George Gammon Live Q&A 8-1-21


Tune in every Sunday at 8:00 pm EST for a live stream Q&A session with George Gammon where he answers your questions about money, investing, and personal freedom!

In this week’s Live Q&A…

Could the US Experience Weimar Republic Hyperinflation?

Any time inflation or hyperinflation fears begin to crowd headlines as they do every few years, the 1920s hyperinflation of the now-defunct Weimar Republic always seems to be mentioned. This is for good reason as hyperinflation completely destroyed the German currency and took the economy with it.

The formula for hyperinflation that peaked in 1923, started all the way back in 1914 at the onset of World War I when the German government ramped up deficit spending to finance the war. The Germans were banking on a short victory where their defeated opponents would pay for their war bill through reparations.

Obviously, this plan did not turn out well for the Germans and they were now stuck with their own reparation payments on top of their already large debt obligations. This combination proved too costly for the German economy, so the government decided the only way out was to print more currency to devalue their debt.

Although money supply increased by around 65% per year leading up to the hyperinflation in 1923, a loss of faith in the monetary system might have been the final straw that brought with it higher wage costs and goods shortages.

Looking ahead to the present-day United States, you could argue that a similar picture is forming.

Since the Great Financial Crisis, the Federal Reserve has been printing money to support government deficit spending that is propping up the economy. More recently, deficit spending and Fed money printing have gone parabolic in reaction to the March 2020 economic collapse that was caused by government-imposed lockdowns. With more spending projects and handouts in the pipeline, there does not seem to be an off button in sight for the printing press.

Similar still, the United States has recently seen sharp rises in wage costs and supply chain disruptions that have led to shortages for some goods.

If the currency devaluation, stimulus checks, and supply chain issues persist, runaway inflation is all but certain. If left unchecked, runaway inflation could turn into hyperinflation.

So yes, the United States can experience hyperinflation as the Weimar Republic did in the 1920s. However, it remains to be seen if politicians and government bureaucrats have the nerve to stop it.