Another great read on finance and economics is Frederick
Taylor’s, The Downfall of Money, about Germany’s period of
hyperinflation after losing World War I. It is not a pretty picture, as it
documents the misery of the German commoner, the destruction of the middle
class, and the struggle to survive with inflation eroding the value of
Germany’s fiat currency.
Most telling is who Taylor identifies as profiting from
Germany’s hyperInflation between WWI and WWII:
“Creditors lost almost everything. By contrast, everyone,
broadly speaking, who owed money, had their debt liquidated by inflation. And
there were the profiteers and speculators, obviously. People who worked in
banks….Investors in stocks and shares – unlike fixed investments, these
increased in price along with inflation and over the years in many cases
provided an excellent return. Farmers, who could pay off their mortgages and
other debts….and who could charge high prices [on the black market] for their
produce. And the industrialists …who could borrow money…at low interest and pay
it back in depreciated marks. They could also sell in export markets and use
the foreign exchange from the sales to buy businesses, properties and other
material assists inside Germany….”
There was no safe haven in paper money, annuities,
insurance, or rent-controlled real estate. Germany finally climbed out of its
inflation by replacing its currency with a new monetary system linked to gold,
and with the forgiveness of its remaining debts by other world powers. While
Germany’s situation was specific, it was not unique in world history, and
perhaps we can learn from their chapter in planning for our own future
security.
Me, I still have faith in income-producing real estate, but
think I will continue to add a bit of gold to my portfolio, and learn to grow
more of my own food….
Happy Investing!
