muses of the moment

July 12, 2011

When Money Dies

Filed under: Dollar Crisis, Hyperinflation, The Dollar Crisis — totallygroovygirlfriday @ 1:21 am

Groovygirl is rereading When Money Dies by Adam Fergusson (1975). Click here.

This book has a lot of personal experiences of various different classes of the German people during the years of the Weimar Republic Hyperinflation. One thing that struck me was the lack of understanding of the German people of the cause of the inflation and then hyperinflation. They made no connection even in 1923, the worst year when inflation was doubling every other day, that the cause was the government’s printing of money.

The media of the time keep focused on the peg to the dollar. They thought that it was the dollar that was rising in value, causing imports to rise in price. They didn’t understand that it was their currency that was devaluing.

GG finds this interesting and believes that something similar might happen here and around the world. Most people will not get it and therefore will not see the currency cost push inflation coming, even when it passes into a collapse.

Using past reactions as a guide, groovygirl thinks that this link from zerohedge about a run on American banks is very plausible. Click here. The majority of people will want physical cash in their hand when they are panicked, not gold or silver. (GG isn’t saying it is smart, she is just saying it is probable.) The post also suggests that investment funds will move money from the shadow markets to hard dollar assets. This is also very plausible. Unfortunately, as we all know, that will not keep that fiat money and investments from losing all their value in the end.

This will not keep gold and silver from rising very high, just as it did during the Weimar Hyperinflation. GG is just trying to illustrate the possible majority mindset could be very different from yours. This conclusion also suggests a law (or added fee) against cash transactions at some points.

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