Survival Guides

Financial Survival

2 of 6
Use your ← → (arrow) keys to browse

INFLATION – OUR CHIEF ENEMY

The first thing you need to know about how dire our situation is revolves around the concept of inflation. Most economics texts will define inflation as an increase in the supply of money. Where the rubber meets the road, your average person on the street will define inflation as a rise in prices. Many people remember back to the early 1960s when a bottle of Coca Cola cost a meager five cents. Today, that same bottle of Coke costs, on average, $3.50. In most people’s minds, inflation is quite simply the fact that things cost more now than they did a long time ago.

Both of these thoughts – rising prices as well as an increase in the supply of money are merely symptoms of inflation, however. Keep that in mind as we move forward! We can easily look to history to see how we might fare in the future – but according to many prominent economists, the future is hyperinflation. Hyperinflation sounds a lot like inflation – hyperinflation is just more inflation, right? Wrong. Hyperinflation is actually different, and it comes from deflation or slow economic growth. Are there any examples of this situation occurring in the past? Unfortunately, there are many examples, but one stands out – Weimar Germany.

In the 1920s, Germany was essentially exactly like America is today. They had just lost the First World War, and were saddled with debts too massive to be sustained. As their debt exploded, the German government tried to raise taxes to cover the debt, which of course did not work. The next course of action was to print money to cover the debt – lots, and lots of money, just like we are doing right now in America. Currently, we are printing $85 billion worth of currency every month! As the velocity of money increased in Germany, hyperinflation took hold, and hit the people hard. Now, it’s time to look at the true definition of hyperinflation:

Hyperinflation: a monthly increase in the
inflation rate of 50% or more in one month.

What’s the root cause of hyperinflation in that case? A loss of confidence in a nation’s ability to repay debt. Think for a minute how frightening hyperinflation is. We already cited the example of the Coke that cost 5 cents in the 1960s and costs $3.50 right now. What if it cost $7 – next month? And $14 the month after that? That, my friends, is hyperinflation, and it has occurred in modern countries within the last 25 years, and will occur in America.

2 of 6
Use your ← → (arrow) keys to browse

Related Articles

Leave a Reply

Your email address will not be published. Required fields are marked *

Back to top button

Adblock Detected

Please support us by whitelisting our page! Turn off your ad blocker for some excellent content!