Be Like Hugo Stinnes

Lessons From the “Inflation King” Were you forwarded this email? [Sign-up to The Daily Reckoning here.]( [Unsubscribe]( [Daily Reckoning] Be Like Hugo Stinnes - How the “Inflation King” took advantage of inflation to become one of the world’s wealthiest men… - The necessity of owning hard assets… - Then Jim Rickards shows you why hyperinflation can actually happen in the U.S., despite what many believe… Recommended Link [Urgent: Market Doomsday Indicator Flashing Red]( [Read more here...]( This little-known “[market doomsday indicator]( has appeared before nearly every major financial crash in recorded history. And now after years of silence, it has begun to ring out again… And if it chimes even just one more time…It could be game over for the markets. With some experts already predicting that we could see a dow drop of 80% or more practically overnight. If you are holding any stocks, real-estate or cryptocurrencies… Then I’m urging you to drop what you are doing and watch this now. Because if you miss [this warning]( now, once the crash comes… It will already be too late. [Click Here To Learn More]( Portsmouth, New Hampshire May 10, 2022 [Jim Rickards]Dear Reader, The name Hugo Stinnes is practically unknown today, but this was not always the case. In the early 1920s, he was the wealthiest man in Germany, at a time when the country was the world’s third-largest economy. He was a prominent industrialist and investor with diverse holdings in Germany and abroad. Chancellors and Cabinet ministers of the newly formed Weimar Republic routinely sought his advice on economic and political problems. In many ways, Stinnes played a role in Germany similar to the role Warren Buffett plays in the U.S. today. He was an ultra-wealthy investor whose opinion was eagerly sought on important political matters. He exercised powerful behind-the-scenes influence and seemed to make all the right moves when it came to playing the markets. If you’re a student of economic history, you know that from 1922–1923 Germany suffered the worst hyperinflation experienced by a major industrial economy in modern times. Yet Stinnes was not wiped out during this hyperinflation. Why was that? Stinnes was born in 1870 into a prosperous German family that had interests in coal mining. Later, he inherited his family’s business and expanded it by buying his own mines. Then he diversified into shipping, buying cargo lines. His own vessels were used to transport his coal from his mines abroad and within Germany along the Rhine River. His vessels also carried lumber and grains. His diversification included ownership of a leading newspaper, which he used to exert political influence. Prior to the Weimar hyperinflation, Stinnes borrowed vast sums of money in Reichsmarks. When the hyperinflation hit, Stinnes was perfectly positioned. The coal, steel and shipping interests retained their values. It didn’t matter what happened to the German currency; a hard asset is still a hard asset and does not go away even if the currency goes to zero. Stinnes’ international holdings also served him well because they produced profits in hard currencies, not worthless Reichsmarks. Some of these profits were kept offshore in the form of gold held in Swiss vaults. That way he could escape both hyperinflation and German taxation. Finally, he repaid his debts in worthless Reichsmarks, making them disappear. Not only was Stinnes not harmed by the Weimar hyperinflation, but his empire also prospered, and he made more money than ever. He expanded his holdings and bought out bankrupt competitors. Stinnes made so much money during the Weimar hyperinflation that his German nickname was “Inflationskönig,” which means “Inflation King.” When the dust settled and Germany returned to a new gold-backed currency, Stinnes was one of the richest men in the world, while the German middle class was destroyed. Stinnes saw the German hyperinflation coming and positioned accordingly. Hyperinflation may or may not arrive in the U.S., but distressing levels of inflation certainly have. It’s likely to get worse before it gets better. As Stinnes’ case proves, inflation doesn’t affect everyone in a society equally. There are distinct sets of winners and losers. The winners are those with gold, land and other hard assets. The losers are those with fixed-income claims such as savings, pensions, insurance policies and annuities. Debtors win in inflation because they pay off debt with debased currency. Creditors lose because their claims are devalued. You might not become ultra-wealthy like Stinnes, but by owning hard assets, you can actually prosper from inflation while millions of Americans see the value of their savings destroyed. But you can’t wait until inflation gets even worse. By then it’ll be too late. Make sure you have your gold and other hard assets beforehand. There’s no time like the present. Below, I show you why the journey from inflation to hyperinflation may be shorter than you expect. Read on. Regards, Jim Rickards for The Daily Reckoning P.S. When the panic hits, demand will explode and supplies will vanish. But I also recommend that you NOT invest in gold until you see my urgent message about the gold market. That’s right. Don’t even buy a single ounce of gold [until you see this message.]