Friday, September 27, 2013

Two Inflation Classics

An absolute classic on what happens to a society when sever inflation hits is "When Money Dies". Rudolf Havenstein played the role of Ben Bernanke, but the book probes the human element to hyperinflation. The trauma of losing the Great War hit to the newly formed nation's core and culminated in the hyperinflation whirlwind. Behind all of the trillion and quadrillion looking numbers, there were families, singles, widows and disillusioned Germans and Austrians suffering and searching for any relief and stability. Something Stefan Zweig mentioned in his memoir was that the high inflation period allowed people to live rent free for a few years, but getting food, goods and services was the problem. Good thing diabetes was not a problem then in Austria. As the introduction reads, the madness that was the hyperinflationary period in Germany already involved Hitler.

A little known paper on handling hyperinflation is "The Hyperinflation Survival Guide". The hyperinflations of South America are the main focus. A perverse feature of the hyperinflation periods was that businesses playing with their money in foreign exchange or speculative investments were wiser than those who put their money back into their productive businesses. At the core of all hyperinflations is the idea that you might as well rip up any contracts you have because the rules are gone. In the end, only a responsible central authority can shut down rampant inflation. This is geared more towards business managers, purchasing departments and even accounts receivable/payable employees. It is still a good read despite being over 20 years old. Having read it years ago, it is where I first read that even inflation in the teens would cause what feels like hyperinflation elsewhere. Our financial position has only weakened since this essay's publication.

Both of these are long reads, but good ones for an understanding of odd economic situations with the human element thrown in to remind economics readers that people are at the core of the numbers game.

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