My Takeaways – When Money Dies: The Nightmare Of The Weimar Hyper Inflation

My takeaways from this book

• always hedge your bets
• those that converted their marks to other currencies retained more of their value
• the government is not going to tell you the truth and will appeal to your patriotism to stay/right the sinking ship
• those with fixed incomes (pensions, etc) get absolutely destroyed because their income stays fixed
• the blue collar were earning more than white collar during this time. Related because the blue collar could shop their skills around to those willing to pay, whilst those with jobs only had the one source/method of income
• blue collar would demand wage rises due to the increasing cost of living. The government would print more money to appease those people, creating a positive feedback loop when the government would not be able to stop
• the mark was losing value every day so Farmers were withholding produce as long as possible for a better price. Restricting supply and thus increasing
• Inflation (hyper-inflation) would not be linear and you would see an exponential increase
• Within the bubble, new/the government would keep this inflation informaiton from the masses. People actually felt that the prices were rising rather that the money was being devalued
• hard choices need to be made (and strong armed) and having a republic would be deterimental as opposing groups try to advance their objectives. the incentive for the masses will rule and will prioritise 1st order effects over 2nd order effects.

Related takeaways

• Raising taxes is politcal suicide. it is easier to tax the populace through increasing the money supply. it is kind of stealth tax because the numbers and effects are not 1-1 correlated. It takes time for the effects to be felt. M2 velocity to increase.
• whilst increasing taxes there is a headline number and easy calculation that a taxpayer can produce
• it took 50 years for UK to pay back debts back to the US, whilst it took US only a few years of inflation to get rid of the WW2 debt
• the luxury items produced during a bull phase lose alot of value during a depression as these goods are ‘nice to have’ rather than essential. People were bartering their pianos, valuable possessions just for a sack of potatoes
• These items (piano) were illiquid and not fungible. WSB suggests stacking the sats and the crypto because this is the boat in a rising tide that is slowly creeping up. All is fine when it is at your ankles, but once it reaches past your mouth and over – where you can no longer stand. Everyday is a struggle.

pay your taxes

the ancient romans were complaining about taxes 2000 years ago, and today is no different. The tax that you pay is essential to pay for the framework or system that keeps things in order. Look around you, there is always tax.

Even using cryptocurrency you have to pay a tax (fee or inflation) to keep the system running. To maintain your health there is tax to workout.

It is when these taxes become a greater proportion of your life/income that it becomes a problem. Think about all the items that you have committed to, only a few can be done.

Remember the chinese proverb “looking to catch two chicken you will get none”

Risk and reward

at the end of the day – what you don’t want is to be wiped out.

Think of a chain, where you wish to observe the chances of getting either Heads/Heads or Heads/Tails. You would probably think the probability to obtain either of the results its equally probably. However, if you think carefully, the failure condition of Heads is Tails. Which means you need to wait for another Heads to obtain the sequence of heads/tails again.

The sequence Heads/Tails is more probably because the failure is Heads/Heads which does not decrease your likelihood again. From my reading this is called a Hidden Markov Model. Like the game of snakes and ladders you want to avoid the snakes to go back to the beginning. Starting from scratch is the real killer.

This is what investment gurus, nicolas taleb and other warn you about. not all risks and their outcomes are the same. There are one’s that give you are haircut, and others that completely wipe you out. I believe they are called the long tails and are the result of ‘black swan’ type events.

In a bull market everyone is making money, but like all bull markets they become oversaturated and come to an end. If you are the last buyer – than you are the one left holding the bag. You have the opportunity to make enormous profits but the very next day that could evaporate and you are left with 20% gains.

The question is, would you be happy with that? I think that a certain point, complete what is recommended and if something 3x’s take the original capital of the table and continue as normal. That way, you will still retain your original capital if all things go back to zero.

free the mind – by subtracting

How often do we watch a movie and follow the main character as they start their journey carrying just the bag on their back. We see the character evolve and develop as they overcome challenges and experience new things on their journey.

One thing which we do not notice as we follow the character – is actually how uncomfortable it would be to undertake. If you have ever been camping or backpacking, you know that the comforts and the specialised equipment (like coffee machine) that you use daily are sorely missed. On a joruney you do not value this item enough to lumber it around , so you simply live without.

What this does is it focuses your mind on what is essential and it breaks the habit. It frees your mind from the burden that you just have to use the item that you bought. On the journey, you are now free to buy coffee, accept coffee from others because you have no other choice.

Though i am not on a travelling journey, i like to see myself in a journey of life. My current wardrobe is filled to the brim and I have a habit of not throwing items away – lest they become useful in the future. My biggest hangup is spending money on an item that I had previously bought.

After work on a friday i set aside some time and I went through all my stuff again. And I was supprised at all the things i have accumulated over the year. There were definitely duplicates of items (cables) and stuff that i had never used before (beach ball). This beach ball I have kept for nearly 2years without any use!

Doing this exercise allowed me to reconcentrate my efforts and, put in front of myself, the things that truly matter and are important to me. I feel that there is still some more things that I can throw away (old boxes) and monitor which will free up even more space for me.