Hyperinflation As A Weapon Of War? Fake WWII Occupation Scrip and the First $10 Pack of CigarettesSubmitted by Chris Kakistocraski on Tue, 02/12/2013 - 00:05
People don't get inflation and hyperinflation because they've been trained their entire lives that more is better so more money must be good, right? Well sure it's good if you're the only one with a lot of money. If nobody else has any money they will either work cheaply or sell you the things you want cheaply, so your big pile of money would keep its value.
But if you're rich and everyone else around you is rich too, then is anyone truly better off? Those who would work for or sell to at a discount previously will now see that money abounds, it moves fast and is not held nearly so dear.
World War II offers a unique example of 1000% inflation:
"On a personal level, I had always been very friendly with the Colonel; he was one of the most unusual people I had ever known...
"During our farewell talk, Colonel Kotikov mentioned the “money plane” which had crashed in Siberia and had been replaced. I asked what he meant by “money plane.” The U.S. Treasury, he explained, was shipping engraving plates and other materials to Russia, so that they could print the same occupation money for Germans as the United States was printing.
"I was certain he was mistaken. I was quite sure that never in history had we let money plates go out of the country. How could there be any control over their use? “You must mean, Colonel,” I said, “that we have printed German occupation money for Russia and shipped the currency itself.”
“No, no,” he replied. He insisted that plates, colored inks, varnish, tint blocks, sample paper – these and similar materials had gone through Great Falls in May in two shipments of five C-47s each. The shipments had been arranged on the highest level in Washington, and the planes had been loaded at the National Airport... " (From Major Jordan's Diaries ch. 12 How Russia Got U.S. Treasury Plates)
You might guess that Russia overprinted this occupancy currency. You might guess that this flood of money would fail to impress after a while the purveyors of goods and that prices would skyrocket. You might even predict $5 candy bars and $10 cigarettes. But would you be right?
"...The sum of money which we lost in redeeming the marks which the Russians rolled off their presses, with no accountability whatever, appears to have been $250,000,000! It was not until September, 1946, that we put a stop to the siphoning of our treasury by refusing to redeem further marks. By this time the plates had been in Russian hands over two years...
"...Russia could pay its occupation army in marks, and in fact did so, adding a two-year bonus for good measure. If the Red Army could get anything out of the German economy with these marks, all well and good. If they could get anything out of America, even better.
"In any event, these marks cost the Russian economy nothing whatever. With the materials provided from Washington, they took over a former Nazi printing plant in Leipzig, deep in the Russian zone, at a safe distance from American inspection, and started the presses rolling.
"Any GI could buy a pack of cigarettes for 8 cents at a U.S. Army Post exchange. For this the Russian and German black-markets would offer him 100 marks from the Leipzig mint. To realize a profit of almost $10 on an 8-cent package of cigarettes, the American had only to take his 100 Leipzig marks to an Army Post Office, purchase a $10 money order and mail it to the United States.
"It was revealed that the standard offer for a five-cent candy bar was 50 marks, or $5; $18 for one pound of Crisco; $20 for one K-ration; $25 for a pound of coffee, and $2,500 for a wrist watch costing $17.
"By December 1946, the U.S. Military Government found itself $250,000,000 or more in the red. It had redeemed in dollars at least $250,000,000 marks in excess of the total marks issued b its Finance Office! The deficit could have had no other origin than the Russian plant in Leipzig." (ibid http://www.sweetliberty.org/issues/wars/jordan/12.html)
This story highlights so many keys to what inflation is and how it works. FIrst it shows that if madmen are allowed to print money they will print a mad amount of money. Secondly it shows how when big piles of cash or anything else hit the market the value goes down because it is so easy to come by. And finally it shows how quickly this inflation of prices to meet the available money supply happens. Just a couple years is all it takes, and sometimes less than that.