Bankruptcies of governments
have, on the whole, done less harm to mankind than their ability to raise loans.
Tawney, Religion and the Rise of
By a continuing process of
inflation, government can confiscate, secretly and unobserved, an important
part of the wealth of their citizens.
Maynard Keynes, Economic Consequences of
Unemployed men took one or two
rucksacks and went from peasant to peasant. They even took the train to
favorable locations to get foodstuffs illegally which they sold afterwards in
the town at three or fourfold the prices they had paid themselves. First the
peasants were happy about the great amount of paper money which rained into
their houses for their eggs and butter. . . . However, when they came to town
with their full briefcases to buy goods, they discovered to their chagrin that,
whereas they had only asked for a fivefold price for their produce, the prices
for scythe, hammer and cauldron, which they wanted to buy, had risen by a
factor of 50.
Zweig, The World of Yesterday, 1941
have had a lot of questions about my thoughts on inflation and hyperinflation
of late, especially in the new “Ask Mauldin” section on www.johnmauldin.com. Unfortunately, the
answer is not short and simple. The good news is that my new book has an entire
chapter on inflation and hyperinflation, and today, as I fly to La Jolla (more
below), I give you that chapter as this week’s letter. The letter will print a
little long, as there are a lot of charts. Hopefully it will encourage you to
want to read the rest of the book!
note, my co-author (Jonathon Tepper) and I have different views on the subject,
for different countries. In some, we consider high (or worse) inflation a
serious prospect. In others the opposite is true. There is no one size fits
all. And of course our best estimates today are based solely on the facts as we
know them – if the facts change, so will our opinions. When we wrote this
chapter late last year, it was not obvious that the Fed would purchase 100% of
the US debt. We currently assume that will stop. If it does not, then the
lessons of this chapter are more important than we would like them to be.
Inflation and hyperinflation are choices made by humans. That means there is an
element of uncertainty, when logic would dictate there should not be. And also,
we start off the chapter a little tongue in cheek (we are NOT really
recommending inflation as an answer to debt!).
Endgame got up to #2 on Amazon yesterday
(#1 non-fiction). Thanks to all you faithful readers who bought the book,
whether there or at your local bookstores. Maybe this weekend, those of you who
procrastinated will help us get to #1! And if you are going to buy some extra
books for clients, family, or friends go ahead and do it now! No more
procrastination! Go to www.Amazon.com/endgame
and get clicking!
just bought the book myself (really!) on Kindle. I need it on my IPad for
reference. It works great! And we are #1 on Kindle! OK, I will only be this
aggressive for another month or so, then it’s back into regular e-letter mode,
but cut me some slack – books are a big deal for my generation. And I
think this one adds some important insights to the national conversations that
must be had around the world. Now, let’s jump into the chapter on inflation.