Liberty Maven

“Let it not be said that No One Cared, that No One Objected, once it is realized that our Liberties and our Wealth are in Jeopardy.” – Dr. Ron Paul

Originally published July 16th, 2008 at http://www.nolanchart.com/article4257.html

Most readers of this article probably recognize that these are turbulent times in the America – whether it is a stock markets, supermarket, or gas station. You have no farther to look than the $5 T-as-in-TRILLION loss in Fannie Mae and Freddie Mac last week. You have no farther to look than the nosedives of the Dow and the S&P 500. Many may even recognize that the US Dollar Index (arguably the best indicator of the dollar’s purchasing power, a weighted index based on the Euro, Yen, Pound, Canadian Dollar, Swedish Krona, and Swiss Franc) is also at its all-time low. The index’s performance over 2001-2008 is quite shocking, as the purchasing power of the US Dollar has dropped 40% against this basket of currencies. The dollar hit a new all-time low against the Euro on July 15^th. Gas higher than $4.50/gallon is now common, and food, despite the government figures, is getting expensive. If you still have your job, your wages aren’t exactly keeping up, are they?

Yes, this inflation and loss of purchasing power is certainly horrible for those who own and earn the American dollar, that is, We the People. However, my question to you is not whether America is in bad straits inflation-and-purchasing power-wise but whether or not you objectively think that America is ultimately headed for hyperinflation, where hyperinflation is defined as higher than 10,000% inflation per year. Modern-day example – Zimbabwe, which cannot print money fast enough and, unbelievably, is now adding expiration dates onto their banknotes. This February, the inflation rate was well over 100,000%. This May, the hyperinflation hit 1,000,000%.

My question at first may seem ridiculous, that what happens today in an economically ruined country like Zimbabwe could happen to the World’s Largest Economy and its sole Military Superpower. But first please read below about the Hyperinflation Beast unleashed in post-WWI Germany, the infamous Weimar Republic. Although the dynamics in America are quite different – for instance Weimar Republic voter turnouts were typically over 80% for most elections — as a freedom writer I must heed and warn of the final result – the Weimar Hyperinflation was one of the many prerequisites which enabled the violent Nazis to come to power.

______________________________________________________

“It was horrible! Horrible! Like lightning it struck. No one was prepared. You cannot imagine the rapidity with which the whole thing happened. The shelves in the grocery store were empty. You could buy nothing with your paper money.”

– Dr. Friedrich Kessler, Harvard law professor who lived through the Weimar Hyperflation

______________________________________________________

Prior to WWI, Germany was Europe’s wealthiest, most powerful, and most advanced economy. Germany produced two-thirds of Europe’s steel, half of its coal, and more electricity than Britain, France, and Italy combined. Its population of 67 million dwarfed its neighbors’ with the exception of Russia. Cutting-edge advances in agriculture created a boom – for instance at the start of WWI, Germany was producing 1/3 of the world’s potatoes. Germany was the leader for most modern industries – its quality products from companies like Krupps, Thyssen, Siemens, Hoechst, and BASF were famous the world over.

To finance WW1, Germany borrowed money. In the midst of the war, the expenditures far exceeded revenue. The government began printing money without the backing of economic resources, but Germany wasn’t worried. They expected to payback the loans with the spoils of war, namely annexations of industrial area and tribute from the defeated. However, after their defeat, the national debt, forced Versailles reparations (in gold), loss of major industrial areas to France, shrunken domestic market, shift to peacetime economy, war veterans’ disabilities, political barriers to increasing taxation, etc. combined into a devil’s brew. What followed next wasn’t pretty.

Before the war in 1914, 4 marks = 1 American dollar.

After the war in 1919, 47 marks.

In 1921, 263 marks.

In July 1922, 493 marks. August, 1,000 marks. December, 7,000 marks.

In January 1923, 17,000 marks. July, 353,000 marks. Hyperinflation begins.

In August, 4,621,000 marks.

In September, 98,860,000 marks.

In October, 25,260,000,000 marks

In November, 2,193,600,000,000 marks

In December, 4,200,000,000,000 marks were required to buy a dollar.

Printing presses were unable to keep up with the need for banknotes of higher denominations. Stamps fell out of use as they couldn’t be printed in the right value fast enough; letters had to be mailed with a banknote stapled to the envelope. If a cup of coffee was ordered for 5,000 marks, the bill might be for 8,000 marks when the customer left the café.

