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JT: ... What did their currency top out at? 4.2 million marks to the british pound before it collapsed utterly? I recall reading about people literally taking wheelbarrow loads of marks to buy one shoe or a few buttons in order to barter for food or what ever they could get their hands on.
KJB: ... According to Peikoff, in 1923 the value of the German mark fell to its lowest level: 4,200,000,000,000 to the U.S. dollar. Its difficult to imagine such a disparity.
Germany was charged with the entire cost of all civilian loses of World War I. The Allies took Germany's gold. The war ended November 11, 1918, with an armistice: both sides stopped fighting; it was not a surrender. The Versailles Treaty a year later brought Germany, the UK, the USA, and France together, leaving out Austria, Russia, and everyone else. It was there that the terms of surrender were laid down.
The UK had to borrow 250 million ounces of silver from the USA to be coined for use in India, which was on the verge of revolt. (The Congress Party of India was formed in 1880, I think.) German propaganda in India was that the Bank of England's paper would not be redeemed. So, the USA made it good. The UK paid that back -- which why we have over 90 million 1921 Morgan Dollars and so few dimes, quarters and halves from that year. The silver came from the international markets, purchased with the gold that was paid by Germany, reducing her currency to pure fiat.
People pushing wheelbarrows were newsy. Gresham's Law gave them reason to pay each other in worthless paper as fast as possible. That said, nonetheless, hoarded silver coins still circulated: it was the only way daily trade could continue. Moreover, note that in this same period, local scrip - "Notgeld" - also circulated by choice and necessity. Fiat money can have value as markers in exchange. We have other real world examples from modern Iraq where the Kurds used a certain limited issue of Saddam Hussein's last paper during the American occupation.
Germany's worthless currency came from the government for government purchases and debts - bureaucrats, office rents, pencils.
Moreover, inflated currencies have worked long enough to be replaced... or not.
Back in 1890 or thereabouts, when Japan joined the international gold standard, their yen changed from a large silver coin on par with the US Silver Dollar to a gold coin on par with the US gold dollar. After conquering Korea, defeating Russia, taking Manchuria - oh, and losing World War II - the yen fell to 300 to 1 against the dollar... but they kept the currency. Italy and Turkey also kept their currencies despite losing two world wars and the zeroes were only dropped when they joined the EU.
A couple of years ago, I was waiting at a bus stop and saw a Dominoes Pizza sign: One Topping Medium 899. At which point, Walmart will be paying $1000 per hour.
The Bush-Obama bailouts tripled the money supply, but prices have not tripled. The sky is not falling. You need a more nuanced theory grounded in actual facts to explain the past and present well enough to predict the future. I always buy silver and gold coins - or always bought them: I've been selling for about a decade... This is real, but it is not the end of the world.
BTW: Austria was also broke. However, on the advice of certain Austrian economists, Austria borrowed gold, issued gold coins, and stabilized its currencies... while villages issued Notgeld and the "Woegels" that Irving Fisher studied. Such emergency moneys were issued by cities and other ad hoc authorities the USA in 1933.
The US Dollar is backed in gold (and silver). The US Treasury sells gold and silver coins near the market par every day. The silver coins ("Eagles") enter commerce through a limited number of large buyers who resell them at narrow margins down the market chain to you. Gold coins are sold directly to consumers, again, despite some numismatic permium, very close to the London Spot Price for gold, not bad if you want to buy a single one-ounce coin ...as opposed to a 100-oz bar, which is how the price is set.
The US Dollar is backed in gold and silver -- and don't you forget it. Austria sells "Philharmonic" gold coins. China sells Pandas. Australia has its Kookaburras and Kangaroos. Canada's gold is 5 Nines  Fine, the best on the market. The gold and silver coins of the UK include a lovely goddess in wet clothing. Just sayin' ... get your facts from someone other than Leonard Peikoff.
(Edited by Michael E. Marotta on 11/13, 5:08am)
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