-- Posted Thursday, 9 April 2009 | | Source: GoldSeek.com
By R. D. Bradshaw
There are a host of lessons which can be learned from Weimar Germany’s bout with hyperinflation in the early 1920s. Much of this story has been told in a number of writings over the years. The Goldsmiths, Part LIX, addresses that issue extensively. Without wasting time repeating that material, there is one important issue which is crucial to understand. It was briefly commented upon in the Goldsmiths, Part LIX. Here, that idea will be expanded on and related to the present situation developing in the United States.
A Peculiar Problem
USA Gold’s article on hyperinflation in Weimar Germany (“Nightmare German Inflation” at www.usagold.com) broached this problem as follows: “But the main force which gave inflation its momentum was the steady decrease in the true value of money in circulation. This has been observed in all past rapid inflations and it is vital to understand it if inflation is to be coped with. During the war…, the price inflation lagged behind the rate at which money was issued. But now, as people lost confidence, prices began jumping much faster than the government could generate new money.
“Thus the total circulating currency fell drastically when measured in terms of its true value. One economist stated that, ‘In proportion to the need, less money circulates in Germany now than before the war. This statement may cause surprise but it is correct. The circulation is now 15-20 times that of pre-war days, whilst prices have risen 40-50 times.’ In fact, the total currency when calculated in gold value fell from 7428 million marks in January 1920 to a mere 168 million by July 1923.
USA Gold added that the average citizen found it harder and harder to get the money needed to buy necessities. This happened despite the proliferating billions/trillions of marks. Banks, short of money, could not honor checks. Businessmen were short of money to buy materials and meet payrolls. The government faced the same problem. It appeared that there was not too much money around, but rather much too little.
This need for money grew on all sides. It seemed that any halt to the printing presses would bring business to a standstill and throw millions of workers out on the street. The government itself would be unable to carry on. USA Gold notes that on October 25, 1923, the Reichsbank noted that it had that day printed 120,000 trillion marks. Unfortunately, the day's demand had been for one million trillion. So the German government announced that it was expanding production and the daily issue would soon be 500,000 trillion!
USA Gold adds: “Once people lose confidence in a currency, they try to get rid of it. As Lord Keynes pointed out, this makes circulation speed up enormously, and hence prices rise faster than the government can print new money. Marshall, studying this process, concluded that, ‘The total value of an inconvertible paper currency cannot be increased by increasing its quantity; any increase in quantity which seems likely to be repeated will lower the value of each unit more than in proportion to the increase.’”
The Dilemma of a Shortage of Money
What a paradox this whole thing turned out to be. There, in Germany, the printing presses were running full blast 24/7 pouring out currency by the trillions. But instead of too much money to satisfy and serve the people’s needs for money, there was a shortage of money. It’s not that there wasn’t a lot of money in the economy. But the problem facing the people was the huge demand for money. There simply was not enough money to buy the things needed and support the economy with its appetite for more and more money.
The comments above from USA Gold on the shortage of money/cash raise questions about the current effort of the US rulers to try to force deflation on the American public. As mentioned by John Olaques (quoted in the Goldsmiths, Parts XXVII and XXXXVII), we are entering a period where there may be deflation and a shortage of cash wherein people have no money to buy goods and services but (money) to only (service) debts. Thus, it’s now possible that we are already seeing pronounced similarities between the German hyperinflationary period and our own current experience.
In the vein of availability of money to support the needs of the economy, it must be said that there are already signs of a shortage of money. For proof, USA Today on Apr 6, 2009 had a story by Marisol Bello on “Communities print their own currency to keep cash flowing.” It said: “A small but growing number of cash-strapped communities are printing their own money. Borrowing from a Depression-era idea, they are aiming to help consumers make ends meet and support struggling local businesses.”
