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 21st 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.
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