Art Cashin On The Coming Hyperinflation

Tyler Durden's picture

We present today's thoughts by Art Cashin on the coming hyperinflation (and no, it does not mean very high inflation - it means a complete and total collapse in the monetary system - which is what Ben Bernanke is attempting to achieve), without commentary.


(Today we will revisit one of the most devastating economic events in recorded history.It all began with the efforts of a few, well-intentioned government officials.)

Originally, on this day (-2) in 1922, the German Central Bank and the German Treasury took an inevitable step in a process which had begun with their previous effort to "jump start" a stagnant economy. Many months earlier they had decided that what was needed was easier money. Their initial efforts brought little response. So, using the governmental "more is better" theory they simply created more and more money.

But economic stagnation continued and so did the money growth. They kept making money more available. No reaction. Then, suddenly prices began to explode unbelievably (but, perversely, not business activity).

So, on this day government officials decided to bring figures in line with market realities. They devalued the mark. The new value would be 2 billion marks to a dollar. At the start of World War I the exchange rate had been a mere 4.2 marks to the dollar. In simple terms you needed 4.2 marks in order to get one dollar. Now it was 2 billion marks to get one dollar. And thirteen months from this date (late November 1923) you would need 4.2 trillion marks to get one dollar. In ten years the amount of money had increased a trillion fold.

Numbers like billions and trillions tend to numb the mind. They are too large to grasp in any “real” sense. Thirty years ago an older member of the NYSE (there were some then) gave me a graphic and memorable (at least for me) example. “Young man,” he said, “would you like a million dollars?” “I sure would, sir!”, I replied anxiously. “Then just put aside $500 every week for the next 40 years.” I have never forgotten that a million dollars is enough to pay you $500 per week for 40 years (and that’s without benefit of interest). To get a billion dollars you would have to set aside $500,000 dollars per week for 40 years. And a…..trillion that would require $500 million every week for 40 years. Even with these examples, the enormity is difficult to grasp.

Let’s take a different tack. To understand the incomprehensible scope of the German inflation maybe it’s best to start with something basic….like a loaf of bread. (To keep things simple we’ll substitute dollars and cents in place of marks and pfennigs. You’ll get the picture.) In the middle of 1914, just before the war, a one pound loaf of bread cost 13 cents. Two years later it was 19 cents. Two years more and it sold for 22 cents. By 1919 it was 26 cents. Now the fun begins.

In 1920, a loaf of bread soared to $1.20, and then in 1921 it hit $1.35. By the middle of 1922 it was $3.50. At the start of 1923 it rocketed to $700 a loaf. Five months later a loaf went for $1200. By September it was $2 million. A month later it was $670 million (wide spread rioting broke out). The next month it hit $3 billion. By mid month it was $100 billion. Then it all collapsed.

Let’s go back to “marks”. In 1913, the total currency of Germany was a grand total of 6 billion marks. In November of 1923 that loaf of bread we just talked about cost 428 billion marks. A kilo of fresh butter cost 6000 billion marks (as you will note that kilo of butter cost 1000 times more than the entire money supply of the nations just 10 years earlier).

How Could This All Happen? – In 1913 Germany had a solid, prosperous, advanced culture and population. Like much of Europe it was a monarchy (under the Kaiser). Then, following the assassination of the Archduke Franz Ferdinand in Sarajevo in 1914, the world moved toward war. Each side was convinced the other would not dare go to war. So, in a global game of chicken they stumbled into the Great War.

The German General Staff thought the war would be short and sweet and that they could finance the costs with the post war reparations that they, as victors, would exact. The war was long. The flower of their manhood was killed or injured. They lost and, thus, it was they who had to pay reparations rather than receive them.

Things did not go badly instantly. Yes, the deficit soared but much of it was borne by foreign and domestic bond buyers. As had been noted by scholars…..“The foreign and domestic public willingly purchased new debt issues when it believed that the government could run future surpluses to offset contemporaneous deficits.” In layman’s English that means foreign bond buyers said – “Hey this is a great nation and this is probably just a speed bump in the economy.” (Can you imagine such a thing happening again?)

