How To Get ThroughThe Coming Hyperinflation(Part 3)

Dateline: 21 October 2013

German One-MIllion mark paper money from 1923. At the height of the hyperinflation a loaf of bread cost 3 billion marks. But few merchants would take paper money for their goods.

In Part 2 of this series I told you about the book, When Money Dies, which is a historical record of the era of hyperinflation in Weimar Germany back in the 1920's. I learned from the book that, while financial chaos and destruction raged, the country people did not suffer anywhere near as much as people who lived in the cities and towns.

The most serious aspect of hyperinflation was that people who did not have the land, the tools, and the know-how to raise food for themselves, had a very difficult time getting food. People who had considerable financial resources in the form of savings, and conventional investments in German marks, watched helplessly as the buying power of their wealth dwindled.

One such person was Anna Eisenmenger, of Austria, who kept a diary through the hyperinflationary years. She was a widow with the financial resources to live comfortably. In the years leading up to the hyperinflation, as the economic problems of Germany, Hungary and Austria worsened, Anna Eisenmenger wrote...

'I must make myself believe that I am really far better off than hundreds of thousands of other women. I am at least immune from material cares and can help my children since I have a small fortune, safely invested in gilt-edged securities. Thank God for that!'

Unfortunately, by the end of the hyperinflationary period, as new currency reforms were implemented, Anna Eisenmenger's small fortune was wiped out. In 1924 she wrote...

'All who were not clever enough to hoard the forbidden stable currencies or gold have, without exception, suffered losses. ... My millions have dwindled to about a thousand new schillings. We belong to the new poor. The middle class has been reduced to the proletariat...  I feel that my strength is deserting me. I cannot go on.'

I'll have more to say about "stable currencies" and gold in Part 4 of this series. For now, I want to focus on something more important than preserving wealth, and that is the preservation of life. While there is a correlation between wealth and the preservation of life, wealth is not always a dependable source of sustenance, especially when that wealth is devalued by hyperinflation.

One of the amazing things about the German hyperinflation was that, as people in the cities and towns faced starvation, food was abundant in the country. The peasants and farmers had what they needed to live comfortably, and they had plenty of food to spare. But they refused to exchange it for worthless paper money.

When Money Dies, tells of a man who wanted to buy a single egg from a peasant with German paper dollars. The peasant would not take any amount of paper money and told the man, "We don't want any Jew-confetti from Berlin."

The farmers wanted something of value for their crops. Paper money had little to no value. But jewelry, furniture, fur coats, rugs, paintings and the like did have value. Many wealthy people in cities and towns, unable to provide for their most basic food needs themselves, readily traded such possessions for food, as long as they had them to trade. Early in the financial tumult, Anna Eisenmenger wrote...

'The state still accepts its own money for the scanty provisions it offers us. The private tradesman already refuses to sell his precious wares for money and demands something of real value in exchange. The wife of a doctor whom I know recently exchanged her beautiful piano for a sack of wheat flour. I, too, have exchanged my husband's gold watch for four sacks of potatoes, which will at all events carry us through the winter... My farmer had hidden the sacks of potatoes under straw on top of which he placed some apples. The apples were duly stolen, but the potatoes reached me safely... When the farmer's eyes rested on the grand piano at which Erni [her blinded son] was seated improvising, he took me aside and said: 'My wife has been wanting one of those things for a long time. If you'll give it to me, you shall have all you want for three months.'

Unlike the few who had financial wealth, most of the people in the urban areas did not have much in the way of material possessions to trade for food. When Money Dies tells of an incident in one city where a hungry mob accosted a policeman on a horse. They wanted the horse, and proceeded to kill and butcher it in the street, hauling off pieces of the animal to eat. At the height of hyperinflation, dogs were routinely butchered and eaten. Would you eat horse or dog meat if you were hungry? Yes, you would.

Eventually, bands of desperately hungry people headed out of the cities and towns, looking to loot food from nearby farms. Anna Eisenmenger's daughter went to stay with some cousins in the country who had a small farm. They had "eight cows, two horses, twelve pigs and the usual poultry." Her daughter wrote and told the story of coming home from church with her Uncle and Aunt one day and encountering a mob that was ransacking the neighborhood.

