I remember the fall of the Berlin wall, and the end of communism, it surprises me even now.
It takes a lot for a country to succumb to hyper inflation and most of the examples I can think of were linked to political and structural instability. It's unlikely to happen in any stable democratic state, but it's not impossible. The good news is that hyper-inflation doesn't last. At the end of the day, money isn't real it's a token to exchange for things of value and it's possible to change the token.
Interesting story about the coins. I lived in Russia for several years as well. It amazed me with all the problems that they had with hyperinflation after the fall of the Soviet Union that the communists were not able to take back control. I also am surprised that they stayed as infatuated with the US as long as they did.
McD's is a luxury so to speak in such times and some people seem to be able to imagine away the real problems hyperinflation causes by thinking they could go without the hamburger. Imagine milk costing $10 grand a gallon 18 months from now. Also, the government is 4 months late paying your parents social security check and they have no other savings to speak of because it has been wiped out already. So how do you buy your kid's milk and help out your parents?
Also, around the same time, the world's largest pyramid scheme (MMM) was run in Russia so many people who did have money lost much of it there. A friend of mine whose parent's owned a bank, lost the entire bank in that scandal.
Russia went through some rough years. It seems to be much better there now -- except for the price of housing in Moscow which is outrageous.
deepali
· 1 year ago
Funny enough, we were talking about the fall of the Russian empire today - how at the end, they were embroiled in foreign wars, had gone in debt, etc.
FourPillars
· 1 year ago
Interesting post - I knew I had read your "coin" story somewhere else, but I couldn't figure out where. :)
Mike
SavingDiva
· 1 year ago
Hyperinflation is scary...I frequently worry about inflation....with the federal reserve and banks lowering interest...my savings accounts may not be the best place for my savings...
Money Blue Book
· 1 year ago
There is some serious inflationary concerns in the US economy at the moment. There is some talk that the Fed should stop dropping interest rates and just let the economy bleed itself out to stop the upward pressure of core prices. Scary stuff
boomie
· 1 year ago
We don't have to wait for another attack. We are imploding from within. Our banks are totting tin cups and are going around the world begging for cash, otherwise they'll go under. Our own massive use of unsustainable debt and credit will be our own demise.
Excellent post. Thanks for writing it.
Wealth Building Lessons
· 1 year ago
I think its a possible scenario. not on the same scale, but possible nonetheless.
they kept printing more and more ZDollars which led to hyperinflation.
check out Ron Paul's video as he berates Bernanke for pursuing the same "monetary policies"
Steve (Brip Blap)
· 1 year ago
Thanks all, for the comments. There are certainly a million possible scary scenarios out there for how it could go down, and I'm enough of a rosy-colored glasses patriot to think it won't happen that way here. At the same time, I have a cynical view from my own experience in Russia - as LOD mentions - and from Bubelah's experience growing up in the waning days of the Soviet Union. Things fall apart rapidly when they start falling apart, sometimes. Americans assume - probably like Soviets, Ottomans, Romans, etc. - that the good times will roll forever. I hope they will but know they won't...
Personal Loan Portfolio
· 1 year ago
MBB: "There is some serious inflationary concerns in the US economy at the moment."
That is why Bernake's recent comments about pumping money into the system worry me. Sure it boosts the economy but it also increases the money supply causing more inflation.
The standard salary increase at my work is 4.5% this year, but I recently read that inflation is 6% (only one article so I am not sure if this is correct). Plus, my health care premiums went up by 23%* and my out of pocket expenses went up by $5 for prescriptions and doctor visits.
Steve, it is impossible to not live in Russia long and it not make you cynical. I also completely agree with your statement: "Americans assume - probably like Soviets, Ottomans, Romans, etc. - that the good times will roll forever. I hope they will but know they won’t…" It always happens.
* Last year was the first year they offered the plan that I am on and I believe that they had it under priced, so I am not as upset as you might imagine at that increase.
Claus
· 1 year ago
I grew up in West Germany in the belief that everything was set and would stay as it is. One of our older teachers, I think he was our sociology teacher, once asked me after classes how I thought about reuunification of Germany. This question seemed absurd to me. The iron curtain had gone up long before I was born and to me chances anything would change that balance of powers seemed so slim that it wasn't even worth thinking about it. But to the teacher in hins mindset - all this years - it was a temporary situation that he surely felt would at some time change back to a unified Germany. That was the early 1980th.
We all know what happened in the end of the 80th.
BTW: The same year you were exchange student in Germany I spend a year as exchange student in the US
All Comments
It takes a lot for a country to succumb to hyper inflation and most of the examples I can think of were linked to political and structural instability. It's unlikely to happen in any stable democratic state, but it's not impossible. The good news is that hyper-inflation doesn't last. At the end of the day, money isn't real it's a token to exchange for things of value and it's possible to change the token.
McD's is a luxury so to speak in such times and some people seem to be able to imagine away the real problems hyperinflation causes by thinking they could go without the hamburger. Imagine milk costing $10 grand a gallon 18 months from now. Also, the government is 4 months late paying your parents social security check and they have no other savings to speak of because it has been wiped out already. So how do you buy your kid's milk and help out your parents?
Also, around the same time, the world's largest pyramid scheme (MMM) was run in Russia so many people who did have money lost much of it there. A friend of mine whose parent's owned a bank, lost the entire bank in that scandal.
Russia went through some rough years. It seems to be much better there now -- except for the price of housing in Moscow which is outrageous.
Mike
Excellent post. Thanks for writing it.
http://www.wealthbuildinglessons.com/2007/05/09...
they kept printing more and more ZDollars which led to hyperinflation.
check out Ron Paul's video as he berates Bernanke for pursuing the same "monetary policies"
That is why Bernake's recent comments about pumping money into the system worry me. Sure it boosts the economy but it also increases the money supply causing more inflation.
The standard salary increase at my work is 4.5% this year, but I recently read that inflation is 6% (only one article so I am not sure if this is correct). Plus, my health care premiums went up by 23%* and my out of pocket expenses went up by $5 for prescriptions and doctor visits.
Steve, it is impossible to not live in Russia long and it not make you cynical. I also completely agree with your statement: "Americans assume - probably like Soviets, Ottomans, Romans, etc. - that the good times will roll forever. I hope they will but know they won’t…" It always happens.
* Last year was the first year they offered the plan that I am on and I believe that they had it under priced, so I am not as upset as you might imagine at that increase.
That was the early 1980th.
We all know what happened in the end of the 80th.
BTW: The same year you were exchange student in Germany I spend a year as exchange student in the US
Claus
http://www.wiseclerk.com