When things began to disintegrate, no one dared to take away the punchbowl. They feared shutting off the monetary heroin would lead to riots, civil war, and, worst of all communism. So, realizing that what they were doing was destructive, they kept doing it out of fear that stopping would be even more destructive.

Currencies, Culture And Chaos – If it is difficult to grasp the enormity of the numbers in this tale of hyper-inflation, it is far more difficult to grasp how it destroyed a culture, a nation and, almost, the world.

People’s savings were suddenly worthless. Pensions were meaningless. If you had a 400 mark monthly pension, you went from comfortable to penniless in a matter of months. People demanded to be paid daily so they would not have their wages devalued by a few days passing. Ultimately, they demanded their pay twice daily just to cover changes in trolley fare. People heated their homes by burning money instead of coal. (It was more plentiful and cheaper to get.)

The middle class was destroyed. It was an age of renters, not of home ownership, so thousands became homeless.

But the cultural collapse may have had other more pernicious effects.

Some sociologists note that it was still an era of arranged marriages. Families scrimped and saved for years to build a dowry so that their daughter might marry well. Suddenly, the dowry was worthless – wiped out. And with it was gone all hope of marriage. Girls who had stayed prim and proper awaiting some future Prince Charming now had no hope at all. Social morality began to collapse. The roar of the roaring twenties began to rumble.

All hope and belief in systems, governmental or otherwise, collapsed. With its culture and its economy disintegrating, Germany saw a guy named Hitler begin a ten year effort to come to power by trading on the chaos and street rioting. And then came World War II.

We think it’s best to close this review with a statement from a man whom many consider (probably incorrectly) the father of modern inflation with his endorsement of deficit spending. Here’s what John Maynard Keynes said on the topic:

By a continuing process of inflation, governments can confiscate, secretly and unobserved, an important part of the wealth of their citizens. By this method they not only confiscate, but they confiscate arbitrarily; and, while the process impoverishes many, it actually enriches some…..Those to whom the system brings windfalls….become profiteers.

To convert the business man into a profiteer is to strike a blow at capitalism, because it destroys the psychological equilibrium which permits the perpetuance of unequal rewards.

Lenin was certainly right. There is no subtler, no surer means of over-turning the existing basis of society than to debauch the currency. The process engages all the hidden forces of economic law on the side of destruction, and does it in a manner which not one man in a million is able to diagnose….By combining a popular hatred of the class of entrepreneurs with the blow already given to social security by the violent and arbitrary disturbance of contract….governments are fast rendering impossible a continuance of the social and economic order of the nineteenth century.

To celebrate have a jagermeister or two at the Pre Fuhrer Lounge and try to explain that for over half a century America's trauma has been depression-era unemployment and deflation while Germany's trauma has been runaway inflation. But drink fast, prices change radically after happy hour. And, tell Fed Chairman Bernanke that it was the “German Experience” that caused many folks to raise an eyebrow when he alluded to the power of the “printing press” a few years ago. But, rest assured that no one would let it happen again.



Once again, we suggest everyone read The Dying Of Money before it is too late.


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Sudden Debt's picture

I've recently bought a lot of 2 and 5 silver Reichmarks and when I looked them up in wiki, I found this interesting text:

[edit] History

The Reichsmark was introduced in 1924 as a permanent replacement for the Papiermark. This was necessary due to the 1920s German inflation which had reached its peak in 1923. The exchange rate between the old Papiermark and the Reichsmark was 1 ?? = 1012 Papiermark (one "trillion" in US English, one "billion" in British English, German and other European languages, see long and short scales). To stabilize the economy and to smooth the transition, the Papiermark was not directly replaced by the Reichsmark, but by the Rentenmark, an interim currency backed by the Deutsche Rentenbank, owning industrial and agricultural real estate assets. The Reichsmark was put on the gold standard at the rate previously used by the Goldmark, with the U.S. dollar worth 4.2 ??.