Wages had to be massively inflated so people could survive. Employees collected their paypackets in shopping baskets or wheelbarrows, then immediately rushed to the shops to buy supplies before the plunge in the value of money put them out of reach. It was estimated 90% of a family’s pay went to food, which inflated madly. People on fixed income had to sell their belongings to eat. Starvation, food riots, massive strikes, looting, gunfights, hoarding followed. Sarcastically, I note the only good thing is that any fixed-rate mortgages were paid off pretty quick. Also keep in mind that although Germany was by far the worst, Austria, Hungary, Russia, and Poland all suffered hyperinflation as well.

______________________________________________________

How did it all end? Given the gravity of the problem, the solution was fairly easy. The German central bank (probably fatigued from printing away all that wealth and property from the people) issued a new currency, the Rentenmark, that was tied to the price of gold. As soon as it was circulated in high enough quantities, the hyperinflation ended.

Interestingly enough, right now there is another major case of gold being used to abate inflation. The Vietnamese Dong has been recently inflating at about 25%. (Although its not the sole reason, I can’t help but note the Vietnam’s central bank has a “hopping peg” policy to the dollar so it can be argued that is an example of the USA exporting some of its monetary pains to Asia – we take their goods, and send back inflation.) To combat inflation, Vietnamese private citizens have been importing gold madly to store their value in metal rather than paper currency that is devaluing. 60 tons were imported in January-May 2008, compared to 78 tons in all of 2007. Considered that global gold production/input is about 1500 tons, and consumption is 2000 tons, this is not an insignificant volume for a small country like Vietnam. However, in June the Vietnamese government tried to put a stop to this by suspending gold imports.

Well, back to topic, I was unable to locate the M3 increase rate (the increase in the overall money supply which correlates to inflation) increase in Weimar Republic, and since March 2006 the Federal Reserve has deigned to stop reporting this figure, the best bet right now is shadowstats.com, which estimates the true inflation of the US money supply, M3, at 16%, and true consumer inflation at 11%, which differs from the government estimate of 4%.

Translation: Unless you are getting pay raises at about 20%, this should send chills down your spine as in purchasing power terms you are getting poorer with every day that passes. Any savings you may have in American dollars are being devalued as well. Listen to Ron Paul talk about the “Strong” Dollar Policy and what his meeting with SecTreas Paulson and Fed Chairman Bernanke on July 11, 2008 was really all about. And here is the ShadowStats report on hyperinflation in America, its prediction that hyperinflation is likely, and the timing may be as soon as 2010. Here is food for thought on the world dumping the Dollar and the arrival of a “new, more equal world economic order.”

Lastly, many reading this probably won’t do any research and will think Hyperinflation in America is simply impossible. Last year I would have agreed with you. That was when I stumbled on this website, Eric Englund’s hyperinflation.net and perused the work there. At the time, I thought his work was a bit extreme. Now, I am not so sure – for instance, in July 2007, he wrote here about the perils the American public and stockholders faced with Fannie Mae and correctly predicted its crash. So perhaps there is some truth there. If you read the above closely, surely there are some parallels between the Weimar Republic and the United States. Surely the “strong” dollar is not the right place to be, as I’ve already warned in previous articles below.

So, the question remains for you, Reader, I challenge you to reply. Long-term, is America headed for Hyperinflation or not? Until decided, pardon me as I pass by you in the opposite direction a few times with my wheelbarrow. Getting a few loads stashed away before the herd stampedes may not be such a bad idea.

In Liberty,

Jake, the Champion of the Constitution

www.campaignforliberty.com

Author’s Note: The source data from the section on the Weimar Republic was paraphrased almost exclusively from pages 103-117 of The Coming of the Third Reich by Richard J. Evans, 2003. A fascinating read on this scholar’s examination of Hitler’s rise to power, no matter which shade of the political spectrum you sieg heil (Hail Victory) from.

The 3 Trillion Dollar Government: Hyperinflation in America? (Part 1/2)
Published: July 13, 2008
A Prelude. Interesting statistics on the Federal Government Taxation and Deficit, the Trade Deficit, the National Debt, and more

We the People of the United States, in Order to form a more perfect Union, establish Justice, insure domestic Tranquility, provide for the common defence, promote the general Welfare, and secure the Blessings of Liberty to ourselves and our Posterity, do ordain and establish this Constitution for the United States of America.

