I'm currently reading "Dying of Money: Lessons of the Great German and American Inflations."  It's a very insightful and fact filled book which is part history and part economics lessons.  Readers will learn mucuh about Keynesian economics, which in part caused the downfall of Germany's paper money and the massive hyper-inflation that resulted. hyperinflation1_553

In short, Keynsian economics says the governments should intervene in recessions by printing money and lowering interest rates, in order to stimulate the economy.  Sound familiar? Bernanke and Obama are strict Keynsian economists. 

In the 1920's, "When the debacle was finally stopped, the old (German) mark, which had once been worth a solid 23 cents, was written off at one trillion old marks to one new one of the same par value. The most spectacular part of that loss was lost in the mark's final dizzy skid; all the marks that existed in the world in the summer of 1922 (190 billion of them) were not worth enough... to buy a single newspaper or a tram ticket."

The US if following EXACTLY the same political and economic patterns as 1920's Germany. The most important lesson for individuals (as opposed to politicians and government bodies) is to see what people did who survived and even profited from the chaos of hyper-inflation.

While money had no value, some things actually grew in value.  While most people lost their entire savings (since money was worthless) and stocks crashed, some people made forturnes. The 2 categories that actually grew in value were: 

  • Commodities  - gold, silver, metals, agriculture, raw materials
  • "Real estate is a classic hedge against inflation. The name is apt. Real estate is a real value. The intrinsic value of real estate is indestructible... If a man owns a piece of land to live on, it is equally good for living on before, during, or after an inflation. Its intrinsic value for living on is not affected by prices, even land prices."

It's a great book. Not an easy read, but worth every minute. It's available to read online here.

Time to start buying up Hawaii real estate?