Back in the Great Depression, when there was a shortage of cash; many state and local governments printed their own money. I remember “mills” distributed by the state of Oklahoma back in the 1930s. Now businesses are getting in on the act as noted by USA Today. A consortium of businesses can join together and print and use their own money. It seems clear enough that there is already a developing shortage of cash in America as if the nation was experiencing deflation instead of inflation.
While the US is not yet to the hyperinflation stage, it is factual and true that inflation has continued to plague the US economy in 2009 despite the efforts of the plutocratic financial market manipulators to try to force deflation on the American people (through their controlled collapse in the housing and commodity markets in 2007-2009).
The reason why inflation continues (although its rate of increase is down in 2009 from earlier levels) is because much of the costs to run the US economy is linked to wages (and there are too many wage increases built into the US economy by union/employee contracts and step increases).
The Postal Example
Let me give you a perfect illustration of the problem with an examination of the US postage rates and how the US postal service operates. Like so many other businesses, labor is the key cost in the postal service. And like so many other US services, the cost of labor continues to go up each year. The problem is that the postal service employees are granted step increases annually. This means higher labor costs annually.
There is another issue which many people do not understand. Over the years, the postal employees and their union have bargained for and installed very high salaries among postal employees. When I was a young person, postal clerk pay was quite low—after all, the training and work requirements were not very great as compared with many other occupations in America. But this changed over the years. Today, many of these clerks in a local post office are making $35,000 to $40,000 per year plus benefits. This is not only good, but it is a very high salary for the level of work involved.
Too, the US postal service has gone the way of many large corporations. They have instituted a huge bonus pay plan whereby they dole out hundreds of $millions or $billions annually. When this is commingled with the high salaries, post office labor costs are great and they place a huge demand for more and more income for the post office.
So, how does the post office respond to this need for more and more money? Why, they raise the postage rates annually. They go up every year. And for 2009, a five percent raise is on tap in May 2009.
In another illustration, take the cost of intangibles—like utility rates, insurance costs and even the matter of having an automobile worked on in a local garage. Almost none of these service providers have been reducing his charges. Instead, they keep going up.
What is Hurting
The plutocratic push for deflation has meant little or nothing overall in the US economy. Inflation rates keep going up; though admittedly, they are rising at a lower pace than they were in 2007 and early 2008. What has happened is that the plutocrats are punishing producers of goods—like farmers, miners (yes, even gold and silver miners), oil drillers, etc. Here below is a story about agriculture which should tell us something. It is from The Capitol Times of Madison, Wisconsin which quoted John Kinsman, a Madison dairy farmer and president of the Family Farm Defenders.
Kinsman said: “As our government enacts a stimulus package and President Barack Obama announces bold initiatives to stem home mortgage foreclosures, disaster threatens family farmers and their communities.
“The government's response to plummeting commodity prices and tightening credit markets leads to the basic question: Who will produce our food? This is a worldwide crisis. U.S. policy and the demand for deregulation at all levels -- from food production to financial markets -- contribute greatly to the global collapse. The solution must be grounded in food sovereignty so that all farmers and their communities can regain control over their food supply. This response makes sense here in Wisconsin and was the global message from the 500+ farmer leaders at the Via Campesina conference in Mozambique in October.
“Many U.S. farmers are going out of business because they receive prices equal to about one half their cost to produce our food. How long could any enterprise receiving half the amount of its input costs stay in business? As an example, dairy farmers in the Northeast and Midwest must be paid between 30 and 35 cents per pound for their milk to pay production costs and provide basic living expenses. Until 1980, farmers received a price equal to 80 percent of parity, meaning that farmers' purchasing power kept up with the rest of the economy. Unfortunately, a 1981 political decision discontinued parity, and today the dairy farmers' share is below 40 percent.
“ ‘Free trade’ and other regressive agricultural policies have decimated farms. We are now a food deficit nation dependent on food imports, often of questionable quality.
