World War. 

The Germans had used debt to finance that war.  (Debt to finance a war?  Where have we heard that?)  Then to service that debt, the government just continued to print mountains of Reichsmarks, which was their currency.  As is the usually the case, eventually the inflation express took over.

Germany was is decent shape to recover after the war because much of the heavy fighting was away from their industry and their huge coal reserves.  It could have been fairly easy to regain their place as major manufacturers in Europe.

The Treaty of Versailles and subsequent demands from the Allies, in particular France made it nearly impossible to keep up with war reparations required by the victors.

Hence the rapid increase in currency printing.  Soon prices were increasing so fast that workers were being paid several times a day.  The image is very clear of spouses meeting their husbands outside workplaces to get the pay and literally running to the store to buy what they could before the prices of food went up again.

Here is a good illustration of the price of hyperinflation.  In 1913 the total mortgage balance of all properties in Germany was about 40 billion Reichmarks, ($221 billion in today's dollars.)  That was about 16% of German wealth at that time.

In just ten years, that total mortgage amount was worth about 1 American cent.  So the German government dumped that worthless paper on their debtors.

Of course many of the citizens of Germany had their savings and assets destroyed by this practice.  Food became too expensive to buy.  Fixed income people were forced to sell anything they could just to survive.  Bartering came back into vogue. 

Farmers were unwilling to bring their produce into the market because the Reichmarks they received as pay were worthless.  Roving bands of people marched into the country to loot the farm area in search of anything to eat.

Hospitals, religious centers and charitable organizations were forced to close as their funding was exhausted.

So the summary for the Weimar Republic was that the government tried to print themselves out of debt.  They already spent more than they took in via taxes.  Then they printed more and more Reichsmarks. ( Hmmm?  This sounds kind of familiar too.)

It reached that velocity of money point where they couldn't control it and hyperinflation kicked in and ruined countless lives. 

This was not a third world country with limited resources.  Germany was a major industrial nation filled with highly intelligent people.  The mountains of Reichsmarks were more valuable as fuel for fires to keep the people warm than to buy heating oil or coal.

The middle class of Germany was very nearly destroyed by this inflation rate.  Desperation set in and opened the door to a then little known activist with a gift for stoking that frustration into anger and inciting hatred against "all the outside forces causing their suffering."  And history was changed....

Here is a link with some more detail on this dark period of German history.  As with all things, you'll need to do some research and decide for yourselves, which course of action is in your best interests.  The source of this information has a direction they favor, but overall the information is very accurate.

At the end of this page is a very powerful teaching video.  Lack of financial literacy puts too many of us behind the eight ball, unable to respond correctly to changing economic conditions.  Exactly as the German people in this Reichsmark era.

But there is good news.  Over 3 million people have taken the time to watch this insightful presentation.

Learning From The Mistakes Of The Past

Hopefully there will not be another example of history repeating itself.  Hopefully there will not be another former major manufacturing nation that used debt to finance wars, then continued to print fiat currency to cover that debt. 

Hopefully there won't be a central bank losing control of the velocity of money, thereby allowing the middle class, the working class to be swept away in a flood of worthless paper currency.

 Be vigilant! 

What Is Your Opinion on the Reichsmark Devaluation?

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Just below is a quote from "Don't Sweat The Small Stuff" by Richard Carlson.  The chapter title is "Open Your Heart To Compassion." 

"Every day we are given hundreds of opportunities to practice compassion in action.  We can learn to be less reactive and live with more patience.

We can smile when others are serious.  We can drive our cars more carefully, pick up litter on the streets, recycle, and reduce our consumption.

We can resolve conflicts rather than create them, and we can become less judgemental and more inclusive.  When someone is aggressive, we can teach them to be more peaceful.  Instead of waiting for an example, we can be the example.

The more compassion that enters your heart, the happier and more peaceful you will become.  By knowing that you are doing your part to create a better world-whatever form that takes-you will fill any void that exists in your life, and you will begin to find the peace you are looking for."

What's New?

Just below is an article from Peter Schiff about passing the buck from one administration to the next.

Owning The Bubble

Just below is a link to look up your congressional representatives.   Let them know you expect accountability.

Congressional Representative Look Up