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George Washington sheds a tear for the US Dollar

12 - A Repeating Pattern of Government Inflations

Inflation Through the Ages

There is evidence of inflation for four thousand years of recorded history. Babylon and Ancient China had inflations. The Athenian lawgiver Solon introduced devaluation of the drachma. The Roman Empire was plagued by inflation and, more rarely, deflation. Henry the Eighth of England was a proficient inflationist, as were the kings of France. The entire world underwent a severe inflation in the sixteenth and seventeenth centuries. "Continentals" in the American Revolution and the assignats in the French Revolution were precursors of the wild paper inflations of the twentieth century. Steadily rising prices have been the general rule and not the exception throughout man's history.

The twentieth century brought inflations like no other. The proliferation of money substitutes, credit, electronic banking, the refinement of highly organised economic systems and increasing central bank power ensured that there has been nowhere to hide from inflation. Two major inflations have been experienced over the last 100 years...

i) The German Inflation (1914-1923)

The German inflation ran for nine years - eight years of gestation and one final year of precipitous collapse. This inflation had its roots in World War I, after which the German money printing machine went into overdrive.

Just before the First World War in 1913, the German mark, the British shilling, the French franc, and the Italian lira were all worth about the same, and four or five of any were worth about a dollar. At the end of 1923, it would have been possible to exchange a shilling, a franc or a lira for up to 1,000,000,000,000 marks, although in practice by then no one was willing to take marks in return for anything. The mark was dead, one million-millionth of its former self. It had taken almost ten years to die.”6

The German people suffered a period of hardship and real starvation as well as a permanent obliteration of their life savings. When the debacle was finally stopped, the old mark, which had once been worth a solid 23 U.S. cents, was written off at one trillion old marks to one new one of the same par value. The most spectacular part of that loss was lost in the mark's final dizzy skid; all the marks that existed in the world in the summer of 1922 (190 billion of them) were not worth enough, by November of 1923, to buy a single newspaper or a tram ticket. That was the spectacular part of the collapse.7

The German inflation paved the way for the rise of Adolf Hitler and World War II.

ii) The Great American Inflation (1973-ongoing)

Potentially the most spectacular inflation of them all, and still ongoing, is the Great American Inflation. This is the inflation which will impact you and your family, and it is the inflation I am now going to explain...



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