Dying of Money: Lessons of the Great German and American Inflations
by Jens O. Parsson

Most of us have at least a general idea of what we think inflation is. Inflation is the state of affairs in which prices go up. Inflation is an old, old story. Inflation is almost as ancient as money is, and money is almost as ancient as man himself.

It was probably not long after the earliest cave man of the Stone Age fashioned his first stone spearhead to kill boars with, perhaps thirty or forty thousand years ago, that he began to use boar's teeth or something of the sort as counters for trading spearheads and caves with neighboring clans. That was money. Anything like those boar's teeth that had an accepted symbolic value for trading which was greater than their intrinsic value for using was true money.

Inflation was the very next magic after money. Inflation is a disease of money. Before money, there could be no inflation. After money, there could not for long be no inflation. Those early cave men were perhaps already being vexed by the rising prices of spearheads and caves, in terms of boar's teeth, by the time they began to paint pictures of their boar hunts on their cave walls, and that would make inflation an older institution even than art. Some strong leader among them, gaining greater authority over the district by physical strength or superstition or other suasion, may have been the one who discovered that if he could decree what was money, he himself could issue the money and gain real wealth like spearheads and caves in exchange for it. The money might have been carved boar's teeth that only he was allowed to carve, or it might have been something else. Whatever it was, that was inflation. The more the leader issued his carved boar's teeth to buy up spearheads and caves, the more the prices of spearheads and caves in terms of boar's teeth rose. Thus inflation may have become the oldest form of government finance. It may also have been the oldest form of political confidence game used by leaders to exact tribute from constituents, older even than taxes, and inflation has kept those honored places in human affairs to this day.

Since those dim beginnings in the forests of the Stone Age, governments have been perpetually rediscovering first the splendors and later the woes of inflation. Each new government discoverer of the splendors seems to believe that no one has ever beheld such splendors before. Each new discoverer of the woes professes not to understand any connection with the earlier splendors. In the thousands of years of inflation's history, there has been nothing really new about inflation, and there still is not.

Around the year 300 A.D., the Roman Empire under the Emperor Diocletian experienced one of the most virulent inflations of all time. The government issued cheap coins called "nummi," which were made of copper washed with silver. The supply of metals for this ingenious coinage was ample and cheap, and the supply of the coinage became ample and cheap too. The nummi prices of goods began to rise dizzily. Poor Emperor Diocletian became the author of one of the earliest recorded systems of price controls in an effort to remedy the woes without losing the joys of inflation, and he also became one of the earliest and most distinguished failures at that effort. The famous Edict of Diocletian in 301 decreed a complex set of ceiling prices along with death penalties for violators. Many death penalties were actually inflicted, but prices were not controlled. Goods simply could not be bought with nummi. Like every later effort to have the joys without the woes of inflation, the Edict of Diocletian failed totally.

So it has gone throughout the millennia of man's development. For at least the four thousand years of recorded history, man has known inflation. Babylon and Ancient China are known to have had inflations. The Athenian lawgiver Solon introduced devaluation of the drachma. The Roman Empire was plagued by inflation and, more rarely, deflation. Henry the Eighth of England was a proficient inflationist, as were the kings of France. The entire world underwent a severe inflation in the sixteenth and seventeenth centuries as a result of the Spanish discoveries of huge quantities of gold in the New World. "Continentals" in the American Revolution and the assignats in the French Revolution were precursors of the wild paper inflations of the twentieth century. Steadily rising prices have been the general rule and not the exception throughout man's history.

The twentieth century brought the institution of inflation to its ultimate perfection. When economic systems are so highly organized as they became in the twentieth century, so that people are completely dependent on money trading for the necessaries of life, there is no place to take shelter from inflation. Inflations in the twentieth century became like inflations in no other century. The two principal inflations that occurred in advanced industrial nations in the twentieth century will probably prove to have done more to influence the course of history itself than any other inflation. One of these was the German inflation that had its roots in World War I, grew to a giddy height and a precipitous fall in 1923, and contributed to the rise of Adolf Hitler and World War II. The other was the great American inflation that had its roots in World War II, grew in the decade of the 1960's toward an almost equally giddy height, and contributed to results which could not even be imagined at the time this book was written.
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