After returning from a trip to Carlsbad Caverns last weekend, I went to the “quarter” car wash, and discovered it had gone from $1.50 to $2 a 25% increase. Asking the owner why, he answered that everything from electricity, water, detergent, wax, property tax, and insurance has gone up. Not just a little, but a lot. Then I read how steel is up close to 50%, milk is going up 50 cents a gallon soon, and gasoline will be $2 everywhere, pretty soon. All the while, the “helicopter money” keeps falling down everywhere in the world. $20 billion for Egypt, a few hundred billion here and there, and pretty soon you’re talking about real money, to paraphrase a famous comment. Or is it real money? No, of course it isn’t. It is scrip. Just like at a carnival or amusement park, where scrip is issued for the rides. Scrip to pay for everything we buy. Obviously, it can’t go on forever. Where will it end? How will it all come or go down? We must look at history for examples and clues, and they are easy to find, right here in America.
“Money,” has failed three times in America already. Paper “money,” at any rate, and the dollar has already failed by about 98%, and is on its last legs. The first time, was during the Revolution, when George Washington had to fight a war, and there was no money with which to fight it. The obvious solution the infant Congress used, was to print money to fight the war. As usual, amid lofty promises of redemption, value, integrity, etc, it worked for a while. At least till we won. By the time Yorktown was surrendered, the “money,” had become valueless. The same scenario occurred during the War Between the States, on both sides. The Greenbacks and Confederates became worthless before the North, unfortunately, won. At least Lincoln was done in, as just punishment for starting the conflict, but we won’t get into that here. So, how will it all go down? About as it is now, only the speed will increase.
The car wash is typical. A 25% increase overnight. The owner said he was postponing it as long as he could, but breaking even, was not his idea of how to make a business profitable. I was in the theatre business for 11 years, and had 6 movie theatres. My favorite was an indoor palace built in 1927 in suburban Filthydelphia. The Lansdowne had a stage, pipe organ, and I loved that house. My regular admission was 75 cents. This was in 1963. When I played “Goldfinger” first run, I raised it to a dollar, amidst screams of protest. I had no choice, as I was paying 50% of the gross for the film. Today, a 50% film rental is unheard of in the industry, and 90-10, with the house “nut” subtracted, is not unusual. So what’s it cost to take in a movie now? In New York it’s ten bucks, and a Broadway Show can cost $150. When the presses run overtime, and new ones are added, the end is in sight. I do get tired of mentioning Stott’s Law, but you know what it is. As the dollar supply increases, there are never enough to go around. In 1924 Germany, they were printing so fast, and using so much paper, that the more they printed, the more they needed. Why? Because prices were going up as fast as they printed, and faster at times. Eventually, they took the old notes, and stamped new values on them, and even then, it was not enough.
People would go into a restaurant and buy a cup of coffee at 5,000 Reichsmarks, and by the time they asked for a refill, the price had gone up 500 marks. People who had saved in these failing paper monies, lost everything. People who had “whole life” insurance policies, found that all the years they had paid the installments, were for naught. Always, when an inflationary decline happens, the momentum picks up speed, until it is finally break neck, and the entire thing collapses. When I was a kid, a “whole life” policy of $5,000, was for rich people. Imagine what that would buy today with a new Dodge Truck going for $40,000. My 1941 Plymouth truck sold for about $400 new. As the process in Iraq grinds on and on, now with other nations pulling out their people, the cost will escalate, and more and more helicopter dollars will roll off the presses, making them have less and less value.
Wars oftentimes precipitate a currency failure. Wars were responsible for the previous failures in America, as was the case in most failures in history. War is expensive, and most governments print money to pay for them. When they print too much, or the amount in circulation becomes absurd, faith is lost in them. After all, it is merely faith which keeps the buck alive at all. The four major wars the US has been involved in, all depreciated the dollar. Prices were just about twice after WW II, as they were before. Korea and Viet-Nam, also took their toll as to the dollar’s purchasing power. Many think Iraq can develop into another Viet-Nam. Will Iraq break the dollar’s back?
When it really begins to go down, the scenario will be the same as happened with the car wash at $2.00, eggs now at $2.25, and gasoline at $2.00, only it will happen much faster. As the dollar supply goes heavenward, with millions of government checks being written for everything under the moon, sensible or not, the faith in dollars, as well as their sheer numbers, will cause their value to expire. As prices go up monthly, and then weekly, and finally daily; savings accounts, CDs, life insurance policies, and bonds, will be foolish to hold or buy. Gradually, the populace will begin to realize the futility of depending on the dollar, and they will turn to other things, and especially gold and silver, which will then go heavenward as the dollar goes down to the depths of you know where. There will be rushes on the banks to get the dollars out before they go lower, and buy anything. Anything at all, because the next day they will cost more, and the dollar will buy less. Panic will be everywhere, and the presses will turn out octillions of dollars to meet the demands. The more they turn out, the less they will buy, and the more will be needed.
This all sounds extremely remote, I know, but when it begins, nothing will, or can stop it. The signs are ominous. The thought of a financial system collapsing, is absolutely sickening, and I am aware of it. To realize that your “money,” which you have so assiduously saved for a rainy day, is rapidly becoming mere pieces of paper with no purchasing power, is enough to give one nightmares. Yet it has happened over and over again in history, as well as here in the US. If you have ever watched a plane crash, or an auto wreck, in extreme slow motion, you can realize how terrible the realization is. You say to yourself, “If only he had not driven so fast, or checked the plane’s landing gear, those people might not have died.” Or when the ultimate happens, “If only I had taken that money out of the bank and put it in something tangible.” The facts simply cannot be ignored however, and they are that the US government, is literally out of control. Things like the Patriot Act, the Iraq mess, and ever widening scope and controls thrust upon the citizenry, makes the result incontrovertible. Dollars, dollars, dollars everywhere, and prices going up, almost on a daily basis.
We have all grown up with dollars, and considered them sacrosanct, sort of. We have saved in them, used them, and spent them all of our lives. It is a difficult thing to imagine that they could lose value ever faster and faster, till they are at zero. They are already at 98% of zero, compared to seven decades or so ago. Look at re-runs of Gunsmoke on channel 529 every day, if you have a dish, and see the Delmonicos steak dinners for 45 cents, and nickel beer at the Long Branch Saloon. This is a true price of a hundred years ago. It is difficult even for me, at age 70, to remember that at age 18, I thought if I could make $55 a week for the rest of my life, I would be happy. When something like this happens, and continually increases in velocity, only a fool would keep dollars in bonds or in banks. Why watch your life’s savings evaporate? Word is out, that interest rates may go up in June, which could collapse the housing industry. What else is there to keep the economy afloat? Protect yourself.