The message from past crises is clear: money-printing on the scale we’re seeing it now brings inflation. And while that might feel good at first, says Dominic Frisby, the endgame is grim.

In 1974, inflation of more than 10% gripped the US. President Nixon had unpegged the dollar from gold three years earlier; the oil price had risen by 400%; prices were out of control.

An American lawyer by the name of Ronald H. Marcks decided to write a book about inflation, specifically the spectacular episode that all but destroyed Germany in the early 1920s and the American inflation that had steadily gained force since 1962.

He couldn’t get a publisher, so he decided to self-publish, and 1,000 copies of Dying of Money – Lessons of the Great German and American Inflations were printed.

Marcks didn’t want to upset any of his clients and so he did it under a pseudonym – Jens O. Parsson was the name he chose.

Writing under a pseudonym limits the extent to which you can promote, and the book never became a household name. Even today there is no Wikipedia entry. But copies lurked in libraries, PDFs changed hands on the net and the book never went away. And a good thing too, because it’s terrific.

Paperbacks are trading hands on Amazon for over $800, so, good though it is, I don’t recommend you rush out and buy a copy. However, I’m going to quote a couple of passages here and let’s see how true they ring to this strange Covid world around us.

Inflation and deflation are slightly ambiguous terms that mean different things to different people. When definition is not clear, dispute often follows and so it is with inflation and deflation. Economists are forever arguing about which it is we are experiencing, when, often, they mean different things by the terms. As a result we now have terms like “stagflation”, “disinflation” and “reflation”.

Originally, inflation meant a growth in the supply of money and credit, with the consequence of higher prices. As you would inflate a tyre or a dinghy, so you inflate the money supply. The consequence of more money is higher prices. Deflation meant the opposite. Less air in the dinghy – with the result that it sinks.

To most economists, inflation simply means rising prices, and deflation means falling prices. They don’t look at the amount of air in the dinghy, just at how high or low certain waves go.

Rising and falling prices are defined by measures such as CPI. But the Consumer Price Index, to give it its full name, only measures the prices of certain consumer goods and services.

It doesn’t measure house prices, copper prices, share prices and many of the other prices that feature in our lives. These prices, what’s more, are prone to the deflationary forces of improved productivity and distribution and market competition, which push things down.

Research by Positive Money shows that only about 13% of newly created money and credit actually goes into the goods and services measured by CPI. So CPI is not a true measure of inflation.

The extraordinary money supply created by central banks in the post-2008 era did not make its way into the real economy and CPI was fairly muted over the period. Instead, the money made its way into financial assets – where there most certainly was inflation. Ordinary Joe in the real economy, however, did not see any of the “benefits”.

Today, though, via furloughs, loans and all the other means of bailing out the Covid crash, the money is, very definitely, going into the real economy. And it’s starting to look like this time it will show.

You’d think the economy was booming. Stocks are up, commodities are rising and the biggest inflation canary of the lot, silver, is going ballistic, up almost 30% in little more than a week.

I’m even noticing signs of inflation in the supermarkets – far fewer “3 for 2” deals, reductions and other bargains. Many people, as a result of not spending during the lockdown, are actually feeling cash rich. This is something of a crack-up boom: inflation is here.

“Everyone loves an early inflation,” Parsson says [begin from page 71]. The effects at the beginning of an inflation are all good. There is steepened money expansion, rising government spending, increased government budget deficits, booming stockmarkets, and spectacular general prosperity, all in the midst of temporarily stable prices. Everyone benefits, and no one pays. That is the early part of the cycle.”

This is what we are experiencing now. It’s what, according to Parsson, comes next that we should all be worrying about:

“In the later inflation, on the other hand, the effects are all bad. The government may steadily increase the money inflation in order to stave off the later effects, but the later effects patiently wait.

“In the terminal inflation, there is faltering prosperity, tightness of money, falling stockmarkets, rising taxes, still larger government deficits, and still roaring money expansion, now accompanied by soaring prices and ineffectiveness of all traditional remedies.

“Everyone pays and no one benefits. That is the full cycle of every inflation.” [end from page 71]

Nothing is ever as simple as it seems in a book. Real life has twists and turns and false signals galore. But take a step back from the daily noise and consider the long-term picture, and Parsson’s description seems rather apt.

Will central planners be able to manage the later, bad inflation (assuming it comes)? After 2008, their confidence is surely up. My view is that they got away with it then – they dodged a bullet. They might not get so lucky this time round.

To Parsson again: “Scarcely a person … was untouched by inflation's handiwork. Every citizen, in his daily life and with his earthly fortune, danced to a tune he mostly could not hear, played for him by the government's inflation.

“It was up to every citizen to learn for himself what was happening and to look out for himself if anyone was going to, because no one else was looking out for him. The government certainly was not.

“The government was compelled by its other duties not to protect him but the opposite, to continue to steal from him by the inflation as long as it could. The forces at work were such that there was no practical possibility the inflation would end or abate".

If Parsson is right, the government’s priority is not you, it is itself. It is its predicament and staying in power. If it needs to debase its currency to do that, it will. The way to protect yourself from the government debasement is via non-government money. Every penny you put into gold or bitcoin is a penny that government can’t debase.

