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(37,305 posts)
Sat Sep 29, 2012, 09:37 AM Sep 2012

Art Cashin On The Most Important History Lesson Of The Last Century

Submitted by Tyler Durden on 10/13/2011 10:08 -0400

Today, instead of the traditional market observations by the Chairman of the Fermentation Committee, we share with readers a critical historical lesson from Art Cashin, focusing on an event that took place 89 years ago, which as Cashin says is "one of the most devastating economic events in recorded history and an important backdrop to Europe today. It all began with the efforts of a few, well-intentioned government officials." Many will know what we are talking about already...

Originally, on this day (-2) in 1922, the German Central Bank and the German Treasury took an inevitable step in a process which had begun with their previous effort to "jump start" a stagnant economy. Many months earlier they had decided that what was needed was easier money. Their initial efforts brought little response. So, using the governmental "more is better" theory they simply created more and more money.


Let’s take a different tack. To understand the incomprehensible scope of the German inflation maybe it’s best to start with something basic….like a loaf of bread. (To keep things simple we’ll substitute dollars and cents in place of marks and pfennigs. You’ll get the picture.) In the middle of 1914, just before the war, a one pound loaf of bread cost 13 cents. Two years later it was 19 cents. Two years more and it sold for 22 cents. By 1919 it was 26 cents. Now the fun begins.

In 1920, a loaf of bread soared to $1.20, and then in 1921 it hit $1.35. By the middle of 1922 it was $3.50. At the start of 1923 it rocketed to $700 a loaf. Five months later a loaf went for $1200. By September it was $2 million. A month later it was $670 million (wide spread rioting broke out). The next month it hit $3 billion. By mid month it was $100 billion. Then it all collapsed.


Currencies, Culture And Chaos – If it is difficult to grasp the enormity of the numbers in this tale of hyper-inflation, it is far more difficult to grasp how it destroyed a culture, a nation and, almost, the world.

People’s savings were suddenly worthless. Pensions were meaningless. If you had a 400 mark monthly pension, you went from comfortable to penniless in a matter of months. People demanded to be paid daily so they would not have their wages devalued by a few days passing. Ultimately, they demanded their pay twice daily just to cover changes in trolley fare. People heated their homes by burning money instead of coal. (It was more plentiful and cheaper to get.)

The middle class was destroyed. It was an age of renters, not of home ownership, so thousands became homeless. But the cultural collapse may have had other more pernicious effects.


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Art Cashin On The Most Important History Lesson Of The Last Century (Original Post) dkf Sep 2012 OP
"wide spread rioting broke out" only after the price passed 2 million? dixiegrrrrl Sep 2012 #1
That says a lot about what it takes to get people rioting. dkf Sep 2012 #2


(60,010 posts)
1. "wide spread rioting broke out" only after the price passed 2 million?
Sat Sep 29, 2012, 10:40 AM
Sep 2012

And it only collapsed after bread hit 100 million? Only THEN????

I hope people nowdays do not sit still that long HERE when they realize what is happening to prices/inflation.



(37,305 posts)
2. That says a lot about what it takes to get people rioting.
Sat Sep 29, 2012, 12:46 PM
Sep 2012

We are not close to revolution...yet. But make it impossible to eat and that is when the you know what hits the fan.

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