What didn’t happen all at once? Actually, the same thing happened and still happens all around the world, but not all at once. What? The decline and eventual going to absolute zero, of the value of un-backed paper currencies. The German Reichsmark is the one most famous, and it did indeed go to a hilarious zero. Zero, meaning it was eventually used to start fires, used as wallpaper, or a loaf of bread costing a wheelbarrow full of them. A streetcar ride may have cost a million, but the return may have cost 1.5 million. A cup of coffee’s refill, would cost more than the first cup, etc. Before the war, the German Reichsmark was worth a U.S. quarter.
In 1914, one man shot another (an archduke), and that started WW I, which killed an estimated 12 million. When war was declared, the Reichsmark went to a half of U.S. quarter. Germany lost, and it became official in 1918, just a few months after the U.S. got in, thanks to Woodrow Wilson. My Dad was drafted to go into that war at age 18, but never was injured or sent overseas, because it ended shortly after he became an 18 year-old soldier. We survived the WW I inflation sort of, because we went in when it was almost over. After the war, Germany, the loser, had tremendous debts, which they had no way of paying. They were broke. The Reichsmark presses began to roll. During the next couple of years, the Reichsmark stood at about a U.S. dime. Think about it. The war was over, and your savings account In Reichsmarks, which was Germany’s currency, had lost 90% of its value in just three or four years, or to put it another way in U.S. terminology, your savings account in Dollars, had lost 90% of its value, even if you had your Dollars tucked under your bed, in a safe, or anywhere. In America, we fought WW II with un-backed paper Dollars, and in just the same four or five years, during 1941-1946, America’s Dollar lost 50% of its value or purchasing power. Everything doubled in price here between 1941 and 1946. Cars and every other thing had doubled their price in Dollars. The same thing happened during Korea and Vietnam, only less so. Wars are total disaster, whenever and wherever they occur, both to the victors and the defeated. 61 years ago, In 1950, I was in New York briefly. At 16, I had a ball! Subway fare was a nickel, the Staten Island Ferry was a nickel, and a Tad’s Steakhouse steak was 99 cents. Believe it or not, cars were required to drive with their parking lights on, and were no to use headlights.
About 1921, a new, previously un-heard of thing happened. WWI’s loser, (Germany) was ordered to pay for the damage it caused. This never had happened in previous wars, nor wars since, as far as I know. The winners of that war wrote the Treaty of Versailles, which Germany never signed, but it required Germany to pay millions of Reichsmarks every week, practically forever. Germany was broke, unable to pay its own debts, and suddenly was ordered to pay hundreds of times more. Then, the presses really began to roll. A Reichsmark worth a U.S. dime? No longer. Germans made a couple of payments, and then threw in the towel, and that was the end of the Reichsmark. It took a couple of years, but by 1924 it was over, and Germany brought forth a new, also un-backed currency.
Now look at the U.S. Dollar. It took Germany’s currency to go from a U.S. quarter to nothing, in about ten years. Its decline was from WWI, through the Treaty of Versailles, but it happened, and Germans who had religiously saved their Reichsmarks in savings accounts or stocks and bonds, had lost everything. They didn’t know what else to do. Their money was the Reichsmark, and ours is the Dollar or ‘buck.’ Could they have bought gold or silver? Maybe many did, and it saved them, but their minds were on what they knew, and that was their ‘money’ or Reichsmark. Ours is the Dollar, and that’s what people think of as value today. It’s our ‘money,’ which we use daily. Saving in anything but our ‘money,’ or the Dollar? “Of course not, how else can we save?” This might sound logical, and I understand it, but it is in error!
Like every other un-backed paper money in history, they all go to zero eventually. Some faster than others. Germany’s went fast. France’s did also after their revolution. The Dollar has lost 90% of its value in the last hundred years or less, and it loses seemingly faster every year. Trump didn’t reign in the spending, and now Biden wants to spend $1.9 trillion for foolishness. That is certain the make prices go up (inflation) pretty quickly, if that bill is signed. What else is there to say? Don’t save in Dollars or Dollar denominated things. Save in real money which for thousands of years, has been gold and silver!
-Don Stott
don@coloradogold.com.