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The most famous of modern monetary disasters occurred
in Germany in 1923. The indirect cause of the German hyperinflation was
the Treaty of Versailles, which brought to a close the First World War. More
directly it was the level of reparations which the German people were
required to pay to the victors. More directly still it was the occupation by
France and Belgium of Germany's industrial heartland in the Ruhr valley, as
an attempt to force the payment of those reparations, which were outstanding.
Germany was already proving ungovernable as
democrats, republicans, communists and the extreme right vied for power.
Assassinations were rife.
In reaction to the Ruhr occupation the
government, such as it was, encouraged the closure of factories to prevent
the achievement of the foreign occupiers' aims, and it offered payment in
newly printed money to Germans thrown out of work.
The results are well documented. Restaurant
prices rose during the meal; workers had to be paid twice a day; the money
presses consumed a vast tonnage of paper; the population took to shares as a
possible money store and financial speculation ran amok. It was fine to enter
into this era with nothing to lose, but a disaster for anyone who had built
themselves even a small fortune on the old rules of the world. German savers
were wiped out.
The inflation was a revolution of wealth -
transferring it from those who had saved to those who had the foresight to
act. It drove large numbers of the impoverished middle classes to despair and
even suicide.
"The young, and
quick-witted did well. Overnight they became free, rich and independent. It
was a situation in which mental inertia and reliance on past experience was
punished by starvation and death." Sebastian Haffner - 1939
Paul Sustain
Director and Founder
Bullionvault.com
Also by Paul Tustain
Paul Tustain is director and founder of BullionVault -
the world's fastest-growing gold ownership service, where you can buy gold today vaulted in
Zurich on $3 spreads and 0.8% dealing fees.
Please Note: This article is to inform your thinking, not lead
it. Only you can decide the best place for your money, and any decision you
make will put your money at risk. Information or data included here may have
already been overtaken by events – and must be verified elsewhere
– should you choose to act on it.
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