During the Second World War, Germany established fixed exchange rates between the Reichsmark and the currencies of the occupied and allied countries, often set so as to give the Germans economic benefits. The rates were as follows


 This puts 4,6 Oz of silver = 1 month average salary



Slewburger's picture

As fast as I can. Personally trying to dry up I've been mildly successful.

In the book, the exchange rate between the mark and the CHF kept changing (daily), and people couldn't figure out why the franc was getting so the fvcktards here it will probably be the RMB.

Blindweb's picture

Interesting.  During the hyperinflation the gold:silver ratio went from 1:16 to 1:160, but apparently that was because there was a fear of communist invasion. 

StarvingLion's picture

The Goldbugs and Austrians are both simpletons who don't understand the system.  Here's why:

tmosley's picture

Broad brush you paint with there.

Makes me not want to watch your crap.

Punderoso's picture

Funny, the guy in your video is the amateur simpleton who uses stupid strawman arguments against goldbugs and Austrians and cannot even describe what they believe correctly. Obviously, this fool has never read Rothbard or Mises, and looks like he is just regurgitating "Money As Debt" video series with his own personal emphasis that it is all "machiavellian".  The emphasis that it is "private" sounds like more socialist junkfood.  First of all the Federal Reserve is not private, it is a quasi-government entity that essentially acts similar to a cartel in controlling the money supply which has substituted paper currency for constitutional gold or silver currency.  The "private" part is emphasized incorrectly as the problem (as is always done by the socialist to try to mindjob you that a collectivist government/public fiat currency is the solution), rather than the fact that our corrupt government gave the Fed this cartel power with the Federal Reserve Act of 1913. It sure is funny how cartels/monopolies enforced by the government/law like the Federal Reserve do so much damage yet this is never conceived as the problem by this moron.  No the problem is that it is private?  Really, I thought in a free country that is were it should be with the people in a free banking system (read Rothbard), rather than taken away from the people by creating a government backed monopoly that controls the currency and forces us to use it rather than sound money.  A private entity does not have the power to do this, only a corrupt  entity who has partershiped with the government to enforce the monopoly can do this.

EscapeKey's picture

I suggest that guy goes back and re-reads Rothbard.

CH1's picture

When people begin with insults, I seldom read any further. Is it not enough to say, "I think they are mistaken"? Venom more or less invalidates you.

StarvingLion's picture

THE AUSTRIANS ARE COMING...THE AUSTRIANS ARE COMING...Central Banks will abolished and you will be saved!  End Keynesianism now! Hahahaha...Looks like the ZH "Community" is just another grand bunch of dumb suckers fed constant propaganda:

"The Chicago school created Damon’s “monetary vortex,” which exists to claw back all of the wealth that was lost to “socialism” as a result of the Great Depression. When the vortex collapses, as any Ponzi scheme must, the Austrian school is waiting in the wings to blame the vortex on “Keynesianism” (it has already begun, in spite of the fact that Chicago monetarism has been the official policy of the U.S. and the Fed since at least 1975, when Congress issued House Concurrent Resolution 133) and insist on the abolition of central banks and the institution of “free” banking (which manifestly is not free, else they would not have had to market it as such; it simply would have been understood). Adopting the Austrian scheme will ensure that all the ill-gotten gains of the Ponzi scheme are retained by the fraudsters who perpetrated it and provide a monopoly over money that will allow its owners to create economic depressions at will. You don’t actually need a central bank to have a money monopoly. (And don’t think for a moment that the Austrian approach will end financial speculation financed through fractional reserve lending; the financial “innovators” were able to skirt reserve requirements that were adjusted in real time, and they will find it that much easier to avoid reserve requirements that never change.)

infotechsailor's picture

[ adopting the Austrian scheme will ensure that all the ill-gotten gains of the Ponzi scheme are retained by the fraudsters who perpetrated it and provide a monopoly over money that will allow its owners to create economic depressions at will ]

As the Austrians were against the bailout and against Fed intervention (or its existence at all), this begs the question:

Can your analysis possibly be anymore ass-backwards?

