56 THE BiG DROP
Nine percent inflation will cut the value of the dollar in
half in about eight years. Eight years is not a long time. If
you’ve got three children and they’re heading off to college,
by the time the first one goes and the last one finishes, that’s
probably eight or nine years.
What does that do to your retirement income, insurance
policies, your annuities and your savings?
It cuts them in half. It potentially cuts your retirement in
half. That’s something to be concerned about.
Now, inflation might not stop at nine percent. Or, it could
go to ten or twelve percent. As I mentioned, we saw thirteen
percent inflation in 1980 so it’s not impossible. That’s in the
lifetime of many Americans. They probably remember that.
Of course, hyperinflation in a modern industrialized na-
tion is something much more extreme. Everyone talks about
Zimbabwe in recent years or nationalist China in 1949.
But Germany was not Zimbabwe. Germany was the third
largest economy in the world in 1929, a major industrial power
and exporter yet they had a hyperinflation. It was the result of
bad policy and psychology taking over. Hyperinflation usually
starts out with bad policy but once people realize what’s going
on, they’ll do the rest. Then, they dump the money as fast as
they can.
You know what happened during Weimer hyperinflation?
People were getting paid twice a day. Not once a month or
twice a month or once a week.
They would actually break for lunch and the wives would
come down to meet the husbands at the factory gate. The
husbands would get paid in stacks of notes, which had been
brought over by the bank or in a car or a wheelbarrow.
Then, they would run right out and they would buy a ham,
a bottle of wine, a stick of butter or whatever they needed for
that day. Then, they’d do the same thing again at the end of the
day when they’d get another pay pack.