Dateline 20 October 2013
In Part 1 of this essay I noted that America's debt and future entitlement promises are too high to ever be paid in full. In their borrowing, reckless politicians have pledged the earnings of future generations of Americans. It is akin to you or me borrowing way beyond our ability to ever repay, with the expectation that our children and grandchildren will work and sacrifice to pay the debt long after we're dead and gone. I don't think that's possible on a personal level, but our government has done it on a national level.
There are people in the know who assert that the only way out of this quagmire of debt is by default (we aren't paying!) or hyperinflation (the creation of more and more increasingly worthless dollars). I think we can expect other drastic measures too.
For example, there will be even-higher taxes. And we shouldn't be surprised when the government nationalizes all private pension programs. That means personal IRAs and 401Ks will be taken over (confiscated) by the Feds. We will have some sort of government annuity program instead. After all, it's those rich people who have private pension plans, and that's just not fair. But not to worry—the politicians will give government IOUs to the "rich" people when they take their investments. If government can nationalize health care, they can nationalize pension programs too.
And I wouldn't put it past the government to simply take a percentage of money from everyone's bank accounts as needed, like happened in Cyprus earlier this year. They call it a "bail-in." Clever.
This situation of America's increasing, and increasingly unpayable, debt will not go away without a lot of pain and suffering. It will become a much greater crisis. In some minds, it is already a crisis. Many who have in the past eagerly loaned to America are not so eager anymore. They are starting to realize that the American dollar is not what it once was. They are looking for a better investment.
There is a lot of talk about scrapping the American dollar as the world's reserve currency (as was decided at Bretton Woods, on Mount Washington, New Hampshire, back in 1944). Such an outcome seems inevitable. There will then be a new world currency of some sort. The dollar will no longer reign supreme. And the ramifications of that are ominous for America. No longer will we be able to create money out of thin air to pay our debts.
But I digress. This is an essay about how a person or a family can get through the coming hyperinflation, if it actually does come. I'm no expert on this subject, mind you, but I have read the book pictured at the top of this page. When Money Dies tells the story of hyperinflation in Germany after the first World War. It is a history book.
There are people who say that history repeats itself. I'm not one of them. I happen to believe that history is linear, not circular. But I do think that history rhymes, so to speak. Thus it is that history books have a way of being somewhat prophetic.
I think those who learn about the past are better equipped to understand the present. People who look at history are more likely to see the "macro" picture (the long-term trends) and can put the micro-details of everyday news into better context. Those who are ignorant of history tend to be tossed to and fro by so many crisis du jours, as presented to us by the mainstream media. That's the way it looks to me.
Anyway, When Money Dies was not easy for me to understand. It is about German and European history, German and European geography, German and European politics, and German and European money. My brain just isn't geared for German and European details like it is for American. Besides that, I found the political-economic minutia of what led up to the Wiemar Republic hyperinflation of 1921 to 1923 was hard to understand. But I paid money for the book and I plowed through it. In so doing, I got the general picture of what to expect if hyperinflation comes. I also learned how best to get through it.
In short, the hyperinflation in Germany (which also affected Hungary and Austria) resulted in widespread social and political chaos, uncertainty, and destruction. Everything went to pieces. Life savings were wiped out. People with once-secure jobs were out of work. Prices for everything rose to incredible heights. Food supplies dwindled. The population, particularly in the cities and towns, were destitute, hungry, and, when winter came, they were cold. There was martial law. There were political assassinations. There were labor strikes. There were secessionist movements. It was a disaster.
Gerald Celente, director of the Trends Research Institute, often repeats a phrase that goes like this... "When people lose everything, and they have nothing to lose, they lose it." That observation certainly applied to the urban areas of Germany during the years of economic upheaval. Riots took place in the cities of Germany when the people were hungry and desperate, and we can be sure that riots will come to America's cities if a similar economic breakdown happens here.
But it was a much different situation in the rural areas of Germany, Hungary and Austria, and it turns out that most of the population of those countries lived in the rural areas. Adam Ferguson, the author of When Money Dies, writes in Chapter 7
'In the countryside the landowners and farmers were less affected than anyone, producing most of their own essentials...'And Chapter 8 begins...
'Only the country people were surviving in Germany in any comfort; anyone who lived off the land had the readiest access to real values.'
Keep in mind that farm people in the 1920s were not like farmers of today. Back then they had diversified, self-reliant small farms. Unlike today's modern farmer, who buys his groceries at the supermarket like everyone else, the farmers of 1920's Germany were not dependent on supermarkets. Not hardly.
So right there is one historical insight into how you and your family can get through a future American hyperinflationary disaster. Get out of the urban and suburban areas, and into the rural countryside where you can be more self reliant— where you are part of a community of others who are also equipped to live a more self reliant lifestyle. The lesson of history is clear on this.
This matter of leaving the urban and suburban areas is pretty much a self-evident bit of wisdom. It is the first of six bits of advice that I posted back in early 2008 when I wrote An Agrarian-Style Economic Self Defense Plan. So I'm probably not telling you something you don't already know. But the matter is so important that it bears repeating.
I ended Part 1 of this series by telling you that I learned from When Money Dies what a person or family needs to do to get through the chaos and devastation of hyperinflation. I said the answer may surprise you. Well, the advice to get out of the urban areas probably didn't surprise you. I've decided to save the surprising bit of information for part 3, which is coming up next. Stay tuned....
To go to Part 3 of this series