We thought the bad inflation was coming after the post-2008 money print, but it never quite came. If inflation “patiently waits” as Parsson suggests, then perhaps its time is coming now. The gold and silver price action certainly suggests that it is.

Interview with "Dying of Money" Author, Jens O. Parsson

The Dying of Money, written under the pen name Jens O. Parsson, is perhaps the best explanation ever written on the process by which inflation works through markets and the economy. Considered a “Must Read” by Jim Puplava and regularly quoted by him on the Financial Sense Newshour, it is our honor to present a portion of his recent interview on the show (airing for subscribers this Friday) where they discuss the mechanics of inflation, how it moves from the stock market into goods and services, and some of the tell-tale signs for identifying when this process is about to begin.

Jim Puplava: After World War I, the Major Powers went through a Great Recession, but unlike the power that was defeated things were different in Germany. In 1920 and 1921, Germany had enjoyed a remarkable prosperity envied by the rest of the world. Prices were steady, business was humming, and everyone was working. The stock market was skyrocketing. The Germans were swimming in easy money. Within a year they were drowning in it. Until it was all over, no one seemed to notice any connection between the earlier false boom and the latter inflationary bust.

Fast forward to the 21^st Century today and we have central banks around the globe printing money. Will we see inflation again? Well, we are going to be talking about that today with my special guest, Jens O. Parsson. Now you’ve heard me talk about Dying of Money over the years. I’ve often referred to the author as Jens O. Parsson. His real name is Ronald Marcks and he joins me on the program today. Mr. Marcks, it’s great to be speaking with you.

Ronald Marcks: Oh, it’s my pleasure.

Jim: Before we get into your book, I want to ask you: Why did you choose a gnome de plume, such as Jens O. Parsson when you wrote the book, rather than using your name?

Ronald: Well, I was a practicing lawyer at the time—this was in the middle ‘60s—and we had a number of clients that were the hot stocks of the period and I had some bad comments to make about that period in US economic history and I didn’t want to offend any clients. So, I published it under an assumed name.

Jim: You have written, in my opinion, one of the best books I have ever read on inflation and how it works. Given your law background, how did you acquire the insights into the process of inflation and how it works itself through the economy?

Ronald: Well, it was a process of self-education. I had never had an economics course, which I think was a bit of an advantage because I hadn't been imbued with some of those wrong ideas that economics was teaching; but, I saw the inflation starting to happen in the middle ‘60s and I wanted to see what was the cause of this. So, I conceived of the idea that I have in the book of tracing inflation to the quantity of money times its velocity divided by the amount of assets to be paid for by the money. And before I discovered that theory had already been created by some economists who are not the orthodox economists but mavericks of a sort.

Jim: Who were those economists?

Ronald: Well, Irving Fisher was one. He was a very prominent American economist and had written on the subject back at around the turn of the century before World War I.

Jim: You know, one of the things I learned in your book, the ability of savers in Germany to hold marks enabled the government to mask the underlying effects of inflation. This storage factor of investors saving marks kept them from being immediately dumped into the market. In many ways, just like today where you have Americans that are holding Treasuries or buying Treasury bonds—a lot of money has gone into bond funds—do you see a lot of similarities between what was happening in Germany and what’s happening today?

Ronald: Oh, very much so. In fact, I think it’s even worse now than it was in Germany. I did some calculations on the present state of affairs. The money supply has increased by 4.85 times since the end of 1979 and prices have only increased by 2.32 times, which means that there’s a latent inflation of about 109%, by these calculations. That inflated money, I would say, is mainly in the debt markets because you find that even Federal debt securities are pretty close to zero percent interest, which is very contrasting to the situation you had in the past when outbreaks of inflation were occurring. Interest rates when higher than 10% for instance. So, that’s where I think the money is that’s been pumped out and the question is, when does that money start to come back from debt securities into goods.

Jim: This is something I guess people here in the United States have had a tough time understanding. The one thing that the US has as an advantage is we’re the world reserve currency. Does that give us a little bit more leeway, in your opinion, versus a country like Argentina?

Ronald: I don’t think it gives you more leeway, I think it gives you less because those foreign holders of dollars are the potential for an outburst of inflation. If they lose faith in the dollar, that’s what will happen. This happened with Germany too. The German mark was greatly respected at the time and a great many marks were held by overseas holders, including Americans, and when the inflation started to get rolling all of that foreign money came into Germany looking for things to buy and that compounded the inflation instead of reducing it.

Jim: You know, something that you talk about in your book, which we’re seeing play out today, is every burst of monetary inflation was followed by a stock market rise and boom with prosperity. Every contraction by a stock market fall and recession. We saw, for example, the boom of the late ‘90s followed by a contraction and a stock market fall. That was followed by more money printing and we got another stock market and real estate boom; and then we got a crash in the stock market as well as real estate. Let’s talk about those reservoirs of inflation that you talk so much about in your book—money wealth being one of them and the stock market being another.

The remainder of this audio interview will be available for subscribers Friday, June 7th on the Newshour page.