Hyperinflation Coming?
Hi Barefoot,
I am one of those 20-something Reddit users who makes some ‘tendies’ off GameStop. Most of my meagre net worth is in a high-interest savings account and an ETF as I save for a home deposit. But I have something that really should get your attention: hyperinflation. It is gaining massive traction on WSB (Wall Street Bets, on Reddit), and it is not your average conspiracy theory. Even Michael Burry (of ‘The Big Short’ fame) is talking about it. They are likening our current financial climate to the hyperinflation seen in post-WW1 Germany. What do you make of it?
Harry
Hi Harry,
I’m not going to rule out hyperinflation.
Heck, after the last 12 months I’m not ruling anything in or out. After all, who would have thought we’d be locked in our homes for the better part of the year?
One lesson I’ve taken from our annus horribilis is to be humble: the world is far too complex for us to accurately predict anything.
Another lesson is to stop reading online articles designed to scare the clicks out of you.
Instead, I’m going to suggest three books for you to read:
The first is When Money Dies. Author Adam Fergusson tells the shocking story that Germany faced post WW1 ... where a loaf of bread skyrocketed from 160 marks in 1922 to 200 million marks by 1923. Fergusson has since reassured readers that no advanced economy will hit hyperinflation anywhere near the level he writes about. Yet it doesn’t have to: even sustained double-digit rates of inflation can ruin people’s lives. And that to me is the message of this book.
The second is The Great Depression: A Diary by Benjamin Roth — one of my all-time favourite books. It’s the actual diary notes of a lawyer living through the Great Depression (what makes it fascinating is that he doesn’t know he is). His writing paints a very different situation to the one we are in now: in the Depression, the average person had next to no money. Today we’re flush with cash.
The final one is The Rational Optimist. Author Matt Ridley convincingly argues that, contrary to the doom-and-gloomers, the world is actually getting better. And it is. The best time to be alive is right now.
Harry, investing and saving — and living — is the ultimate act of optimism. So be bold!
Scott.