Ghana to Hyperinflation to Germany (1923)DQ reader Steven Kreuch e-mailed me this morning and said that production at Ghana's gold mines had been cut in half today by government request so that there would be enough electricity to power all the television sets for the World Cup game vs. the U.S.
Oh, come on! How am I supposed to root for my own country when the other side is shutting down industrial production so that they have enough electricity to watch the game? Go Ghana!
I mentioned this story to someone at work, and he immediately pulled up the CIA World Fact Book online, which has a ton of useful and interesting information (here's the page on Ghana, by the way).
Since this fellow is a stockbroker, the first thing he pulls up is inflation rate by country, then scrolls to find the highest inflation rates worldwide (Ghana is one of the worst, with a 15% inflation rate annually). He noticed that Iraq had the second highest inflation rate in the world with 40%.
That, of course, made me think of Germany.
Post WWI, Germany experienced what was probably the single worst episode of hyperinflation in the history of the world. Here's a description from the PBS website (excerpted from Paper Money by George J.W. Goodman, otherwise known as "Adam Smith"):
Before World War I Germany was a prosperous country, with a gold-backed currency, expanding industry, and world leadership in optics, chemicals, and machinery. The German Mark, the British shilling, the French franc, and the Italian lira all had about equal value, and all were exchanged four or five to the dollar. That was in 1914. In 1923, at the most fevered moment of the German hyperinflation, the exchange rate between the dollar and the Mark was one trillion Marks to one dollar, and a wheelbarrow full of money would not even buy a newspaper.
That's one trillion as in nobody can imagine what that number even means.
Here's another excerpt:
"My father was a lawyer," says Walter Levy, an internationally known German-born oil consultant in New York, "and he had taken out an insurance policy in 1903, and every month he had made the payments faithfully. It was a 20-year policy, and when it came due, he cashed it in and bought a single loaf of bread." The Berlin publisher Leopold Ullstein wrote that an American visitor tipped their cook one dollar. The family convened, and it was decided that a trust fund should be set up in a Berlin bank with the cook as beneficiary, the bank to administer and invest the dollar.
It's an amazing story, and the full excerpt from the book is a great read. You can find it here.