Your idiocy reminds me of the guy who tries to make videos "debunking" Peter Schiff with non-sensical commentary and poor editing.  Not surprisingly, the comments and ratingsare disabled.

Their channels are:

SchiffForSenate2012 (nice name)

Judging from the elementary spelling errors, and uneducated commentary, I wouldn't be surprised if these channels are all the same person (perhaps one of Bernanke or Geithner's 12 year old Nephews)

SheepDog-One's picture

Hyperinflation in what, stocks-food-gasoline, hyperdeflation in everything else?

SWRichmond's picture

All things, including currency-thingies, deflate w.r.t. gold, some more than others.  Things (houses, strip malls) that were recently chased by a lot of fractional-reserve-credit-lending-creating-money-out-of-nowhere will deflate more.  You do the math.

B9K9's picture

Why is it that no one ever seems to mention the MIC, (peak) oil and their inter-relationship? Can we agree that the absolute number #1 goal of the USA is to maintain our military control of ME oil supplies? If so, then stop.end.of.story; all further discussions must be considered within this context. Ok, now that we have that issue settled, let us move onto the next question: Does a weak(er) dollar or a strong(er) dollar support this mission?

Granted, with a weaker dollar, we could still maintain control, but it would have to be perfomed in a much more brute force, overt manner. That is, we'd have to significantly enlarge our present occupation footprint and rely on a more basic method similar to what the Soviets used in E Europe after WWII. IOW, you and what army are going to make us move?

Our current strategy is a more elegant construct, in that we utilize both a carrot and stick. The carrot being the $USD that offers both utility and value storage. (You can buy a lot of fancy hardware with the $USD.) The stick of course being a carrier task force or two, some drones poised to blast apart yet another "wedding party", etc. Now, when a country has a well established imperial methodology in place, what does it take to alter firmly entrenched national security policies?

That's why I gotta laugh every time I see another rant about the power & influence Bennie, the Fed, Dimon, GS, etc. have over the US government. Sure, it's very powerful, but it's still trumped by the MIC. All monetary/fiscal actions taken to date have been directed towards attempts at re-igniting organic loan growth aka blowing bubbles aka "economic growth". That means saving the banks was merely a means to an end, not the end itself. (The end being national security.)

Let me repeat, there will be no QE and subsequent dollar destruction unless it is deemed as a viable mechanism to support our established military objectives in securing ME oil. If you want to bet against the MIC, be my guest. The MIC will be the last entity standing - the bankers can (and will) go down, entitlements can (and will) be cut, states can (and will) become insolvent & default. But the day the MIC leaves the ME is the day you might as well become a cannibal, because there is literally "no there, there" at that point in the story.

SWRichmond's picture

...but it's still trumped by the MIC.

Nope.  The central bank exists to fund the government so that it can afford welfare AND warfare.  Absent free-flowing money, the MIC dissolves.  What's the first thing any country does when it enters a a war?  Inflate the currency.

doolittlegeorge's picture

absolutely.  and with nat gas at rock bottom prices "we're gonna move beyond oil REAL quick."

hedgeless_horseman's picture

What happens to the USD when the KSA et al can sell ALL OF WHAT IS LEFT of their remaining oil to the chi.coms?  Will they still want dollars?

BobWatNorCal's picture

"Can we agree that the absolute number #1 goal of the USA is to maintain our military control of ME oil supplies?"
No. Even the US Dem party is reluctantly accepting the need to switch to nuclear. (It will still be a few more years).
At that point, domestic supplies, shale/tarsands, etc will be sufficient for the foreseeable future.

Commander Cody's picture

No. Even the US Dem party is reluctantly accepting the need to switch to nuclear.

If only they backed up their hollow words with deeds.

Citxmech's picture

Sorry - can't run the military on nuclear power.  There's a reason our defense complex is the #1 consumer of oil in the world.

