The Weimar Collapseon August 29, 2011 at 19:01
Hyperinflation is the situation whereby inflation becomes out of control as it is very high. At this time, prices might be the same within foreign currencies; however they will escalate within the specific economy that is experiencing hyperinflation. This will occur rather rapidly and that currency will lose its value rather fast at an alarmingly fast rate.
It should be noted that this accumulates over a period of about 36 months and can compound at around 26 percent per year. In normal inflationary terms, inflation is reported monthly, however hyperinflation occurs daily and at a rate of 5-10 percent each day. As more currency is printed, the more hyperinflation accelerates and a vicious cycle is created which is hard to break.
Hyperinflation will become obvious once there is an uncontrolled supply of money taking place like so called Quantitative Easing (QE) in the United States and elsewhere. This was very evident in Zimbabwe when the currency there became worthless. Although some will wake up very late in the game, members of the public will do what they can to get rid of the money before it loses any more of its value. The consequences of hyperinflation are dire in that social upheaval, war and currency meltdown are usually the rewards of this type of economic crisis.
Just after World War One, the Weimar Republic was formed. This was a parliamentary republic in Germany. This government replaced the imperial government with a constitutional government which was the order of the day prior to World War One. Due to the social upheaval and political confusion that followed the war, the republic came about in 1919.
When this scenario occurred, there was breakdown on every level in the country. At the time, Communists and Imperialists were at each other’s throats both opposing whatever objectives the government was attempting to achieve. Sadly, this spilled over into violence in the streets, political parties were formed and they often went to war against each other. It got so bad that Bavaria was taken over by Anarchists and Communists and was declared independent and renamed the Bavarian Soviet Republic.
At the time, a 50 million mark bank note was printed and it was worth only $1. After a few short weeks the note held no value whatsoever. Furthermore, Germany was ordered to pay money to the Allies for losses incurred during the war. In today’s terms it would have been worth $400 billion. Germany had now entered the world of debt to other countries. Cost of living soared to more than twenty times than before the outbreak of war. Burning the money for fire was cheaper than buying firewood. In 1921, 60 marks was worth $1. By 1922, this exchange rate was 8000 marks to $1.
With the economies in America and elsewhere heading the same way, it is very possible that the same thing can happen. This is why many people are turning to precious metals such as silver and gold as a hedge for the U.S. Dollar and other fiat currencies. Many investors believe that silver will become alongside gold one of the currencies of the day as the dollar continues to devalue. Silver is money after all and will be used as money again. It is mainly due to the amount of debt that America has incurred and Quantitative Easing (QE) that currency has devalued so much.