Did You Know Some German Economists Predicted Deflation During the Hyperinflationary Weimar Republic?
For those that still listen to the “stuck in Wonderland” Alice-like economists that are still predicting deflation in the Western world as a consequence of this monetary crisis and that are currently lauding a US stock market recovery due to “the best February US stock market performance since 1988” (which incidentally followed the best September US stock market performance in 70 years!), know that some of the “best” German economists lulled their citizens into believing deflation was coming just years before hyperinflation destroyed every single German citizen’s livelihood and wealth that didn’t have the foresight to ignore these jokers and store most of their wealth in gold. Amost every single German citizen that was able to weather the hyperinflationary Weimar Republic just fine had bought considerable amounts of gold before hyperinflation struck. Due to the method in which financial oligarchs set up and control the academic system in every country, every country is going to birth prominent economists that are nothing more than a soapbox for the elite bankers in that country.
When WWI began in 1914, the German Central Bank, the Reichsbank, suspended redemption of the German Mark in gold, an act that allowed it to expand monetary supply in Germany four-fold by the end of the war in 1918. Even though the wholesale price index in Germany had increased by more than 12.5 times from the start of WWI to the start of 1920, inflation leveled off and speculation regarding a mark recovery actually led to appreciation in the mark for the next year or so. This led to, by now, the infamous predictions of some German economists back then that the German mark was going to enter a multi-year period of extended deflationary pressure. Unfortunately, these German economists ignored the key fact that the Reichesbank was continuing to issue “funny money” backed by nothing. Eventually, all that printing led to a global loss in confidence of the mark, and the price index exploded in Germany, from a very brief period of deflation in 1920 to 154.86% inflation in 1921 to 7,488.55% inflation in 1922 and more than 26,000,000,000% inflation by 1923.
So what was the result of this hyperinflation in Weimar Republic Germany? Those that depended on fixed income streams became destitute as the value of these income streams turned into dust. Farmers that had food refused to sell it to anyone that had stored their hard-earned money in German marks as the receipt of this paper had become worthless. Workers that believed inflation was good for them in the beginning stages of the inflationary crisis because they did not at first realize that their increased incomes were making them poorer as inflation severely outpaced their wage increases, soon became malnourished as they could no longer afford food.
So what are the lessons to be learned here? Does the fact that prominent US economists are always speaking of the deflationary effects and (false) low US inflation rates of this global monetary crisis doom the US and other western nations to a period of inevitable hyperinflation? Of course not. No one for certain can know if hyperinflation will ever reach the shores of Europe and America. What I do know, though, is that significant inflation is coming to Europe and the US and that those people that rely on fixed income streams denominated in fiat currency, or those that remain invested in US and western stock markets because they can’t figure out that the gains they are making in the markets are being canceled out by the devaluation of the fiat currencies in which they are denominated, will suffer severe hardships in the future.
Nearly two years ago, I wrote an article titled, “Hundreds of Millions May Face Starvation in the Next 5-10 Years” because I understood that the effect of Central Banks creating new money out of thin air would be inevitable hunger and starvation around the world. This was much more a fact than a prediction given my understanding of the global monetary system. Nearly two years later, my worst fears in that article are now coming to fruition, as massive food price spikes and high unemployment have led to riots and mass protests in Algeria, Iran, Chile, Vietnam, India, Oman, Jordan, Yemen, Bangladesh, and Pakistan and even the ousting of government leaders in Egypt, Tunisia, and perhaps next, Libya, where deaths from the rioting have already been reported to be anywhere from a 1,000 to several thousand. If you think that my prediction of hundreds of millions will eventually face starvation due to Central Banker policies being enforced upon the world is a gross exaggeration, just last month, World Bank President Robert Zoellick estimated that 44 million people have been pushed to the brink of death from starvation due to severe price increases that have occurred in just the last eight months. And our global monetary crisis is likely not even at the mid-point as of yet.
So what can one do to protect oneself from the inevitable? This entire global monetary crisis originated within the shadowy halls of the US Federal Reserve and the Bank of England so to think that the countries that spawned this crisis will remain least affected by this crisis is just plain foolish. To the contrary, the countries that house the Central Banks that created this crisis will likely eventually suffer greater ill effects than any ill effect of any country suffering today. Whether that results in hyperinflation, as I said before, is impossible to predict. But knowing that it will result in significant inflation is as much an inevitable event as my prediction from a couple years back that insane monetary expansion by Central Banks would cause massive food price inflation and eventual critical levels of starvation around the world.
So the keys to prospering during this crisis will be the same as they keys during the Weimar Republic.
Number One, own real money in gold and silver, not funny money. For those that still use the ridiculous arguments that gold and silver are barbarous relics that are useless because you “can’t eat gold and silver”, remember that German farmers during the Weimar Republic refused to accept German marks as payments for their food, but surely accepted gold for their produce back then.
Number Two, stay away from investing in general stock market indexes in countries in danger of monetary collapse and invest in assets most likely to significantly outpace inflation. Yes, German citizens and even outside speculators sure believed the returns in the German stock market were appealing when strong inflation propelled the stock market higher. But when million percent returns in the German stock market became worthless, those uber strong returns turned out to be lures that destroyed dreams.
Number Three, educate yourself enough about the monetary crisis so you can separate fact from fiction. Even though Germany experienced a brief period of zero inflation and even deflation before inflation exploded throughout the roof, bankrupting many of its citizens, the warning signs of coming severe inflation were there for years prior, for those that actually took the time to look. None of these crises develop overnight and it takes years for them to ferment; however, it sometimes only takes months to explode and catch people unaware, off guard and unprepared.
Number Four, stay away from shameless bandwagon jumpers that never spoke of gold and silver until just a couple of years ago and that just started pushing gold and in particular, silver, just last year. Chances are, if they just started advocating gold and silver as a means of protecting your wealth, they still understand extremely little about gold and silver today. If they understood the real reasons to own gold and silver, they should have been advocating gold and silver many years ago, not just realized their merits after gold and silver received mainstream media attention.
Though I publicly advocated gold and silver to my close personal friends since 2005, I publicly started blogging very liberally on the benefits of gold and silver ownership starting in 2006 in an article titled “Gold’s Speculative Stigma is Unwarranted“. In that article, I wrote, “I’m not really sure why, but large investment firms by and large seem to ignore year after year precious metals such as gold, silver, palladium and others.” On the day I wrote that article, gold was trading at $588 an ounce, silver at $11.76 an ounce. Today gold is trading at over $1,400 an ounce and silver at $34 an ounce.
To understand that you clearly have not missed the boat yet in gold and silver if you have not yet invested in precious metals, then learn about the Key to Surviving the Global Monetary Crisis and ensure that you understand the reality of what is happening today. Finally, stay away from paper gold and paper silver products like the GLD and SLV as these are NOT proxies for the real thing. So is it too late to buy gold and silver now? Not by a long shot. This doesn’t mean that gold and silver will not experience large bouts of volatility in the future because they will. But the uptrend is still intact and will in my estimation, be intact for a while to come. In fact the largest gains in gold and silver are likely to come in future years. To learn why, visit us at http://www.smartknowledgeu.com.
Good investing,
JS Kim
Managing Director
SmartKnowledgeU Pte. Limited