Dying of Money: Lessons of the Great German and American Inflations

By Jens O. Parsson

Overview

Originally published in 1974 by Wellspring Press, "Dying of Money" is a study of inflation that draws extended parallels between the German hyperinflation of 1914-1923 and the American inflation that was unfolding at the time of writing. The book combines historical narrative, economic theory, and practical advice for wealth preservation during inflationary periods. Despite its age, it has experienced a remarkable revival of interest in the post-2008 era of quantitative easing.

Key Themes and Arguments

The German Inflation

The book opens with a detailed account of the German inflation, tracing its roots to World War I financing through money creation rather than taxation. Parsson documents the "Great Prosperity" of 1920-1921, when the inflationary stimulus initially produced economic euphoria -- rising stock markets, low unemployment, and booming business activity -- before the mathematical inevitability of exponential money growth overwhelmed the economy. This sequence, where inflation initially feels beneficial before revealing its destructive nature, is a central lesson of the book.

The American Inflation

Parsson then turns to the American experience, beginning with World War II and tracing the inflationary pressures through the 1960s "Great Prosperity" (paralleling the German experience) and into the Nixon era of price controls and monetary expansion. He argues that the American inflation, while slower in pace, follows the same fundamental dynamics as the German case.

General Theory of Inflation

The theoretical core of the book develops a comprehensive framework for understanding inflation. Parsson examines the mechanics of money creation, the role of velocity (the speed at which money circulates), the distinction between nominal and real values, the relationship between government debt and money supply, and the feedback loops between inflation expectations and actual inflation. He provides a particularly illuminating discussion of how inflation redistributes wealth from creditors to debtors and from the productive to the politically connected.

Keynesian Economics Critique

Parsson offers a sustained critique of Keynesian economics as an intellectual framework that rationalizes inflationary policy by focusing on short-term output and employment effects while ignoring the long-term consequences of monetary expansion. He argues that Keynesian prescriptions amount to treating the symptoms of economic dysfunction while exacerbating the underlying disease.

Self-Defense Strategies

The final sections address practical strategies for preserving wealth during inflationary periods, including analysis of stocks, real estate, gold, and foreign currencies as inflation hedges. Parsson argues that the stock market can serve as an inflation hedge over the long term but may fail to keep pace during periods of accelerating inflation.

Significance

The book's enduring relevance lies in its detailed analysis of the psychological and political dynamics of inflation -- particularly how the initial prosperity created by monetary expansion generates political constituencies that resist the painful adjustments required to restore monetary stability. Its parallels between the German and American experiences offer a framework for evaluating contemporary monetary policies.