Money reform

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Dutch John's picture
Dutch John
Status: Bronze Member (Offline)
Joined: Oct 10 2008
Posts: 50
Money reform

We often wonder what happens during a money reform. What about savings? What about our mortgage or other debt? We do have some examples from the past. I found an article about the German reform from Reichsmark to D-mark.

 

So now came the D-mark. But what happened with saved assets, mortgage loans, other debts or assets? Immediately an escape into asset values set in when the first rumours of a future currency reform began to reach population in April 1948. But since no one knew much about it the reaction remained rather restrained. Only when the D-mark was published officially it became obvious who was the winner and who was the loser now:

Asset values were not
affected by the currency reform
– but savings got cancelled by up to 35%

Whoever owned real properties did not need to worry about his wealth in any way. Asset values remained untouched by the change. Or rather: since the rents got changed in a relation 1:1 (!!) the landlords now got an unbeatable advantage. Because assets of Reichsmark, debts and outstanding debits got, as published on 26th June 1948, recalculated in a relation 1:10 – meaning 10 Reichsmark got exchanged for one D-mark! But that wasn’t enough: one wasn’t even able to decide about one’s newly exchanged money oneself: half of this cash value got frozen  right after the exchange – and who still had more than 5.000 DM on his account hereafter needed a clearance certificate from the tax office in order to be able to avail himself of his money. The ulterior motive hereby was obvious: in this way they wanted to find out black money depots and tax evaders. So if someone had kept high amounts of Reichsmark or had acquired money from the black market which was flourishing up to then, he was now likely to be left out in the cold.

  Whole article: http://www.allgrund.com/top10/immoinfo/4-1998_en.htm#goodbye    I found the conclusion an interesting one:

There is no doubt: at these times, he who has got his asset values made, meaning who has invested his money remote from any possible arbitrary decisions of the government, will have a soft sleep.

 

Another article about the German monetary history, including the horror of the Weimar hyperinflation: http://nowandfutures.com/us_weimar.html

My relations and friends were too stupid. They didn't understand what inflation meant. They didn't rush to get rid of their money (that was what the Jews and the Germans did). All my relations thought it would stop the next week — and they went on thinking so.

 

Regards, DJ

Jim H's picture
Jim H
Status: Diamond Member (Offline)
Joined: Jun 8 2009
Posts: 2385
What will happen to money?

This is the big question isn't it.  Everyone needs to do their own due diligence here...  I see some posters taking pot shots at folks like James Dines because he doesn't correctly remember the history of toll increases on the Golden Gate Bridge... great... this poster is just finding another excuse to not face their own responsibility in decision making.  All pundits are untrustworthy... there.. done.   

If you have savings, you have two choices.... you can go with Illargi of TAE (and many do) and believe that Gold and Silver will fall in value in a great deflation ahead... and that the cash you hold now will become precious in the future;

http://theautomaticearth.blogspot.com/2012/01/january-31-2012-goal-seeked-analyses.html 

"it most certainly does suggest that there are significant risks gold will fail to hold its current valuations around $1700/oz, let alone reach $2000/oz and beyond. The risks are especially formidable when we stop pretending like the Fed, ECB, Bernanke, Geithner or anyone else is in a good financial or sociopolitical position to halt the upcoming waves of debt deflation. We here at The Automatic Earth only ask that you keep these risks in mind as you continue to read and contemplate."

Or you can join Chris, myself, and many others who have essentially lost faith in the currency in advance, based on our expectation that the printing will continue....  an expectation explained so well by Egon von Greyerz;

http://kingworldnews.com/kingworldnews/KWN_DailyWeb/Entries/2012/2/6_Greyerz_-_Gold_Price_to_Hit_$5,000_in_24_Months_%26_Silver_$166.html

“The risks are enormous, Eric.  The risk that many banks will fail is major.  The authorities and central banks, around the world, are going to try to rescue them, but it’s not certain they can or will.  That’s why, again, it’s important to hold assets outside the banking system, whether it’s gold or silver or assets in the ground.That’s the way to protect yourself because if the system survives in the next couple of years, it will only be because there is massive money printing.... 

“Without that they cannot survive.  But because of the massive risks to the financial system, I think it’s absolutely critical that investors hold a major part of their funds outside of the banking system.We are in this for the long-term.  We got into it (gold) in 2002 at $300.  We’re telling clients today, at $1,720, that right now gold is cheap.  We’re holding gold to protect our purchasing power and gold is just beginning a very major move.  That move will take time.  In the next two years I could see $5,000 (gold).  We could see it before the next 24 months.

That is just an intermediate top.  We will have a bigger correction after that.  But I’ve said for some time that gold could reach $10,000, and that’s in today’s money.  And I’m absolutely convinced that we won’t have today’s money in the future.If gold goes up to let’s say $5,000, the (gold/silver) ratio will come back down to at least where it was in 2008, which is 30.  I would say that’s a minimum.  Then your talking about silver at $166.”

Or his long form piece from December that was excellent;  http://goldswitzerland.com/index.php/deus-ex-machina-egonvongreyerz/

This may very well take some time to play out.. but the outcome will ultimately be digital.. either your paper money will be in great demand, or hard assets will be in great demand and confidence will be lost in paper.  Most people will, through their inability, or unwillingness to make a decision... remain in their paper money.  This is why I know paper money will die.... I know it deep in my core... for so many math/technical reasons, but also because I know, from talking to so many folks, that the blind trust for paper is driven so deep that most cannot see past it.. hence the masters of the paper system will continue to print, and print, and print way beyond where anyone could have believed even ten years ago.  And then, all of the sudden, it will be too late.  The (relatively) tiny physical Gold and Silver markets will be overwhelmed by demand from money coming out of other financial instruments... money flowing back into the US that has been emitted overseas for so long...all those uncashed checks now getting cashed   

I leave you with this;

http://www.ritholtz.com/blog/2012/01/living-in-a-qe-world/

   

 

 
   

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