When Money Dies: Money Died in Germany — Could it Die in America Too?
Inflation brought Germany to its knees in the post-war years. Here's what that experience portends for America.
There’s no question about it: the cost of living in the United States has risen dramatically over the last few decades. It’s so bad that I honestly don’t think young people can earn their way out of it.
Back in the late 1980s when my parents bought their house, the average home price in the United States was around $138,000. They were able to buy their home by working basic entry-level jobs that didn’t require a college degree. By working hard and budgeting well, they could save up enough money to start life on their own terms.
Times have changed. Today, the median home price is about $420,000 — or just under half a mil. You can’t afford a home like that just by working an entry-level job. You definitely can’t get an entry-level job anymore without a college degree. And a hiring manager definitely won’t look at your resume for that entry-level job unless you have several years of work experience too.
The middle class is vanishing. Instead of rising in the ranks, young people are battling to stay out of poverty. Between housing, educational costs, and the other basic requisites of surviving in today’s society — food, clothing, and health insurance — young adults are financing their way into adulthood.
That’s a big problem. As the cost of living rises so too will the demands for higher wages. And I’m not talking about earning more money by getting a promotion or switching jobs. I’m talking about young people calling on the government to issue new money to cover rising costs.
I’m talking about inflation.
While the state of the economy today is pretty bad for young Americans, it could actually be much worse. The U.S. Dollar is certainly inflated, but it hasn’t gone off the deep end — at least not yet.
In 1918, the world wrapped up its first global war. Europe’s economies were in shambles. The victors of the war — namely Britain — began divesting themselves of overseas colonies to manage the cost of war. New countries emerged across the British Empire as Britain offloaded the administrative costs of colonization onto the local populations they had previously governed.
The losers were in far worse shape. Unable to pay its war debts, Germany couldn’t borrow money and didn’t have the means to raise more revenue. With few options, Germany turned on the printing presses. It created new money and inflated its currency. In doing so it made the value of paper Reichsmarks worthless and destroyed what remained of the middle class in the process.
In his book When Money Dies, Adam Fergusson dives into the economy of post-war Europe, highlighting the effects of hyperinflation in Germany, Hungary, and Austria. He focuses on the policies and decisions that led to hyperinflation during the post-war period. Originally published in 1975, the book is a cautionary tale for what can happen when poor economic conditions and inept political leadership try to solve problems by printing money.
While the United States is nowhere near the hyperinflationary levels experienced by Germany in the 1920s, the book highlights some striking parallels. It reveals how poor economic policies can affect a population and the lengths they’ll go to restore their standing in society.