Gray Zone Research #001 - Dying of Money

ADMIN NOTE: I sent out the full PDF report to Gray Zone Research subscribers last Friday. I’m running the Gray Zone Research subscription through Forward Observer, but will keep this substack open to publish updates and notes. If you like what you read, please join me here: https://forwardobserver.com/gray-zone-research-subscribe/

Good afternoon, and welcome to very first edition of Gray Zone Research. This month, I’m taking a look at our economic, financial, and monetary future.

In this issue…

• Welcome Wagon… 1

• A note on the American Empire… 2

• One perspective on our short term future… 3

• Alternate Future: An inflationary depression? … 8

• Dying of Money… 8

• What’s the hyperinflation risk? … 12

• What to do about it all… 16

(1) Welcome Wagon

First, I’d just like to thank you for subscribing to Gray Zone Research. For years, I’ve wanted a place to research and write the things I want to research and write about. If you’re like me, then we’re both pretty open to the idea that we’re living through the End of the American Empire. I’m most interested in what empire collapse has looked like throughout history, everything from their politics and their civil wars, to their food sources and their money. This is the entire purpose of Gray Zone Research – to analyze the “fringe” topics that, once we learn from history, we learn shouldn’t be so fringe.

Second, my desire to take on this project is mainly due to the birth of my son. He and his generation will inherit the problems we’re unable to solve. History does not give me a lot of hope that he will live in a time of peace, so I ask myself if there are decisions I can make today that will make tomorrow better. I think there are. This is my best effort to provide an important strategic advantage.

Lastly, the title of this issue is “Dying of Money”, a tribute to the 1974 book of the same name. Written under the pseudonym Jens O. Parsson, Dying of Money compares the Weimar hyperinflation with two periods of inflation in the United States. It is the most instructive book I’ve read on the causes and dangers of both inflation and hyperinflation. And given that we are currently battling with inflation and on the cusp of another global financial crisis, it seems appropriate that we start with where our money might go from here.

With that, thank you again. Your support is incredible. I hope to return the value many times over. – M.S.

// Sections 2-6 are available for Gray Zone Research subscribers //

(7) What to do about it all

There are some obvious partial solutions, such as becoming more self-sufficient and growing or producing more of what you need, and hedging with real assets that will hold their value over time.

In Dying of Money, Parssons explains that some German companies, states, and towns issued their own “emergency money” while others predictably bartered. Use of foreign currencies such as Swiss francs also became common. And still more Germans tried to move their money abroad with some success.

Next week, I’m compiling some best practices which I’ll share with subscribers, but I’ll leave you with a final story.

In the early 1920s, German industrialist Hugo Stinnes foresaw the consequences of hyperinflation. Some even blame Stinnes and other industrialists for promoting hyperinflation among the financial class for the exact reason I’m about to tell you.

Stinnes’ family owned coal mines and he was already very wealthy. In the lead up to hyperinflation, Stinnes took out as many loans as he could and extended his lines of credit as far as they would go in order to buy cargo and shipping companies and equipment. The obvious benefit is that as the mark hyperinflated, so too did his debts disappear, making him the wealthiest man in Germany for a time. But the move also enabled Stinnes to export coal and steel with the companies he owned. 

The moral of the story is that Stinnes thus benefited three times. First, he produced something of value that would have enduring demand. Second, he could raise the prices of what he produced so as to keep up with the rate of inflation. And third, he controlled the export and export rates of his own production, ensuring that his production always connected with a buyer, either domestically or internationally.

My takeaway is that precious metals and other hedges are a defensive solution at best. It’s one part of a hyperinflation survival strategy, but only as a store of value that can be traded for a more stable currency in the future. My major problem with precious metals is that they don’t generate income.

What I learned from Stinnes is that the ability to generate income during periods of inflation and hyperinflation is based on your ability to produce things of value and connect them with buyers. On Friday, 14 April, I’ll send out a mid-month report on long-term, income-generating solutions for inflation and hyperinflation. And I’ll be discussing both reports further with Gray Zone Research All-Access subscribers in the monthly conference call. I’ll see you then. – M.S.