Not Lugers, but interesting German history and a lesson for all

[spacecoast]

Posted this on the other forum, consolidating information from the original post and a response...

Like many of you, I'm sure, when I was a kid I was introduced to stamp collecting and spent many pleasurable hours matching stamps to spaces in the catalog and carefully affixing them with stamp hinges, sometimes without recognizing the historical context of the stamps. My mentor was a neighbor, an accomplished collector, who kindly provided me with a Harris Statesman album and a cake box full of stamps. As an adult I have collected U.S. Plate Blocks, but have never forgotten the start that kindled my interest.

I still have that album and over the Thanksgiving holiday I happened to be reading a book about Hitler's rise to power, published in 1944. One of the chapters in the book discussed the fantastic hyperinflation of 1923, something I was familiar with but had never connected to my early interest in stamps. Something clicked and I pulled out my Statesman album and found the Germany page for 1923. It's fascinating, to say the least.

My understanding is that before WWI a German mark was the equivalent of something like an American quarter, or about 4 marks per dollar. A wealthy person might have some tens of thousands of marks in the bank. Early German postage was denominated in pfennigs (100 to a mark, the German equivalent of our penny). By early 1923, inflation in Germany was already high but really took off during the year. The page of 1923 stamps I have pasted below starts with 100 Marks (already a huge amount compared to earlier denominations), but steadily marches upward at an exponential rate. In many cases the rates were changing so rapidly that they took lesser stamps and overprinted them with values thousands of times higher, which you will see over and over on this page. The largest denominated stamp I can find near the bottom is 20 billion marks. The wealth-destroying nature of that inflation, of course, aided and hastened Hitler's cause in railing against the bankers (some Jewish) during his rise to power.

Sometimes you have little pieces of history under your nose and don't even realize it. You should be able to click on the image below to examine some details for each stamp if you wish.

Follow up:

The author of the book I read related a story that stuck with me. This isn't word for word, but the essence was:

A previously wealthy depositor would receive a polite note from the bank.

"We are returning your deposit of 68,000 marks because it has become impractical to manage it. The smallest denominated bill we could find is 1,000,000 marks, so we have rounded your deposit up to that amount."

A 1-million mark note would be enclosed and the cancelled stamp on the envelope would have a value of 5 million marks.

Essentially everyone in Germany had a do-over (wealth set to zero) in 1923. I don't think any of us (retired or not) would appreciate that occurring today. It highlights the fact that if your money isn't in hard assets (something with inherent value), then it only has as much value as other people are willing to believe it has. Fiat currency is built on a tenous foundation, and when people lose confidence or the government debases the money things can go south in a hurry.

Other modern examples of hyperinflation include Hungary in 1946 and Zimbabwe in 2007-09 - http://www.investopedia.com/ask/answ...rinflation.asp