The Economics of Inflation

"Correct. Bresciano-Turroni was an employee at the time, I think, in Germany, and he followed this hyperinflation development very closely. He describes the impact of inflation on equities, on real estate, on wages and on the exchange rate. I think it’s very important for investors to have a historical background about how booms occur and how depressions then ensue. You can have a depression that is deflationary and you can have a depression that is inflationary. In other words, real incomes go down and standards of living go down, but prices go up. And by printing money, the central banks think they can control the destiny of an economy — when, in fact, an economy moves quite differently from the will of central bankers. “I think it’s very important for investors to have a historical background about how booms occur and how depressions then ensue.” It is a fact of life that we have cycles: we have excursions into prosperity and excursions into depression. The excursions into prosperity can be inflationary or can be disinflationary or deflationary and the excursions into depression can be deflationary or inflationary. Many people think that in inflationary times stocks go up. But, in reality, in nominal terms, equities do go up but — in real terms, or in gold terms, or in a strong currency term — they go down . And this book analyses precisely the social consequences of high inflation. Obviously, they’re not very encouraging. I would say for an investor today, if he reads this and doesn’t understand the implications he shouldn’t read at all."