Wednesday, April 15, 2015

Reality of Hyperinflation – the External Alternative

QUESTION: Mr. Armstrong; What did people really do during the German hyperinflation? It seems that all you hear about has been people running around with wheelbarrows of cash to buy anything. Was that truly reality or just the extremes?
God Bless
ANSWER: Life actually went on. People used American dollars and other foreign currency. Time Magazine for December 31, 1923 reported that the German currency was worth almost nothing yet $12 in American money was paid for good seats at the National Opera in Berlin to see Mattia Battistini. As countries move toward a inflation crisis, it is CONFIDENCE that collapses and so they turn to external currency. The American dollar will still rise and be used in cash transactions as it is right now in Ukraine in the fact of their inflation. Zimbabwe has lost the right to print its own money. People use the currencies of other nations to this day. The same result took place in Japan where the government lost the CONFIDENCE of the people and was unable to produce money that would be accepted. The Japanese used rice and Chinese coins, but not their own county.
In Germany, people used foreign currency. The hyperinflation was the collapse in CONFIDENCE of government. They people turned mostly to foreign currency. They did not trust the new Communist Revolutionary government. This is why the hyperinflation took place. The bulk of the people turned to commodities, and others used foreign currency. This is the standard pattern that has ALWAYS emerged. So life goes on just as we see in Kiev. However, apartments rent in Kiev prices in foreign currency right now, not is domestic currency. The people lack CONFIDENCE in the government and will not retain any savings in local currency, which propels the inflation.

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