Dr. Michael J. Burry, the hedge fund manager who made hundreds of millions of dollars betting the U.S. housing market would crash and helped inspire the best-selling book, “The Big Short,” predicts Weimar-like hyperinflation in the U.S.
Burry, who runs Scion Asset Management, tweeted over the weekend that he fears prices will go up, citing skyrocketing supply-chain costs and U.S. retail sales, which increased 5.3 percent in January thanks to stimulus checks boosting the economy and trillions more planned.
“The US government is inviting inflation,” Burry tweeted.
Burry linked to “Dying Of Money,” a 2011 book by Jens O. Parsson on the lessons of the Great German and U.S. inflations. The cover of the book depicts old German money — a Reichsbanknote issued on Aug. 22, 1923 for one hundred million marks, worth about $20 on the day it was issued. Three months later, it was worth just a few thousandths of a U.S. cent as the process of inflation played out.
Burry also tweeted about the speedy rise in debt-to-GDP ratio, and increases in the money supply measure or M2, which includes cash, checking deposits, and easily convertible near money.
From 1918 to 1933, Germany was referred to as the German Reich or the German Republic. The term “Weimar Republic” became more common in English usage in the 1930s and refers to the city of Weimar, where the republic’s constituent assembly first took place.
Quoting extensively from “Dying of Money: Lessons of the Great German and American Inflations,” Burry mentioned how inflation has recurred throughout history, how it usually follows an economic boom and rise in new fortunes, and how it leads to higher crime, higher cost of living and poverty. He compared Germany’s road to hyperinflation in the 1920s to the current U.S. trajectory.
“The life of the inflation in its ripening stage was a paradox which had its own unmistakable characteristics,” Burry tweeted. “One was the great wealth, at least of those favored by the boom … business and the stock market were booming … Side by side with the wealth were the pockets of poverty. Greater numbers of people remained on the outside of the easy money, looking in but not able to enter. The crime rate soared … demoralization … crept over the common people … from watching their own precarious positions slip while others grew so conspicuously rich … Almost any kind of business could make money … The boom suspended the normal processes of natural selection … Speculation alone, while adding nothing to Germany’s wealth, became one of its largest activities … Everyone from the elevator operator up was playing the market.
“Throughout these years the structure was quietly building itself up for the blow,” Burry continued. “Germany’s #inflationcycle ran not for a year but for nine years, representing eight years of gestation and only one year of #collapse.” Written in 1974 re: 1914-1923. 2010-2021: Gestation.”
Burry quoted Wall Street Journal writer Charley Grant saying, “When dollars might as well be falling from the sky…management teams get creative and ultimately take more risk.. paying out debt-financed dividends to investors or investing in risky growth opportunities has beaten a frugal mentality hands down.”
“Prepare for #inflation,” Burry said in a now-deleted tweet on Thursday night. “Re-opening & stimulus on the way. Pre-COVID it took $3 debt to create $1 GDP, and it is worse now. In an inflationary crisis, governments will move to squash competitors in the currency arena. $BTC #gold.”
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Burry has been making waves saying he doesn’t see bitcoin or gold as guaranteed havens for investors, Business Insider reported. He described Tesla’s $1.5 billion bet on bitcoin as a distraction from its troubles in China (The first foreign carmaker to operate a wholly-owned plant in China, Tesla has been called out by Chinese authorities citing consumer complaints about quality issues). Burry also said Dogecoin’s record price signals a massive bubble.
Burry invested in the video-game retailer GameStop in 2019 and is credited with helping lay the groundwork for its stock to skyrocket up to 2,500 percent in January. But in recent comments, Burry described the GameStop frenzy as “unnatural, insane, and dangerous” and warned of a massive market bubble.
Burry linked to a Wall Street Journal story in which Dogecoin creator Billy Markus said its current price of 8 cents was as crazy as GameStop stock being worth $325 at one point in January, Business Insider reported.
In another tweet, Burry suggested that he expects a market crash within months.