In contemporary society, those who cherish the pursuit of truth, reminiscent of John Locke’s sentiment to “love truth for truth’s sake,” are increasingly rare. Today’s graduates from America’s higher education system emerge with minds muddied and views shaped by extreme ideologies.
This educational journey, which comes at a significant cost to taxpayers, has often stifled genuine critical thinking, leading many to accept scripted beliefs instead of developing their own analytical abilities.
Individuals who chose vocational training over traditional college education often demonstrate a clearer grasp of objective truth, aided by their common-sense approach. Free from the overwhelming nonsense commonly found in academic settings, they possess the capacity to discern fact from fiction more effectively.
The decline in critical thought mirrors the broader deterioration of Western society. A careful observation reveals that as societal conditions worsen, the distortion of reality becomes increasingly prevalent, adopting bizarre and erroneous forms.
For instance, over the past decade, the evolution of language surrounding gender identity has led to the singular use of pronouns like ‘they’, prioritizing social progression over established biological facts and grammatical integrity.
Furthermore, a recent development with Google’s AI image generator illustrated the issue vividly, producing images of racially diverse Nazi soldiers, where the principles of diversity overshadowed historical accuracy, showcasing how AI can replicate human biases.
However, the most significant societal debasement originates from the dilution of currency itself. Inflation—both in consumer and asset prices—emanates from an increase in the money supply.
To clarify this concept, let’s explore a historical instance of extreme currency debasement.
Extreme Currency Debasement
Rudolf von Havenstein, who presided over the Reichsbank, Germany’s central bank, since 1908, understood central banking mechanisms inside out. He was, without a doubt, a quintessential central banker.
When tasked with reviving the German economy in the aftermath of World War I, he opted for monetary stimulus, although he had already been on that path for several years prior.
On August 4, 1914, at the war’s outset, the Goldmark—Germany’s gold-backed currency—transitioned to the unbacked Papermark. Abandoning gold allowed for the expansion of the money supply to accommodate the relentless demands of war.
Consequently, von Havenstein escalated public debt from 5.2 billion marks in 1914 to a staggering 105.3 billion marks by 1918, boosting the quantity of marks from 5.9 billion to 32.9 billion. German wholesale prices surged by 115 percent during this period.
By the end of the war, Germany’s economy faced severe contraction, with industrial production in 1920 plummeting to 61 percent of 1913 levels. Faced with a weakened economy weighed down by debt, von Havenstein had little choice but to ramp up money printing.
Turning back now would not only cause an immediate economic collapse but also lead to societal chaos, given the prior abandonment of the Goldmark.
When Trust Is Lost
Confronted with the prospects of post-war depression or rampant inflation, von Havenstein opted for what he believed to be the lesser evil. He viewed inflation as a way to alleviate Germany’s war burden.
Initially, the consequences of the Reichsbank’s money supply expansion seemed manageable. Even as inflation-adjusted wages dropped, unemployment surprisingly fell to record lows, creating a false sense of stability amidst what was fundamentally a significant economic downturn.
However, as the Papermark’s value dwindled, wage earners began to suffer increasingly. In response, the German government instituted mandatory wage indexing to mitigate the impact on workers, leading to predictably counterproductive effects. Unemployment soared in a matter of years, reversing from historic lows to unprecedented highs.
Simultaneously, the Papermark’s purchasing power and external value fell rapidly, to the point where it ceased to function effectively as a medium of exchange.
Although printing money can induce strain, extreme levels of currency issuance can lead to catastrophic outcomes.
When von Havenstein passed away in late November 1923, he had overseen the production of over 500 quintillion marks. What started as moderate inflation escalated into hyperinflation, with one U.S. dollar equating to 4.2 trillion marks by December 1923.
The collapse of the mark also brought about societal upheaval and paved the way for national socialism. When a nation loses faith in its currency, chaos ensues, and people become susceptible to any ideology.
The global political ramifications of this economic disaster were felt far and wide.
The Second Wave of the 2020s Great Inflation
The ramifications of the money printing and currency debasement unleashed between 2020 and 2022 to address the coronavirus crisis are far from over. A significant economic downturn may be necessary to restore financial stability.
In fact, we are just on the brink of the second wave of the 2020s great inflation.
As evidenced by recent spikes, Bitcoin, gold, and the S&P 500 have all reached new all-time highs, while silver, often overlooked, has also garnered renewed interest.
These climbing asset prices indicate a declining dollar value, as it increasingly requires more dollars to purchase gold, Bitcoin, and stocks.
Interestingly, the dollar index remains stable, hovering above 100. Why is that?
The common analogy comparing the dollar to the “cleanest shirt in the dirty laundry basket” may suggest that other currencies—such as the euro, Japanese yen, and pound sterling—are in even worse shape. Some attribute the dollar’s stability to the lingering influence of the petrodollar.
While these theories may hold some weight, there is a deeper reality at play: the U.S. dollar is a mirage, living off its former glory.
If this insight proves accurate—and evidence suggests it does—the dollar faces an increasing threat of abrupt and significant devaluation. But devaluation against what?
Since both the U.S. dollar and its global competitors are digital/paper fiat currencies, in times of inflation, all nations devalue their currencies concurrently.
Thus, any devaluation of the dollar may not become apparent in the dollar index, but it is unmistakably occurring in real time against alternative monetary assets and financial instruments.
As this trend continues, be prepared for the possibility of $10 cups of coffee and $25 Big Macs by the end of the decade. Such scenarios are not far-fetched.
Have You Bought The BRRR?
Remember, inflation originates from the expansion of the money supply. Its effects manifest in unpredictable ways. Years ago, exacerbated by the pandemic, inflation impacted consumer prices and the housing market.
Prior to that, it was evident in speculative tech stocks. Following a brief pause in 2022, speculative technology stocks have once again caught the attention of investors, while Bitcoin and gold are increasingly viewed as safe havens.
Certainly, the great inflation of the 2020s is anticipated to continue unfolding predictably, becoming clearer in retrospect.
A few years ago, as the Federal Reserve injected an astonishing $5 trillion into its balance sheet, a humorous website named Money Printer Go BRRR humorously depicted a central banker frantically operating a money press.
In the last two years, the Fed has trimmed its balance sheet by approximately $1.5 trillion. Even so, it still remains $3.5 trillion higher than pre-pandemic levels. Additionally, the federal funds rate has climbed from near zero to 5.5 percent.
These measures were enacted to combat inflation, yet the U.S. government’s fiscal policies continue to be radically inflationary.
In particular, the U.S. national debt is escalating at a pace of $1 trillion every 100 days. Investment strategist Michael Hartnett from Bank of America anticipates this trend will persist, exemplifying extreme inflation.
In a perfect twist of life imitating art, a new bitcoin ETF debuted on January 10th with the ticker BRRR, designed to hold bitcoin and already boasting a more than 54 percent increase in less than two months.
Are you tempted yet?
Come on! With a name like BRRR, how can you resist?
Joking aside, the stark message here echoes the fate of the German Papermark in the early 1920s: your money is in jeopardy.
So why not consider buying some BRRR and enjoy the journey toward potential financial instability?
[Editor’s note: It is truly remarkable how a few unconventional choices can lead to life-altering wealth. At this very moment, I’m preparing to make another unconventional decision. >> And I’d love to guide you on how you can too.]
Sincerely,
MN Gordon
for Economic Prism
