Ludwig von Mises - Inflation in the long run

In the long run, inflation comes to an end with the breakdown of the currency.

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Our take on this quote:

The inevitable end of inflation: the breakdown of currency

Ludwig von Mises, one of the greatest economic minds of the Austrian School, warned about the dangers of inflation with this simple yet powerful quote. Inflation, often viewed as a tool for economic stimulus or government financing, may seem manageable in the short term. However, when left unchecked, it inevitably leads to the collapse of the very currency it inflates.

This article will break down Mises' quote, explore real-world examples, and outline key takeaways for investors, politicians, and everyday citizens.

Breaking down the quote

Mises' statement is a fundamental truth of monetary economics: inflation is not a neutral force but a destructive one that ultimately erodes the value of money until it ceases to function as a store of value, medium of exchange, and unit of account.

1. Inflation begins as a policy tool

   • Governments often resort to inflation as a way to reduce debt burdens, stimulate economic growth, or fund public spending. However, inflation is essentially a hidden tax that transfers wealth from savers to debtors.
      

2. Inflation becomes self-reinforcing

   • Once inflation takes hold, expectations shift. Businesses raise prices, workers demand higher wages, and governments print more money to keep up with rising costs. This leads to an inflationary spiral.
      

3. Hyperinflation and currency breakdown

   • If inflation is not controlled, it escalates into hyperinflation. At this stage, people lose confidence in the currency, shifting to alternative forms of money such as foreign currencies, gold, or Bitcoin. The official currency eventually collapses.

Mises’ warning is clear: inflation may provide short-term relief, but in the long run, it always ends in the breakdown of the currency.

Real-World examples of currency breakdown

1. The Weimar Republic (Germany, 1921-1923)

• What happened?
  After World War I, Germany printed excessive amounts of money to pay war reparations and fund government expenses. Inflation spiraled out of control, reaching 29,500% per month at its peak. People used wheelbarrows of cash to buy bread, and savings were wiped out.
   

• Lesson learned:
  Printing money does not create wealth - it destroys the currency.
   

2. Zimbabwe (2000s)

• What happened?
  In an attempt to address economic problems, Zimbabwe’s government printed vast amounts of money. This led to hyperinflation reaching 89.7 sextillion percent per month in 2008. The Zimbabwean dollar collapsed, and the economy had to dollarize.

• Lesson learned:
  When confidence in a currency is lost, people abandon it for more stable alternatives.
   

3. Venezuela (2010s)

• What happened?
  Years of money printing, combined with economic mismanagement, led to hyperinflation exceeding 1,000,000% per year. The Venezuelan bolivar became worthless, and citizens turned to U.S. dollars and Bitcoin for transactions.

• Lesson learned:
  People always seek sound money when their national currency collapses.
   

These examples prove Mises’ point: inflation never sustains an economy - it ultimately destroys the currency.

Lessons for investors

Mises’ warning about inflation carries important lessons for investors looking to preserve wealth in an era of rising money supply and government debt.

1. Avoid holding too much cash

   • Inflation erodes purchasing power. Holding excessive cash in a depreciating currency can be financially devastating.
      

2. Hedge with hard assets

   • Gold, Bitcoin, and real estate are historically strong hedges against inflation. These assets retain value when fiat currencies lose purchasing power. Read a free bitcoin course.
      

3. Diversify across currencies and geographies

   • Holding assets in multiple currencies or investing internationally can reduce exposure to inflation-driven currency collapses.
      

4. Invest in productive assets

   • Stocks in companies with strong pricing power and essential commodities can perform well during inflationary periods.
      

Smart investors position themselves to benefit from inflation-resistant assets rather than being caught off guard by currency depreciation.

Implications for politicians

Mises’ insight also carries critical warnings for policymakers:

1. Short-term benefits, long-term destruction

   • Printing money may provide temporary economic relief, but it ultimately leads to currency collapse. Responsible fiscal policies are necessary to avoid economic ruin.
      

2. Loss of public trust

   • When inflation erodes savings and purchasing power, citizens lose faith in their government and its institutions. This leads to political instability.
      

3. The risk of alternative currencies

   • If governments fail to maintain sound money, people naturally shift to alternative currencies like Bitcoin, gold, or foreign fiat. This undermines monetary control.
      

4. The need for sound monetary policy

   • Instead of relying on inflationary policies, governments should encourage economic growth through free markets, innovation, and stable monetary policy.
      

History proves that ignoring these lessons leads to economic disaster.

Key takeaways

Mises’ warning about inflation and currency collapse remains as relevant as ever. Here are the key lessons:

1. Inflation always ends in currency breakdown

   • Governments cannot print money indefinitely without consequences.
      

2. Hyperinflation is a confidence crisis

   • When people lose faith in a currency, they abandon it for alternatives.
      

3. Investors must protect themselves

   • Holding inflation-resistant assets is crucial to preserving wealth.
      

4. Politicians must prioritize sound money

   • Responsible fiscal and monetary policies prevent economic catastrophe.
      

Final thoughts

Ludwig von Mises’ quote is not just a theoretical warning - it is a historical reality. Inflation may start as a policy tool, but when mismanaged, it ends with the destruction of the currency itself.

For investors, the lesson is clear: trust in government money is not absolute. Holding assets that protect against inflation, such as Bitcoin, gold, and real estate, is essential for financial security.

For policymakers, the takeaway is even more urgent: sound money is the foundation of a stable economy. If governments ignore this lesson, the markets - and the people - will eventually reject their currency.

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