( It’s because we’re witnessing a rare occurrence in the gold market that we haven’t seen for years, and it has serious implications… [Essentially, this could be the most important message you see all year if you are serious about securing your financial future.]( What am I talking about? [Click here to see my urgent briefing.]( Recommended Link [Attention! Before You Read Any Further…,]( Before you read any further in today’s issue, an urgent situation needs your immediate attention. If you don’t plan on claiming this new upgrade to your Strategic Intelligence subscription, you’re missing out on a huge opportunity. Right now is your chance to grab one of the biggest (and most valuable) upgrades our company has ever made to a newsletter. I’m taking Strategic Intelligence to an entirely new level and I’d hate to see you left behind. [Click Here Now]( The Daily Reckoning Presents: Hyperinflation can arrive much faster than you expect… ****************************** Yes, Hyperinflation Can Happen Here By Jim Rickards [Jim Rickards]When you hear “hyperinflation,” you might only think of two images. One is a reckless third-world country like Zimbabwe or Argentina printing money to cover government expenses and worker salaries to the point where trillions of local “dollars” or pesos are needed to buy a loaf of bread. The second image is of the same phenomenon in an advanced country such as Germany but long ago. Perhaps you think of grainy, black-and-white photos from the 1920s displaying people carting around wheelbarrows of paper money. The last thing you probably think of is hyperinflation in a 21st-century developed economy such as that of the United States. We tell ourselves that hyperinflation might happen in faraway or long-ago places but it can’t happen here. Yet it can happen here. In fact, the United States flirted with hyperinflation in the late 1970s, when Treasury bonds were denominated in Swiss francs because the dollar was rapidly depreciating and people were losing faith in the dollar. We also flirted with hyperinflation in the late 1910s following the money-printing to fund World War I. Other episodes arose after the Civil War and the American Revolution. The point is hyperinflation in the U.S. is not unrealistic. There’s no universally agreed-upon definition of hyperinflation. But one widely used benchmark says hyperinflation exists when prices increase 50% or more in a single month. So if gasoline is $3.00 per gallon in January, $4.50 per gallon in February and $6.75 per gallon in March and the prices of food and other essentials are going up at the same pace, that would be considered hyperinflationary. It also tends to accelerate once it begins, meaning the monthly 50% increase soon becomes 100%, then 1,000%, etc., until the real value of the currency is utterly destroyed. Beyond that point, the currency ceases to function as a currency and becomes litter, good only for wallpaper or starting fires. Hyperinflation doesn’t emerge instantaneously. It begins slowly with normal inflation and then accelerates violently at an increasing rate until it becomes hyperinflation. This is critical for investors to understand because much of the damage to your wealth actually occurs at the inflationary stage, not the hyperinflationary stage. The hyperinflation of Weimar Germany is a good example of this. In January 1919, the exchange rate of German Reichsmarks to U.S. dollars was 8.2 to 1. By January 1922, three years later, the exchange rate was 207.82 to 1. The Reichsmark had lost 96% of its value in three years. By the standard definition, this is not hyperinflation because it took place over 36 months and was never 50% in any single month. By the end of 1922, hyperinflation had struck Germany, with the Reichsmark going from 3,180 to one dollar in October to 7,183 to one dollar in November. In that case, the Reichsmark did lose half its value in a single month, thus meeting the definition of hyperinflation. One year later, in November 1923, the exchange rate was 4.2 trillion Reichsmarks to one dollar. History tends to focus on 1923 when the currency was debased 58 billion percent. But that extreme hyperinflation of 1923 was just a matter of destroying the remaining 4% of people’s wealth at an accelerating rate. The real damage was done from 1919–1922, before hyperinflation, when the first 96% was lost. Recommended Link [New Federal Rule could change America forever]( [Read more here...]