Tuesday, November 23, 2010

Lear Capital: Could An Ounce Of Gold Be Worth Trillions One Day?

In a really bizarre moment in history, a single American dollar was actually worth 4.2 trillion German marks.

It really happened. To fund its mega-expensive World War I effort, Germany severed the tie between its mark and gold -- something that's always happened, sooner or later, with government-generated currency.

Today there are no gold-backed currencies in the world.

After 1914 in Germany, the mark became just another fancy piece of worthless paper. No longer tied to gold, there were no longer any limitations on how many marks could be printed. But no worries, either -- the patriotic German populace somehow believed everything would work out fine as long as Germany won the war. Because the winners of wars, everybody knew, always dictated the terms of surrender, including -- and especially -- the economic terms.

The trouble was:


By the end of the war in 1918, Germany was a real mess. The Treaty of Versailles imposed steep war reparations, and that did nothing to strengthen a German Reichmark no longer backed by gold or anything else for that matter. (more)

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