The largest bill the United States currently prints is the $100 dollar bill. In the event that you start to see $500 or $1,000 dollar bills, you should start to worry. Why you may ask? Just ask the Germans or the Hungarians.
After World War I, the Weimar Republic of Germany was deeply in debt because of war-time spending. When the war was over, the bills came due but the German Government didn’t have the money to pay. They were left with two options. Secure more loans (if they could get them) or print their way out of the debt. The printing press was fired up with fury. They printed billions and billions of Marks to pay off their debt. What ensued was one of the most infamous and destructive currency crisis’ in world history. By late 1923, the Weimar Republic of Germany was issuing two-trillion Mark banknotes. At the height of the money printing spree, a 100 trillion mark bill existed. One US dollar was worth 4 trillion German marks. As the value of the German Mark dropped further and further, it took more and more Marks to buy everyday goods. For example, a single egg in Germany cost 80 million dollars. One ounce of gold cost $35,000…enough to purchase an entire downtown block of prime German real estate. The German people saw the money they had saved and invested devalued to the point where they used Marks for wallpaper or burned them to stay warm in the winter months.
The Hungarians were not much different. After World War II, they found themselves in dire straights. They hold the world record for most inflation in a single month. 41,900,000,000,000,000%. In 1946, that meant that prices doubled every 15.3 hours. If you bought a loaf of bread in the morning it would cost you $10. If you bought it at night, the same loaf would cost $20.
In these lessons from history, there are two big questions that have to be asked.
1. What made them devalue their currencies?
2. What tool did they use to get out of their problems?
Those two countries were desperately in debt and printing money was the easiest way out. The problem was too much debt. How much debt does the U.S. government have now? We the people have over 16 trillion dollars in debt, plus the unfunded programs like Social Security, Medicare and Medicaid. There is no end to the spending spree. In theory, a country can cut back it’s spending before the debt threshold is met. Will it happen? No. Politicians will kick the can down the road until there is a major crash. Why? Because the pain of change isn’t greater than they pain of keeping the status quo. Countries such a Greece and Spain have recently been under extreme austerity measures (spending cuts) because their debt limits were out of control and they cannot borrow more money. If they had a printing press like the U.S. does, the option to print money would be on the table.
What happens when the holder of the reserve currency (the Unites States) reaches catastrophic debt levels and can’t get foreign loans? Interest rates rise and we can’t pay our bills. Just like Germany, Hungary and hundreds of countries throughout history, the U.S. will be left with only one tool to solve it’s problems. PRINT MONEY. With each extra dollar printed, it makes the ones in circulation worth less. When we start printing more and more, everything from bread to cars to homes, skyrockets. This is the only logical and reasonable response the U.S. government can give when the bill comes due.
There are some things you should put your money into when the time comes for inflation. The basics are things that have intrinsic or true value. Things like housing, precious metals, and especially food. The most basic human necessity is food. During times of hyper-inflation, the average person will struggle to afford food. What many people wished they had during these trying times in Germany and Hungary was a food supply. Since that time, food storage and Survival Seed Kits have grown in popularity. If the United States doesn’t get its fiscal house in order, those people who look “crazy” right now for having Seed Banks will look like geniuses. Hyperinflation is closer than the U.S. might think.