Category: hyperinflation

Moneybags Musa’s Wild and Crazy Pilgrimage!!!B…

Moneybags Musa’s Wild and Crazy Pilgrimage!!!

Between the 13th and 16th centuries one of the wealthiest and most powerful empires in the world was the Mali Empire, located in what is now west Africa. It’s mighty army numbers over 100,000 at a time when France and England could barely muster an army over ten thousand. It ruled over millions of people. It’s capital, Timbuktu, served as a center of culture, wealth, and learning in Africa. Most importantly, because of it’s geographical location, the Mali Empire controlled an important network of trade routes between Europe, the Middle East, and sub-Saharan Africa, making the empire fabulously wealthy.

image

At it’s height, Mali was ruled by the powerful king Mansa Musa, who reigned from 1312  to 1337. Being the sovereign of a fabulously wealth empire meant of course that Musa himself was fabulously wealthy. In fact, he was so wealthy that he is often credited as the wealthiest man in history. It is extremely difficult to estimate how wealthy he was by modern standards, however most estimates claim around $400 billion US. By contrast Jeff Bezos’ net worth is around $118 billion. Whether this number is accurate or not, it is undeniable that Mansa Musa was seriously loaded.

Musa was a devout Muslim, and as such conducted a pilgrimage to Mecca in the years 1324-1325. When one usually thinks of a religious pilgrimage, especially in the Middle Ages, typically extreme hardship and sacrifice comes to mind. NOT FOR MONEYBAGS MUSA!. Musa made sure that on his pilgrimage to Mecca he would be traveling in style and luxury the likes of which the world had never seen. Making up his procession were 60,000 servants and slaves as well as hundreds of draft animals that carried all his “necessities”. Among his possessions was a large amount of gold. Each servant and slave carried around 1.8kg (4 lbs) of gold, while 80 camels carried around 

23–136 kg (50–300 lb) of gold. Altogether he carried around 116,119 kg (256,000 lbs) of gold, worth around $5 billion US today.

image

Mansa Musa was very generous with his gold when his procession traveled across North Africa and the Middle East. Throughout every city, village, and town he would spend money like a drunken sailor, blowing money so fast that he would make the average US Congressman blush. He bought fine clothes, antiquities, fine foods, and other valuable collectibles. He would also donate large sums of money to local mosques, or commission the building of new mosques. He was extremely generous to the poor, donating to charitable organizations and  surprising beggers and panhandlers with bags full of gold. Often, when parading through a city, he would have his servants toss gold coins to spectators. Mansa Musa’s wild pilgrimage would cement his legacy of wealth for centuries to come.

And he would completely devastate the economy of the Arabia and North Africa for the next decade. What Mansa Musa didn’t understand, in fact what few people understood at the time was the concept of inflation. The value of money is based upon it’s rarity. When more money is added to the money supply without an equal rise in the amount of goods and services, money losses value. If an extremely large amount of money enters the money supply very quickly a situation can occur called “hyperinflation”, where the economy is overwhelmed with too much money, making money itself almost worthless.

When Mansa Musa made his return trip to his empire he noticed that cities which were once thriving economies had been devastated by severe economic depression and had become bastions of poverty. What had happened? As it turns out due to Mansa Musa’s extreme generosity with his gold, he had flooded the local economy with so much gold that gold itself had become worthless. The consequences were dire. People saw their life savings made worthless overnight. Businesses and trade collapsed. The local populace had regressed from societies of complex trade to primitive barter. Unemployment, poverty, and homelessness reached epic levels while crime skyrocketed. Mansa Musa had made a big mistake.

Musa tried to fix the situation by selling back the items that he had purchased and taking large, high interest loans from moneylenders in order to contract the money supply. However the damage had been done, and many of the lands he visited would be gripped by economic depression for the next decade.

image

A collection of worthless bills to be burned d…

A collection of worthless bills to be burned during Weimer Germany’s hyperinflation crises, 1923. At the time 1 trillion German Marks was equal to $1 in value.