madfranks
18th December 2012, 06:48 AM
Just got this in my inbox; it's worth reading:
The Worst Inflation in My Lifetime (http://www.moneyandmarkets.com/the-worst-inflation-in-my-lifetime-51073)
by Martin D. Weiss, Ph.D.
Shortly after we took this family photo in 1951, Dad decided to buy a second home in Brazil, where we experienced the worst inflation of the 20th Century.
And as I’ll show you in a moment, the forces that created Brazil’s inflation were actually less powerful than those that are incubating globally in the 21st century.
In Brazil, we lived near a small town on the central highlands.
A few miles to the north, a distant tributary of the Amazon tumbled into a pristine waterfall from multiple directions, like a miniature Niagara.
And beyond was a mostly uninhabited plateau, which would later be transformed into the new capital, Brasília.
Two other American families also discovered this remote paradise: Janet Gaynor (“A Star Is Born,” 1937) lived nearby.
So did Mary Martin (“Peter Pan,” 1954), along with her son, Larry Hagman of “Dallas,” who just passed away last month.
But Broadway and Hollywood glitter meant nothing to me. I was too busy with my favorite activities — playing with animals of the forest and collecting Brazilian money.
Actually, the former activity wasn’t nearly as dangerous as you might think.
Collecting Brazilian money, however, was another matter entirely.
As always, Dad used the opportunity to teach me a lesson about money. He gave me a Brazilian cruzeiro note and said “You can save it if you want,” he said. “But years from now, you’ll need at least one thousand of these to buy anything.”
His reasoning: The Brazilian government was printing cruzeiros by the truckload. And later, to finance the construction of Brasilia, they would print even more, driving inflation into triple digits.
Sure enough, by 1967 the cumulative effect of rampant inflation was so extreme, the government had to do away with the near-worthless cruzeiro and replace it with the cruzeiro novo, worth 1,000 of the old.
But that was just the beginning. Brazil was forced to announce a second 1000-to-1 currency conversion in 1986 (to the cruzado) … a third in 1989 (cruzado novo) … and still another in 1993 (cruzeiro real).
The climactic finish of this currency conversion madness came in 1994, when a series of new laws created the real, each worth 2,750 of the prior currency.
To buy just ONE real when it was first issued, I would have had to save up 2,750,000,000,000,000 (2,750 trillion) of my original cruzeiros.
Laid side by side, those 1-cruzeiro bills would extend for 429 billion kilometers — the equivalent of 36 trips from Earth to Pluto — and back!
Unless You Experience it First Hand,
It’s Hard to Imagine the Social
Destruction that Inflation Can Bring.
When I was 13, we moved south — to the interior of the industrial state of São Paulo.
There, the standard of living was supposed to be better, but inflation was pervading every aspect of life. Due to inflation, children had to quit school to help support their families.
One 14-year-old student told me:
“I found a job working for the government as a street sweeper, but the government always paid us three months late. The problem was, in the three months we had to wait, my money could only buy half as much as it would have when I earned it!”
A college graduate in his prime of life said:
“I was lucky to get a job working nights in a supermarket. I joined a team of clerks who raced around the store from closing time to opening time the next morning raising the prices on every single item in the store. We did this every night. Even on weekends. Sometimes, prices were going up so fast, the store had to close in the middle of the day to do the same for many items.
Some of the consequences were tragic, even fatal.
Imagine you’re in biology class on a sunny afternoon. The teacher has opened the windows so a warm breeze flows through the classroom.
Suddenly a thunderous noise shakes the entire school. The largest building in town — still under construction — has suddenly collapsed.
A teacher, who lives next door to the construction site, bolts from the school only to find his home crushed under the rubble, his family still inside.
Again, inflation was the underlying cause: Cement prices were soaring. So to save money, contractors tried making their cement go farther by mixing in more sand. And to help cover surging costs, they also decided to add several stories beyond the original plan.