'In the lane which winds to my uncle's farm we noticed a troop of about 80 or 100 men and women. They were bawling and singing and driving in their midst a cart harnessed with a brown horse. Uncle exclaimed: 'They're driving away with Hansl and our cart!"

A lorry of gendarmes turned up at that moment. A few shots were fired, and the mob dispersed into the hills, the horse and cart left behind.

In the cart I saw three slaughtered pigs. In addition, some pieces of slaughtered cows and pigs and a few dead hens were lying in an untidy heap. 'My God, my God,' wailed my aunt. 'What will things be like at home?'... Two gendarmes accompanied us in order to ascertain the damage... We were prepared for the worst. The gates of the farmyard were wide open. There was not a sign of the servant girls. A pig seriously injured but still living was lying in its own blood in the yard. The other pigs had run out into the road. The cow-shed was drenched in blood. One cow had been slaughtered where it stood and the meat torn from its bones. The monsters had slit up the udder of the finest milch cow, so that she had to be put out of her misery immediately. In the granary the store of grain and fodder were in a state of wild confusion... a rag soaked with petrol was still smoldering to show what these beasts had intended. In the kitchen-living room of which my aunt was so proud not a thing had been left whole. Uncle estimates the damage at 100,000 peace kronen, and no insurance company will pay him any compensation for his loss.'

When Money Dies ends with these two sentences...
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'In hyperinflation, a kilo of potatoes was worth, to some, more than the family silver; a side of pork more than the grand piano. A prostitute in the family was better than in infant corpse; theft was preferable to starvation; warmth was finer than honor, clothing more essential than democracy, food more needed than freedom.'

That is a sobering summation, and it underscores the seriousness of hyperinflation. It is something to ponder as the stage is being set for a similar hyperinflationary crisis here in America. 

Yes, I know that our situation is much different from post-war Germany. But there is a glaring similarity... Germany had an enormous, unpayable debt burden, and the country did not have the industrial-economic capacity to pay it's debt obligations. Hyperinflation is simply the natural consequence of a nation that finds itself in hyper-debt, and that is where we find ourselves at this time.

Perhaps we will not see hyperinflation. I sure hope not. But the reality of America's growing and unpayable debt, coupled with unprecedented money creation, and politics-as-usual, will surely lead to some sort of a significant economic crisis. 

The historical record of Germany's hyperinflation, as presented in When Money Dies, is a frightening prospect. But I don't believe fear and overreaction is the proper response. The proper response is to carefully consider the options you have and develop a plan. I will discuss this more in Part 5 of this series.

For now, I would like to point out something well worth considering....

The Potato Paradox

Some potatoes from my 2006 garden

These days, potatoes are one of the cheapest and most plentiful vegetables you can buy. That was probably also the case in Germany back before the privations of war and the the hyper-inflationary crisis, when food was easily obtained for paper money. But all of that changed. The most humble of vegetables became the most valuable.  Anna Eisenmenger gladly traded a gold pocket watch for four sacks of humble spuds. Was it a good trade? Sure it was. You can't eat gold, but you can feed a family pretty well through the winter with a few sacks of potatoes.

So, for people who are considering a wise course of action in the face of a coming crisis, I recommend that you acquire the land and the tools to grow potatoes. More than that, I recommend that you actually grow potatoes. It so happens that growing a good crop of potatoes requires a lot of work, especially if you do it with hand tools. And potato bugs can easily wipe out your crop if you don't learn how to deal with them. 

I can't think of too many other foods that compare to potatoes when it comes to ease of storage, nutrition, and the variety of different foods that can be made with them. They are one of the best food values in a crisis situation. Grow them for yourself and your family now. And grow them if hyperinflation comes so you can exchange them for items of value, as needed, during the crisis. 

That right there—the value of potatoes— is the surprising part of reading When Money Dies. While many "doom-and-gloom" prognosticators are urging their followers to buy gold and silver as a hedge against financial crisis, I don't agree with that. I think it's much more important for families to have the land, the tools, and the experience to successfully grow a good crop of potatoes. 

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