Some thoughts on hyperinflation
On buying a house Canada in 1942:
"The house itself was just a shack, a very run down shack, worse than many of those squatters’ houses. There were two and a half tiny rooms with no toilet and no basement. It was made from waste lumber and was leaning a bit to one side. The full price was seven hundred and fifty dollars — lot, house and all. That was the total amount — one hundred and fifty down, and two years to pay the balance, with no interest."
In the footnotes, the author reflects (ca.1974) on the above passage:
"The fact that working class families could purchase a house with the savings of a few years’ work raises the question of, to what extent living standards have advanced for working people in the last two generations? Impressionistically, those who were regularly employed enjoyed standards of housing, food, open space and freedom from interest payments better than available to many working people today."
Rudy, alas, I never had the chance to follow you on the blue bird. You were disappeared and then Grant Williams said go to your substack. I did. Love your work here. Thank you for it. Really like the longer form. Rock on!
Given that the outcome of hyperinflation is total societal collapse, it seems prudent to avoid going *anywhere near* policies that could result in high inflation that later spirals into hyperinflation. All inflation is dishonest and arbitrarily reallocates wealth. The Fed thinks they can engineer slow inflation that no one will notice (money illusion). Well, people have now noticed -- I am skeptical that the Fed has the will to really tighten. They are playing with fire.
Really excellent article. Substack suits you as a medium for sure
The strange thing is that very few people her in Germany really care. Everything in the stores is at least 20% more expensive, gas and energy where already the highest in world and now almost doubled, and this is even before we start to need energy for heating in the fall. (Most people do not have air condition, so in the summer there is less expenditure). Yet you hear hardly a comment on inflation.
I do not know if they just don't care, or if they do not dare to say anything, like they did not dare to say anything against lockdowns or mass immigrations.
Under Merkel the feeling was we are living in a big void; now it feels like we are walking through cold, molten lava. Very strange.
Rudy my good sir, nice to see you are keeping well and continuing the good fight 👏
Great write up; people are really unaware how bad it is going to get (by design). Definitely miss you on Twitter. I no longer laugh it loud for no apparent reason
It used to be damn near impossible to communicate your last point about the Fed's role in creating and maintaining economic inequality but the tide is turning even as extremism gets, umm...more extremist. Some folks are coming around.
I always appreciate your perspective, Rudy. I know it's a lonely slog but cleaning out the karmic sewers is sacred work.
The prospects of what could happen financially are as scary of what could happen with our insane proxy war with Russia. People just don't get it.
Brilliant, thank you again xxx
I was expecting this post to come - this is an absolute gold of yours!
It's been a pain watching Weimar script being replayed for the past two years (since I started to pay attention). It seems central bankers will gonna celebrate their triumph during the anniversary - such a scrupulous perfect timing they got.
Last year I read a diary from a woman that lived in Vienna which covered the end of the WWI period and through the early 1920s when Austria had its own hyperinflation problem and it was quite a tragic recount of events. Among other things she recounted in the book were selling her late husband's cigars (which were no longer available) to the butcher for meat otherwise her family would have no meat and would be that much closer to starvation. She ended up sending her grandson out of the city to stay with relatives on a farm so they knew the boy could get proper food and grow healthy. That book really reinforced to me the importance of having a stable currency for society to function properly. The central bankers and western governments have really put their countries in harm's way with their policies of the past decade (or more).
For more than a decade, the unintended political ramifications of zero rate policy and QE have been obvious to any serious student of history. Nobody on the Board of the Federal Reserve EVER discussed the political implications of their actions, which tend to radicalize the population and turn them against capitalism. Inflation hurts all but the poorest or the richest and when taken to extremes wipes out the middle and upper classes except for those with large real assets financed by debt. Not saying we are there today, but Weimar clearly contributed to the rise of Hitler in Nazi Germany and great inflations open populations to the rise of strong-men who they hope can restore some measure of prior stability.
I miss your funny seriousness on twitter. Including great ideas like a pigeon hotel
Fantastic article. Cheers.