Mr Lennon Hendrix's picture

Considering that maintaining world hegemony post its brief world hegemony is ill logic, I thank that any try for continued world dominance post peak production would be futile and the greatest mistake.  The US will lose all credibility, and wealth, if a desperate attempt is made for ME oil.  Europe will not have the US' back, as they have their NG pipelines.  Same for China.  It would be the US vs. the world, and it would be the greatest failure.

StarvingLion's picture

Give it up B9K9.  You're buddy Mako is the one-trick pony that is irrelevant.  You, OTOH, are all over the map wailing about.  Folks, I think this guy in the link below is zeroing in much better:

samsara's picture

Thank you B9K9,  for focusing on the target like a laser.   I lump writers into two camps,  those who factor Peak Oil and those who don't.   The MIC will trump All.

I saw the same thing with Mako the other day on Kunstler's Bank Shot article.  I wrote;


Mako,  First Love your posts.  But this statement.

 ....liquidated in the future from which a stable platform can be built for rerunning the same scam.

I disagree.  There will be NO running the scam again in ANYWAY similar this one. 

Two words.

Peak Oil.

We are in a Global Depletion of 2% - 4% of energy output for ever from a Petroleum perspective.

This is The END of Growth as Humans have come to know it.

There will be no rebuilding until our Global Pop. is down below 1 billion or so. 

Word of advice, before anyone Junks me,  Read the Robert Hirsch Report, or Spend a couple of months reading the Geological reasons why.  This is IT kids.

Cantarell - In decline

Bergan - In Decline

US - In Decline (since '71)

North Sea - In Decline

Ghawar - In Decline (Most Likely)


No Recovery,  No Rinse and Repeat.

This is THE End Game and THEY know it.

(If you think Peak Oil has anything to do with Financials, Please don't junk, get educated first)


the rookie cynic's picture

Pardon me plugging my own blog, but it seems apropo in light of today's discussion.

downrodeo's picture

"There will be no rebuilding until our Global Pop. is down below 1 billion or so."


Straight from the Georgia Guide-stones to your eyes. UGH! How unsavory!

MurderNeverWasLove's picture

This is The END of Growth as Humans have come to know it.

There will be no rebuilding until our Global Pop. is down below 1 billion or so.

That's why I junked you.   Physics are physics and human life is human life.

Kill yourself quick, because you're breathing my son's air.  You've had your chance.  Had your say.  Go die now.  If we're playing the mighty tyrant today, who hath commanded there be but a mere billion of us left by noon tomorrow?

I think climate change is the same scam.  I'm willing to talk and mostly listen about pollution and peak this and that, but no one has any right to price the state of the world in terms of lives.

 Murder Never Was Love

We humans are pretty good at figuring out how to get by and survive, without upstart eugenicists and their death-cult of sustainability.

I say everybody get to loving, because I've never felt there were too many little bundles of joy running around, although there has always seemed to be an infinite ability to shirk our responsibility to those in our human family.

Sure, while energy was cheap, the population skyrocketed.  In the most impoverished coutries high birth rate is a matter of survival as a people.  What would you do?  Just kill them off?  We've always seemed to see fit to let people starve.  Not even clean water, and a little soap.

We were programmed with the lifeboat from early on, and told that if you feed the starving, they'll just reproduce at a higher rate.  But the data has never borne that out.  The fact is that starving, desperate, terrorized people are easy to control, and easier to kill.  Perhaps a billion is some sort of ideal, but we're way past that now, and if half of the world is sick, starving, enslaved, imprisoned, or otherwise helpless or marginalized, then how the hell can we expect them to help everyone take care of each other?

chindit13's picture

I saw a piece from a think tank in the UK a while back that estimated the Earth can support about 1.6 billion people if petroleum based fertilizers are unavailable.  Don't know who funded the place, nor if they have some other agenda, but it is food for thought.

