How to Survive a Crack-Up Boom

08 Sep

How to Survive a Crack-Up Boom

Start with Gold and Silver!

After witnessing the hyperinflation of the 1920s in Germany and Austria, the great free-market economist Ludwig von Mises coined an evocative term for the last stage of a currency breakdown.

He called it the Crack-Up Boom.  In German, it is “Katastrophenhausse,” a catastrophe boom.

US monetary policies ensure that something like a crack-up boom is fast approaching today.  Because we think our friends and clients will need to know, from his work Human Action, here is Mises’ description of the breakdown of a currency:

The characteristic mark of this phenomenon is that the increase in the quantity of money causes a fall in the demand for money…. The monetary system breaks down; all transactions in the money concerned cease; a panic makes its purchasing power vanish altogether. People return either to barter or to the use of another kind of money.

The course of a progressing inflation is this: At the beginning the inflow of additional money makes the prices of some commodities and services rise; other prices rise later. The price rise affects the various commodities and services, as has been shown, at different dates and to a different extent.

This first stage of the inflationary process may last for many years. While it lasts, the prices of many goods and services are not yet adjusted to the altered money relation. There are still people in the country who have not yet become aware of the fact that they are confronted with a price revolution which will finally result in a considerable rise of all prices, although the extent of this rise will not be the same in the various commodities and services. These people still believe that prices one day will drop. Waiting for this day, they restrict their purchases and concomitantly increase their cash holdings. As long as such ideas are still held by public opinion, it is not yet too late for the government to abandon its inflationary policy.

gold and silver investments

But then finally the masses wake up. They become suddenly aware of the fact that inflation is a deliberate policy and will go on endlessly. A breakdown occurs. The crack-up boom appears. Everybody is anxious to swap his money against “real” goods, no matter whether he needs them or not, no matter how much money he has to pay for them. Within a very short time, within a few weeks or even days, the things which were used as money are no longer used as media of exchange. They become scrap paper. Nobody wants to give away anything against them.

It was this that happened with the Continental currency in America in 1781, with the French mandats territoriaux in 1796, and with the German Mark in 1923. It will happen again whenever the same conditions appear. If a thing has to be used as a medium of exchange, public opinion must not believe that the quantity of this thing will increase beyond all bounds. Inflation is a policy that cannot last.

Recently Ron Paul, a student of Austrian school economics and sound money, dedicated an episode of his Liberty Report to How to Survive a Crack-Up Boom.

It is a wide-ranging discussion, beyond only the protection of wealth, to include the importance of a community of like-minded people, the challenges of production and provisions, and more.  But for those things that one cannot provide for himself, nothing is more important than purchasing power, says Dr. Paul.

And that is where we come in.  Speak with a Republic Monetary Exchange gold and silver professional before the crack-up boom. Afterward is too late.