Just in time for the New Year we’re being told to brace for dramatic inflation in 2022. It’s said to be the greatest rise in 39 years. Just how bad might it be? Well, take a hamburger that currently costs $2.00. Many burgers cost about that so it’s a good example.
If history repeats itself, come this July that burger will rise to $3. By October, $6. In November it will be $12 and in December that same burger runs $25. Just wait. Next January, it’s $50. In March it’s $100 then $300 come July. Sound crazy? Wait for it. By early August that burger costs $1,000 then soars to $20,000 by the end of the month. September sees the price soar to $250,000 and then, in October, skyrockets to (I’m not making this up) $10 million. Finally, after passing a billion dollars in November that lowly Whopper or Big Mac is priced at 100 billion dollars....
The only bright spot is salaries would follow. Those who have been earning $15 an hour will see wages jump to $100, then $1,000 and soon upwards of a million dollars per hour, or far more.
You think all that must be inconceivable. A fanciful tale of absurdity. Well, it’s a horror story that actually happened exactly a century ago.
It was Germany’s hyper-inflation of 1922 caused by its loss of World War I a few years earlier. In 1922, the worth of German currency fell from 162 marks per US dollar to 7,000 marks. It got worse. Barely a year later, it was 4,200,000,000,000 (4.2 trillion) to the dollar. The reasons were unbridled debt combined with unreasonable reparations imposed by countries who won the war.
Devastating as this was for Germans, years later, it proved a boon for collectors and history buffs seeking tangible artifacts of an incredible era. While prices and wages rose literally hour-by-hour, government printing presses ran overtime producing countless higher-denomination marks. Deutsche Post also overprinted millions of postage stamps with stratospheric numbers.
Those traveling to Germany in the 1920s were frequently offered stacks of the bills in exchange for services. Surviving examples of that inflation-era currency are regularly found in scrap drawers or old suitcases. To that end, many will remember the story of the person who brought a basket filled with inflationary paper marks to a store to buy something. They turned around for just for a moment. When they turned back, the basket had been stolen and the marks were dumped on the floor.
Postal patrons in other countries were stunned to receive mail from Germany. On the envelopes were German stamps with an original face-value of two marks. Those stamps were overprinted with denominations of “200 Millionen” (200 Million marks) or “200 Milliarden” (200 Billion). That rampant inflation was the precursor to and a pretext for World War II.
Because many of those stamps and currency still exist, collections are filled with the ultra-high denomination items. Of course, that all happened a century ago. Financial models have improved. The chances of that repeating itself is impossible, right? Not so fast.
A few years ago, the African country of Zimbabwe saw equally rampant inflation. The result was banknotes in denominations as high as one hundred trillion dollars. For the record that is a “1” followed by 14 zeros. People particularly enjoy collecting those notes as curiosities.
There’s no question the US is entering a new period of inflation. Dollar Tree stores used to sell everything for no more than a dollar. That’s now $1.25 – an overnight increase of 25 percent. If you think that’s extreme just look south to Venezuela.
While the US is looking at five to six percent inflation rate this year, the Venezuelan “bolivar” is experiencing an increase of almost 10,000 percent. That’s actually an improvement over its recent rise of 14,200 percent. Venezuela will soon be redenominating its monetary base. People will exchange 1,000 bolivars for just one. Currently, it takes 250,000 bolivars to equal one US dollar.
While we all hope for little or no inflation, it will climb as long as wages do. And collectors will snap up the peculiar hyper-inflation bank notes and stamps as they are issued. It could make for an interesting 2022 for collectors and the rest of us.
For more collecting advice, visit www.peterexford.blogspot.com