Since everyone is so obsessed with money printing and hyperinflation and the lessons of Weimar Germany, JPMorgan’s European property team lead by Harm Meijer has published a big report on the behaviour of various assets during hyperinflationary periods.
This part of the report, on what stocks did, caught our eye…
During Weimar the German population started to speculate in stocks. From When money dies: “Speculation on the stock exchange has spread to all ranks of the population and shares rise like air balloons to limitless heights…… The population was now engaged in evading taxation and devoting their money to speculative purchases…. Shares in respectable concerns which had paid a 20% dividend, were pushed higher and higher till the final holders could not expect a return of even 1%.”
The next chart shows the performance of the German stock market in marks and USD. It is clearly visible that that the stock market did not fall measured in marks, but was more volatile in USD. We we’re not able to find data for property, but believe the chart would have shown a similar pattern (ie. prices up in nominalterms, but not necessarily in real terms). In addition, we believe that ‘unique’ property would have held its value better compared to the overall market.
Bottom line: In marks, stocks had an amazing run. Even in USD they had a nice runup.
More interesting, perhaps, is the behaviour described above, of the hyperinflation being associated with a mass interest in speculation and tax avoidance.