The city was one of the most prosperous industrial centers in the region. But no matter what the government did, inflation continued to spiral of control.
One day, the president announced an appeal to patriotism — “gold for Brazil.” All loyal citizens were asked to collect any gold they had in their home and donate it to the government.
Remarkably, many people obeyed. One woman even pulled the wedding ring off her finger, drove to town square and dropped it off in a big bucket as local officials shook her hand.
Then it was revealed that a lot of the gold wound up in the pockets of politicians. So the whole campaign backfired and inflation continued to accelerate.
Later, when inflation surpassed an annual rate of 2,000 percent, the government got so desperate it didn’t bother making public appeals. It summarily announced that everyone’s bank accounts were frozen and everyone’s savings were confiscated.
One computer programmer put it this way:
“Sure, the government eventually gave us all our money back. But they replaced the old currency with a new currency. So millions of citizens like me never really got our own money back. We got another kind of money that was worth far less.”
Unbelievable? Well, I can assure you every one of these stories is true — because I experienced them personally.
The young boy who went to work as a street sweeper was a neighbor.
The college grad who got a job changing prices in the supermarket was my friend.
The biology class was my class, and teacher who bolted from the school to rescue his family under the collapsed rubble was my teacher.
The woman who pulled her gold wedding band off her finger to donate to the government was my best friend’s mother.
The computer programmer whose savings were confiscated used to write programs for my company here in Florida.
All These Experiences Were Valuable Lessons. But
Nothing Has Prepared Us for What We’re Seeing Now.
Remember: In the second half of the 20th Century, rampant money printing was almost never a plague that reached the dominant world power; it was typically limited to developing countries.
So, yes, we saw Brazil, Argentina and others run giant budget deficits and finance them with paper money.
But we never saw world’s DOMINANT economic power running the printing presses 24/7 like they are today.
That’s why, I recently showed you this chart, illustrating the sheer enormity of the problem — especially in the United States …
The rest at link... (http://www.moneyandmarkets.com/the-worst-inflation-in-my-lifetime-51073)
The Worst Inflation in My Lifetime (http://www.moneyandmarkets.com/the-worst-inflation-in-my-lifetime-51073)
by Martin D. Weiss, Ph.D.
Shortly after we took this family photo in 1951, Dad decided to buy a second home in Brazil, where we experienced the worst inflation of the 20th Century.
And as I’ll show you in a moment, the forces that created Brazil’s inflation were actually less powerful than those that are incubating globally in the 21st century.
In Brazil, we lived near a small town on the central highlands.
A few miles to the north, a distant tributary of the Amazon tumbled into a pristine waterfall from multiple directions, like a miniature Niagara.
And beyond was a mostly uninhabited plateau, which would later be transformed into the new capital, Brasília.
Two other American families also discovered this remote paradise: Janet Gaynor (“A Star Is Born,” 1937) lived nearby.
So did Mary Martin (“Peter Pan,” 1954), along with her son, Larry Hagman of “Dallas,” who just passed away last month.
But Broadway and Hollywood glitter meant nothing to me. I was too busy with my favorite activities — playing with animals of the forest and collecting Brazilian money.
Actually, the former activity wasn’t nearly as dangerous as you might think.
Collecting Brazilian money, however, was another matter entirely.
As always, Dad used the opportunity to teach me a lesson about money. He gave me a Brazilian cruzeiro note and said “You can save it if you want,” he said. “But years from now, you’ll need at least one thousand of these to buy anything.”
His reasoning: The Brazilian government was printing cruzeiros by the truckload. And later, to finance the construction of Brasilia, they would print even more, driving inflation into triple digits.
Sure enough, by 1967 the cumulative effect of rampant inflation was so extreme, the government had to do away with the near-worthless cruzeiro and replace it with the cruzeiro novo, worth 1,000 of the old.
But that was just the beginning. Brazil was forced to announce a second 1000-to-1 currency conversion in 1986 (to the cruzado) … a third in 1989 (cruzado novo) … and still another in 1993 (cruzeiro real).