As always, unlike the NFL, the author grants full permission to allow any accounts of, rebroadcasts, retransmissions, repostings in part or full of this article to your blog or anywhere else in order to promote the Restoration of our Republic. Veritas numquam perit. Veritas odit moras. Veritas vincit. Truth never perishes. Truth hates delay. Truth conquers.

Subjects of future articles…

1) The Federal Reserve System Must Be Abolished!! Per the Constitution, CONGRESS, not a Private Banking Company, should be in charge of the Dollar, the currency of We the People. Despite any rhetoric to the contrary, our Dollar is being treated like Dirt by Bernanke and his ilk.

“If I could wave a magic wand and the Federal Reserve Bank would disappear tomorrow, I would do so.” – Bob Barr

2) The President’s Working Group on Financial Markets (aka Plunge Protection Team) must either Make its Meetings Open to the Public to the people or be Dissolved. There is no constitutional authority for a secret group to conduct centralized economic planning and daily market manipulations. I leave you with a quote (I did cherry-pick from two paragraphs) from that charlatan’s website, whitehouse.gov.

“The report is that financial markets are strong and solid… The economy of ours is on a solid foundation… Core inflation is low.” – President Bush on the Plunge Protection Team’s annual report, January 2008

_________________________________________________________

Other Recommended Articles on the Honest Money from the Author [Reach the Author Here!]

Bob Barr, What is the Cost of Money? Because Ron Paul and I think you Don’t Know (PART 4/6)
Published: June 6, 2008
A Ron Paul Revolutionary asks Bob Barr if he knows how much a Steel Penny is worth.

Dear Bob Barr, Ron Paul Knows where the “Road to Roota” Leads, Do You? (PART 5/6)
Published: June 6, 2008
Bob Barr, relax for a bit and read a lovely Federal Reserve state-sponsored comic book for schoolchildren. Then tell me what it means.

Billionaires for the Ron Paul Revolution (PART 6/6)
Published: June 6, 2008
Bob Barr, where are the Billionaires that Support You? Jim Rogers, Axel Merk, Peter Schiff all support Ron Paul.

_________________________________________________________

Other Recommended Articles from the Author [Reach the Author Here!]

Iran Declares War on the Dollar = More War for America
Published: April 30, 2008
“Bomb, bomb, bomb, bomb, bomb Iran” – John McCain. America gears up for another Hitler blitzkrieg. And Fu** your Yellow Ribbon.

WARGATE: Rumsfeld Calls for “Another Attack” of Terror to Bolster Support for Bush
Published: May 17, 2008
Breaking News! Read and Listen here at the dod.mil link. Give a Thumbs up if you think Donald Rumsfeld is “waaaay off the record,” I mean way out of line!

My Father’s Vietnam is My Iraq – Disturbing Parallels
Published: May 2, 2008
Maybe 9/11 didn’t REALLY “Change Everything.” An Analogy between the Vietnam and Iraq Wars, topped off by a John McCain expose

Preemptive War and Freedom Video Clips
Published: May 16, 2008
Sick of war? A countdown collection of videos centering on the Bush Administration’s unAmerican policy of Preemptive War followed by a collection videos centered on Freedom and Anti-War. Maybe you missed a clip or two. Are you Insane like Ron Paul, Jesse Ventura, Mike Gravel or are you unAmerican like Cheney, Clinton, McCain, and Obama?

AMERICA, Fight Your Apathy! You CAN Save Our Soldiers and Iraqis from the Sickness of War! Laughter at The Onion is the Best Medicine!
Published: May 18, 2008
Not feeling very Antiwar-ish today? No problem! Try Laughing at our Wars and Foreign Policy using the Hilarity of The Onion!

The Gauntlet is Thrown – The Champion of the Constitution vs. David Petraeus
Published: May 19, 2008
Will Ron Paul Fight Him? No, its just Me and the legend of Cassius Clay!

We the People versus the Might of the US Government
Published: March 2, 2008
What do the experiences of SAS trooper Ben Griffin, Hope Steffey, and Jose Padilla all have in common? They show the Might of Government is overwhelming Right. We the People want Justice!

First They Came for Those Who Didn’t Pay Their Taxes…
Published: April 19, 2008
Then They Came for the Ron Paul Supporters. The Fight that Defeated the late, great boxer Joe Louis Continues.