Short and Sweet
When paper money dies, precious metals prevail.
The lessons learned from the nightmare German hyperinflation of 1923
“They’ll print money until they run out of trees.”
Jim Rogers, investor and financial commentator
Not many investors are seriously concerned about hyperinflation in the United States at this juncture. At USAGOLD, we, too, see it as an outlier – something that could happen but not a probability. But that’s the thing about hyperinflations. Rarely does the handwriting appear unmistakably on the wall. Not many were worried about hyperinflation in Germany in 1923 when it struck out of the clear blue. When disaster did strike, however, it came with a vengeance. Prices shot up in 1921. Then just as quickly – within the space of a year – they ran out of control. By 1923, an individual’s life savings could not purchase a cup of coffee. We ran into the following charts researching another matter at the GoldChartsRUs website. The one unsettling aspect they all have in common is their verticality – an indication of how quickly and conclusively the inflationary catastrophe swept through the German economy.
The first and second charts reflect the severe debasement of the German mark at the time. The third and fourth show how gold and silver performed as a hedge. In effect, what could have been purchased with an ounce of gold or silver before the debacle, could have been purchased at any time as it worsened and finally when it ended a few years later. Few, as stated above, predict an inflationary disaster on the level of the Weimar Republic. Still, it is good to know that by preparing for the lesser version of inflation, one prepares for the nastier versions as well.
Charts courtesy of GoldChartsRUs • • • Click to enlarge
Image (top): Paper German marks converted to notepad, 1920s Weimar Republic. Attribution/ Bundesarchiv, Bild 102-00193 / CC-BY-SA 3.0, CC BY-SA 3.0 DE <https://creativecommons.org/licenses/by-sa/3.0/de/deed.en>, via Wikimedia Commons