One day everything was fine. The next day hell was unleashed.

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One day everything was fine. The next day hell was unleashed.

Foreword: The many parallels between 1924 Germany and present-day United States are cause for concern. Though the U.S. has not yet reached the depths to which Germany descended in that era, few can look at the constant depreciation of the dollar since the early 1970"s and fail to be alarmed. It seems contemporary America differs from 1924 Germany only in the duration between cause and effect. While the German experience was compressed over a few short years, the effects of the American inflation have been more drawn out.

In my view, this has occurred for two good reasons:

First, American central bankers have learned enough from the German experience to delay and extend the consequences of printing too much fiat money.

Second, Germany was a small state isolated from the rest of the world, a pariah nation of sorts following World War I. As a result, it had a difficult time finding a market for its government bonds. German deficits had to be financed internally -- a difficulty which greatly accelerated the printing of fiat currency.

Up until recently, the United States enjoyed a strong world-wide demand for its government paper. Thus, the negative affects of government deficits have been subdued. Now, with consistently low interest rates, and a growing fear globally that U.S. deficits may have run out of control, foreign support for the U.S. bond market has faltered. In the absence of international buyers, the Fed could be forced to monetize an ever larger portions of the debt -- the modern equivalent of printing money.

Whether or not the situation will slip out of control is a matter for debate. The trend, however, is alarming. The largest annual contribution to the outstanding public debt during the Nixon years was $30.9 billion; Ford - $87.2 billion; Carter - $81.2 billion; Reagan - $302 billion; Bush(Sr.) - $432 billion; Clinton - $347 billion; GW Bush - $1,017 billion; Obama - $1,885 billion.

As this report points out, the correlation between deficits and inflation is sacrosanct -- deficits lead to inflation and uncontrolled deficits lead to uncontrolled inflation. Whether or not there will be a Nightmare American Inflation remains to be seen. Let it be said though that the trend is not favorable.

The survivors of the German debacle did so by purchasing gold early in the process. As a citizen and an investor, the best you can do is prepare, and then hope that it doesn't happen here. This report of Germany's hyperinflation, originally published in 1970 by Scientific Market Analysis, could play an important part in your preparation process. There is little doubt it will affect your thinking.

- Michael J. Kosares


But don't worry...we can avoid another fabricated war...on the private side!
Max