( Everything about your way of life is about to change – thanks to a new rule passed by the Federal Government. How much you pay for energy… how you shop for groceries… even how much you pay for healthcare – it could all radically change. That’s according to the man dubbed “The Tech Prophet” by Forbes magazine. Not only that, he believes it could create one of the greatest money-making opportunities in American history... [Click Here To See Why]( Again, if you think this can’t happen here or now, think again. As I also mentioned above, something like this started in the late 1970s. The U.S. dollar suffered 50% inflation in the five years from 1977–1981. We were taking off toward hyperinflation, relatively close to where Germany was in 1920. Most wealth in savings and fixed income claims had been lost already. Hyperinflation in America was prevented by the combined actions of Paul Volcker and Ronald Reagan, but it was a close call. Hyperinflation acts like a deadly virus with no cure. It may be contained for long periods of time, but once it breaks out into a general population, there may be no stopping it without enormous losses. To explain why, it’s essential to know how hyperinflation begins and how it feeds on itself. In a complex system such as the U.S. economy, small initial blunders can have catastrophic consequences once feedback loops and behavioral changes take over. As inflation velocity spikes up, expectations of more inflation grow, and the process accelerates and feeds on itself. In extreme cases, consumers will spend their entire paycheck on groceries, gasoline and gold the minute they receive it. They know holding their money in the bank will result in their hard-earned pay being wiped out. Americans are now realizing this. The important point is that hyperinflation is not just a monetary phenomenon — it’s first and foremost a psychological or behavioral phenomenon. It’s part of what I call the “money illusion.” Money illusion has four stages. In stage one, the groundwork for inflation is laid by central banks but is not yet apparent to most investors. This is the “feel good” stage where people are counting their nominal gains but don’t see through the illusion. Stage two is when inflation becomes more obvious. Investors still value their nominal gains and assume inflation is temporary and the central banks “have it under control.” Stage three is when inflation begins to run away and central banks lose control. Now the illusion wears off. Savings and other fixed-income cash flows such as insurance, annuities and retirement checks rapidly lose value. If you own hard assets prior to stage three, you’ll be spared. But if you don’t, it will be too late because the prices of hard assets will gap up before the money illusion wears off. Finally, stage four can take one of two paths. The first path is hyperinflation, such as Weimar Germany or Zimbabwe. In that case, all paper money and cash flows are destroyed and a new currency arises from the ashes of the old. The alternative is shock therapy of the kind Paul Volcker imposed in 1980. In that case, interest rates are hiked as high as 20% to kill inflation, but nearly kill the economy in the process. Sadly, there are no Volckers or Reagans on the horizon today. There are only weak political leaders and misguided central bankers. Today’s markets depend on the artificially low interest rates that the Fed’s been generating since 2009. Raising interest rates in a meaningful way would devastatingly pop the asset bubbles in stocks and elsewhere. Remember how markets revolted against the possibility of further rate increases in December 2018, when rates were still under 3%? Today, rates are 1% or less and the market’s already cratering. Inflation will likely accelerate, as it did in the U.S. in 1980 and in Germany in 1920. Whether hyperinflation comes next remains to be seen. And just to be clear, I’m not predicting it. But you need to realize that it can happen more easily than most people expect. The assets you need now to preserve wealth in the future are simple and timeless. Gold, silver, land and select tangibles in the right amounts will serve you well. Mutual funds designed specifically to protect against inflation should also be considered. The sooner you take defensive action, the better off you’ll be. Regards, Jim Rickards for The Daily Reckoning P.S. When the panic hits, demand will explode and supplies will vanish. But I also recommend that you NOT invest in gold until you see my urgent message about the gold market. That’s right. Don’t even buy a single ounce of gold [until you see this message.]( It’s because we’re witnessing a rare occurrence in the gold market that we haven’t seen for years, and it has serious implications… [Essentially, this could be the most important message you see all year if you are serious about securing your financial future.]( What am I talking about? [Click here to see my urgent briefing.]( --------------------------------------------------------------- Thank you for reading The Daily Reckoning! We greatly value your questions and comments. Please send all feedback to [feedback@dailyreckoning.com.](mailto:dr@dailyreckoning.com) [James Rickards][James G. Rickards]( is the editor of Strategic Intelligence. He is an American lawyer, economist, and investment banker with 35 years of experience working in capital markets on Wall Street. 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