$1.77 Every Year For Life: What Inflation Can Do To Your Finances: Lessons from Germany and its neighbors during the post-World War I inflation. This series of articles is not intended to imply that the U.S. is likely to encounter a hyperinflationary crisis. However, America has experienced bouts of serious inflation in the past and could easily do so again. The extreme conditions that occurred in Germany help to illustrate the mechanisms of inflation better than a more benign course of currency devaluation could do.

 In 1922, government workers went on strike and gained a small adjustment over the usual rise in their wages, but they had been practically starving for a couple of years. People on pensions were living in dire poverty. The salaries of bank clerks had fallen so far behind price increases that one year’s income would not support a clerk and his family for more than a month.


To illustrate how inflation destroyed the value of savings accounts and, especially, middle-class wages that were not diligently raised to match price increases, here are some statistics from July 1922 in Germany. In that month food prices had gone up 50%. What had cost two Reichsmarks in June cost three in July. Since the beginning of World War I in 1914, living expenses for a family had gone up by eighty-six times, but wages had gone up only thirty-four times. These reported averages greatly overstated the wage increases for many professional workers whose services were not in demand. By October 1923, near the end of the inflationary madness, the average German worker who was fortunate enough to still be employed was able to buy only 20% of the goods and services he or she could have purchased in 1914.


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