MurderNeverWasLove's picture

I don't really doubt that cheap petroleum is the primary driver for most of the growth we've had over the last century, and that includes factors like what you mention.  No doubt we'll continue to adapt as that ride is likely to fizzle out from many pressures, including population growth.  I think we are well on our way to innovating around many of those issues, but I don't count "family planning" or whatever the Chinese call it when they forcibly abort to meet the population goals of the central planners as part of that innovation.

 (++ on Legos comment, below)

Justibone's picture

I don't want kids, thank you very much.

I don't support anyone else's right to tell *you* not to have them, though, provided you can give them an acceptable upbringing, education, etc.  Also: keep them out of my Star Wars(TM) Legos(TM).

lilimarlene1's picture

Isn't there a lot of rare earth in Afghanistan?

Augustus's picture

Why is it that no one ever seems to mention the MIC, (peak) oil and their inter-relationship? Can we agree that the absolute number #1 goal of the USA is to maintain our military control of ME oil supplies? If so, then stop.end.of.story; all further discussions must be considered within this context. Ok, now that we have that issue settled, let us move onto the next question: Does a weak(er) dollar or a strong(er) dollar support this mission?


Of course it is not settled.  It is in the interest of the Oil Cartel Members that there are buyers able to access their supply.  How long would ImaDinnerJacket remain in office if he did not have the ready ready from the sale of Iranian oil production?  And if not to the market with the US sucking up a large quantity, what price would he be able to get from the Hatians, who would be glad to take it off his hands if delivered for free.  Why are the oil supply nations interested in constraining the Somali Pirates?  so they can turn their only export product into cash.

Your statement relies upon establishing a false strawman and proceeds to wild claims.

Tarheel's picture

Surely our Kenyan President would not allow our currency to be completely debased to the point of a $100 loaf of bread, right?!?!

pan-the-ist's picture

Surely our WASP president woudn't try to fight two unfunded wars right?!?!


Popo's picture


It's all about wages.

No wage/price spiral, no inflation.



Justibone's picture

If only that were true.

Also, hyperinflation is a completely different animal from mere inflation.

BrettFavre's picture

this is so silly... completely devoid of any logic about how Fiat money works.... kinda like Art Cashin's market calls - LOL !!

tmosley's picture

He ridicules the man who speaks the truth, and chuckles uneasily to himself.

HarryWanger's picture

I feel the same way about Cashin - he's kind of the drunken old uncle they keep around to tell old stories about the good ole days. What do you expect from a guy who refers to the autumnal equinox for his stock moves. Have another scotch, Art.

RockyRacoon's picture

Art the Fart has forgotten more about the Market than any of us here know.

Chide the old and infirm -- go ahead.  Just remember that you'll be old some day.

And we won't be good to you then either.

I wish Cashin would take a few of the years he has left and write his memoires.

Screwball's picture

I have thought the same thing.  Can you imagine what Art and perhaps Mark Haines could put in print?  Imagine what they have witnessed over the years.  I would love to read about it.  Like them or not, they carry a unique, interesting, and incredible story.

Spastica Rex's picture

I feel the same way about HarryWanger  - he's kind of like the coke-addled nephew they keep around to tell stories about pop culture. What do you expect from a guy who refers to People Magazine for his stock moves. Have some more APPL, Harry.

bada boom's picture

"guy who refers to the autumnal equinox for his stock moves"

Who knows Harry, maybe it did work when people use to trade.

oddjob's picture

Afters years of taking so very,very much...this from Art Cashin means squat.A lifetime Wall street maggott begging for forgiveness is a sickening sight.

Popo's picture

Harry - The bond market feels the same way.   Inflation?  Where?




jdrose1985's picture

Yeah good luck getting fuel prices to move up and immediately killing the real economy lol eventually the Fed will stop bouncing off the brick wall of world commerce which is becoming less and less profitable the further down we have to drill for oil.

Good luck going off the oil standard and all.


doolittlegeorge's picture

some folks "have their running shoes on."  the end of oil is the opporutunity of a lifetime.

43 Steelie's picture

How Bernanke isn't walking around with more bodyguards than Obama at this point is beyond me.