“We all keep worrying deflation, but it can turn so fast” – Adam Fergusson
Back in 1980 when my late grandfather, Abe Roseman, passed away, I inherited numerous personal items. These included tie bars, cufflinks, his old desk and lamp, and several other reminders of my childhood that to this day always put on a smile on my face.
Thirty years later, rummaging inside my late grandfather’s desk, I found 55 ounces of silver. Somehow, after all those years, I failed to pry open every drawer; what a surprise! How did he know I was a silver bull?
Or, perhaps, he wanted to be prepared for hard times.
Wisdom in Experience
I was pretty close to my grandfather. Abe was born in 1911 and lived through the Great Depression in Montreal. My grandmother would later remind me how bad things were in Canada at the time with unemployment at absurdly high levels from coast-to-coast. My grandparents knew how to be frugal and understood the value of money.
My generation (I’m in my early 40s) doesn’t know what it means to suffer an economic catastrophe; but we came darn close in 2008. I think we’re already in a “soft” economic depression.
By “soft” I mean that without government backstops two years ago, we’d see blood in the streets, civil chaos and, possibly, runaway inflation by now.
In my view, this is a depression.
When 2 Million Marks Won’t Buy a Loaf of Bread
One item I inherited from my grandfather in 1980 was a bunch of old German bank notes, neatly tucked away in a plastic folder. At the ripe age of 14, I had no clue what these bills were worth, let alone what the German inscription meant. So I just buried Grandpa’s stash in my safety deposit box for the next 30 years.
Last month, however, I decided to review the causes and effects of the German Weimar Republic’s hyperinflation in the 1920s. I went to the bank and got Abe’s German notes. To refresh my history I read Adam Fergusson’s When Money Dies, first printed in 1975. I urge every investor to grab a copy ahead of “Quantitative Easing Part II” this summer.
It turns out my grandfather kept a bunch of German marks from periods ranging from 1922 to 1924; the note below is a scan. The amount is Zwei Millionen Mark or 2 Million Marks printed on Aug. 15, 1923 – exactly the same year that mind-boggling inflation started to run out of control in Germany.
Unbelievably, two million marks could barely buy a loaf of bread. Within hours, prices would escalate rendering that loaf to 3 million marks, four million marks etc. German paper had become almost worthless. Hyperinflation wiped out the entire middle class.