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George Schulz straightens me out

Posted by John Reed on

I stand corrected. In my book How To Protect Yourself from Hyperinflation & Depression, 2nd edition (…/john-t-reed-s-book-on-hyperinfla…), I said my research turned up many examples of disinflation, like the 1981 ending of inflation in the US by Reagan and Volcker, but none of dis-hyperinflation. Disinflation means the currency inflates, then the inflation subsides, and the nation in question still uses the same currency that was hyperinflated. I mentioned that to a guest at a dinner party Wednesday. He said he could give me an example of dis-hyperinflation and that he was involved in it.

He is George P. Schulz (, one of only two persons—the other was Eliot Richardson—ever to hold four U.S. cabinet posts: Secretary of State, Labor, and Treasury as well as head of the Office of Management and Budget (under Nixon and Reagan). For a novelist writing about adventures in the Executive Branch, George Schulz is one-stop shopping. 

Israel had hyperinflation in 1984 and 1985—rates in the 450% to 1000% range. According to George, the Israeli treasury officials asked him for help. He told them they needed to behave more responsibly, that they needed to get genuine buy-in on the budget from all the related parties including the unions—they had previously regarded the budget as mere PR—and cabinet departments, and that he would be the bad guy as long as they did what he told them. They did.

The Wikipedia discussion of it does not mention Schulz, but seems to corroborate the details.…/1985_Israel_Economic_Stabilizati…

That Wikipedia plan includes price controls. No way did they help.

George and I instantly agreed that the combination of hyperinflation and price controls empties store shelves and lowers product quality. I will be changing my Unelected President book to reflect Israel’s successful dis-hyperinflation because the plot includes inflation adventures.

I was surprised when I mentioned an incident involving Fed Chairman Paul Volcker to George. He said he was not aware of it. Maybe I misdescribed it. Here is the Wikipedia version:

“James Von Brunn was arrested in 1981 for attempted kidnapping and hostage-taking of members of the Federal Reserve Board after approaching the Federal Reserve's Eccles Building armed with a revolver, knife, and sawed-off shotgun. Schulz was not in the Reagan Administration as Secretary of State until 1982.”

My hyperinflation book said the only way hyperinflation ended was elimination of all capital controls, e.g., Zimbabwe or introduction of a new currency that the public trusted e.g., the Rentenmark in Germany in 1923. I now know from George Schulz that there is a third way—dis-hyperinflation e.g., Israel 1985.

I asked Secretary Schulz about some other aspects of my novel. He agreed with two things and disagreed with another. But I was greatly encouraged when he said the book sounded very interesting and asked me to send him several copies when it came out. I will start work on the last chapter tomorrow.

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