“Our food system is nearly broke, which is almost as serious as our country's financial meltdown. With fair farm policies, farmers would get fair prices that would not require higher consumer prices. The Canadian dairy pricing system is the best example that proves fair farmer prices can and often do bring lower consumer prices and a healthier rural economy. In addition, excessive middleman profits are taking advantage of both consumers and producers.
“As more farmers face bankruptcy, we all face a food emergency. European farmers speak from thousands of years of experience on the importance of family farms when they warn us, ‘Any time a country neglects its family farm base and allows it to become financially bankrupt, the entire economy of that country will soon collapse. It may take generations to rebuild the farm economy and that of the country.’
“Despite the magnitude of this food emergency, the ‘farm crisis’ does not appear in headlines, so politicians are not compelled to provide political or financial assistance to something that would likely fail to bring votes. As farmers, we are now only about 1 percent of the U.S. population, and have little power to expose and prevent our demise. However, our urban and rural friends could be vital voices and advocates.
“Bailing out the financial giants will not solve the financial crisis in the country, but the right policies and stimulus dollars could prevent a severe food crisis by saving farmers and workers. Furthermore, farm income dollars remain in and multiply at least two to four times in the local economy.
“Family farmers have proposed fair food and farm policies that can be implemented at a fraction of the present multibillion-dollar policies destroying us. As the Treasury Department develops plans to distribute the bailout funds, the National Family Farm Coalition and others urge it to require banks receiving funds to treat their borrowers fairly by providing debt restructuring as an alternate to home or farm foreclosure or bankruptcy.”
The Point Being Is
Inflation is still running strong in the US. The plutocratic manipulators have curtailed it in the areas where commodities are produced. But otherwise, they have done nothing. And indeed, there is nothing they can do. At some point in time, hyperinflation will be upon us—obviously along with an imposed depression which will absolutely strangle the American people. Yes, we are already into the depression stage with growing inflation.
As noted in the Goldsmiths, Parts LIX-LVI, there was actually a shortage of money in the hyperinflation stage in Germany as available money was used by the public to pay essentials and to service debts. Thus, there was a shortage of money. The banks were strangling the people. Here in America, the taxpayers are giving the banks money which they won’t loan out all the while the banks work full time to force the public to pay off existing loans—and also all the while the economy is in a depression and facing hyperinflation.
The depression stage aggravates things for many people by forcing them to use credit cards to live on. If the banks don’t get their moony, they then charge the people usury interest rates of 10 to 20% per annum. Like John Olaques wrote (see the Goldsmiths, Parts XXVII and XXXXVII), what little money we have (which will never be enough with inflation blowing wild) will have to go for essentials and to service our debt load at the banks with their obsession for usury charges. The result will be a shortage of cash in the nation.
The Bottom Line
I started writing about the incompetent Bush back in 2003. As I noted back then, I believed that he would make a mess out of things and be blamed instead of the ruling plutocrats. Of course, this happened. He did make a mess out of things and the public has come to blame him for much of the present crisis. But, as I noted earlier in the Goldsmiths, Obama too will not be able to correct things. So he too will be blamed. And this brings up another question for our time.
What if it is eventually found that Obama serves illegally (if the legal questions that people tried to raise about him ever receive a hearing in a US court) all the while he is blamed for the economic trouble coming on us? If Obama should have problems or be forced out, we can bank on it that we will have major economic and social problems. The lack of confidence is already building up as I discuss in the Goldsmiths, Part LVII. If this trouble materializes, we can be sure that we will have anarchy and rebellion in the streets from the Obama supporters.
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Besides the revelations contained in the Goldsmiths’ articles, the work of the plutocratic financial market manipulators to conspiratorially manipulate and control the financial markets (to make more profits and install a world government under their management) is also addressed at length in the periodic analysis of the news and in other articles produced at www.analysis-news.com. This website has an article of interest to any person interested in understanding the market Manipulators. It is the Hidden Secret of the Manipulators, why they succeed and how to follow their manipulations.
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-- Posted Thursday, 9 April 2009 | Digg This Article
| Source: GoldSeek.com
