I have read a lot about inflationary periods in history which we have experienced from time to time, under John Law in France and then later during the French revolution and in Latin America. I also experienced periods of high inflation myself in the sense that during the very high inflationary period in Latin America in the 1980's I visited most Latin American countries because I was interested in the fact that when you have high inflation in a country, usually the currency tumbles and so although there is high inflation in local currency, in a strong currency unit, like in the 80's the dollar was strong, the price level actually went down very substantially so investment opportunities were fantastic.
You could buy buildings in Buenos Aires, the stock market in the late 1980's in Argentina... the whole stock market was worth 750 million US dollars, 750m, less than a billion. So you could essentially have bought the whole of Argentina for less than a billion dollars!! What happens in these periods of high monetary inflation is it is highly beneficial for a few families and a few well to do people because they know how to move their money between local currency and foreign currency and they know how to accumulate assets.
The people that get hurt are the masses, the middle class, the lower classes because their wages go up much less than the cost of living increases. Then what usually follows is a kind of political change of wind and you have new governments coming in and sometimes you have revolutions and sometimes you have an entire new leadership.
We had hyper-inflation in Germany and by the way there is a very good book out about the economics of inflation during the Wiemar period, but in each instance it led to a polarization of wealth and this is precisely what is happening now. You have huge merger and acquisition activity and you have stock buy-backs and if you look at the wealth inequality it is not between 1% of the population and 99, it is between 0.01%, the Carl Icahn's of this world and the big assets holders and then the masses that do not have assets so they don’t benefit from rising asset prices.
I can tell you also that here in Switzerland, 90% of the people, they think the government is no longer looking after the interests of the people but after their own interests. It is the same in Europe. I think this is a huge failure of democracy, that democracy instead of having been able to elect leaders that look after the interests of the people, they actually look after their own interests. I mean you look at the Clinton's, the Bush families and so forth, do you think they care about the ordinary Americans? They don’t care, they care about themselves, it is a power game. They care about money that is for sure.