The climactic finish of this currency conversion madness came in 1994, when a series of new laws created the real, each worth 2,750 of the prior currency.
To buy just ONE real when it was first issued, I would have had to save up 2,750,000,000,000,000 (2,750 trillion) of my original cruzeiros.
Laid side by side, those 1-cruzeiro bills would extend for 429 billion kilometers — the equivalent of 36 trips from Earth to Pluto — and back!
Unless You Experience it First Hand,
It’s Hard to Imagine the Social
Destruction that Inflation Can Bring.
When I was 13, we moved south — to the interior of the industrial state of São Paulo.
There, the standard of living was supposed to be better, but inflation was pervading every aspect of life. Due to inflation, children had to quit school to help support their families.
One 14-year-old student told me:
“I found a job working for the government as a street sweeper, but the government always paid us three months late. The problem was, in the three months we had to wait, my money could only buy half as much as it would have when I earned it!”
A college graduate in his prime of life said:
“I was lucky to get a job working nights in a supermarket. I joined a team of clerks who raced around the store from closing time to opening time the next morning raising the prices on every single item in the store. We did this every night. Even on weekends. Sometimes, prices were going up so fast, the store had to close in the middle of the day to do the same for many items.
Some of the consequences were tragic, even fatal.
Imagine you’re in biology class on a sunny afternoon. The teacher has opened the windows so a warm breeze flows through the classroom.
Suddenly a thunderous noise shakes the entire school. The largest building in town — still under construction — has suddenly collapsed.
A teacher, who lives next door to the construction site, bolts from the school only to find his home crushed under the rubble, his family still inside.
Again, inflation was the underlying cause: Cement prices were soaring. So to save money, contractors tried making their cement go farther by mixing in more sand. And to help cover surging costs, they also decided to add several stories beyond the original plan.
The city was one of the most prosperous industrial centers in the region. But no matter what the government did, inflation continued to spiral of control.
One day, the president announced an appeal to patriotism — “gold for Brazil.” All loyal citizens were asked to collect any gold they had in their home and donate it to the government.
Remarkably, many people obeyed. One woman even pulled the wedding ring off her finger, drove to town square and dropped it off in a big bucket as local officials shook her hand.
Then it was revealed that a lot of the gold wound up in the pockets of politicians. So the whole campaign backfired and inflation continued to accelerate.
Later, when inflation surpassed an annual rate of 2,000 percent, the government got so desperate it didn’t bother making public appeals. It summarily announced that everyone’s bank accounts were frozen and everyone’s savings were confiscated.
One computer programmer put it this way:
“Sure, the government eventually gave us all our money back. But they replaced the old currency with a new currency. So millions of citizens like me never really got our own money back. We got another kind of money that was worth far less.”
Unbelievable? Well, I can assure you every one of these stories is true — because I experienced them personally.
The young boy who went to work as a street sweeper was a neighbor.
The college grad who got a job changing prices in the supermarket was my friend.
The biology class was my class, and teacher who bolted from the school to rescue his family under the collapsed rubble was my teacher.
The woman who pulled her gold wedding band off her finger to donate to the government was my best friend’s mother.
The computer programmer whose savings were confiscated used to write programs for my company here in Florida.
All These Experiences Were Valuable Lessons. But
Nothing Has Prepared Us for What We’re Seeing Now.
Remember: In the second half of the 20th Century, rampant money printing was almost never a plague that reached the dominant world power; it was typically limited to developing countries.
So, yes, we saw Brazil, Argentina and others run giant budget deficits and finance them with paper money.
But we never saw world’s DOMINANT economic power running the printing presses 24/7 like they are today.
That’s why, I recently showed you this chart, illustrating the sheer enormity of the problem — especially in the United States …
The rest at link... (http://www.moneyandmarkets.com/the-worst-inflation-in-my-lifetime-51073)