The Kipper & Wipper Crisis: History's Forgotten Financial Catastrophe

1621. The Thirty Years War is bleeding German treasuries dry, and desperate princes discover what seems like the perfect solution: improve their coins by making them cheaper to produce. What could go wrong?

Everything.

In this deep dive into one of history's most overlooked financial disasters, we explore how professional coin clippers called "Kipper & Wipper" accidentally created Europe's first hyperinflation crisis, crashed international trade, and taught the world lessons about currency debasement that we're still ignoring today.

From medieval mint operations to modern quantitative easing, this 400-year-old German monetary experiment reveals uncomfortable truths about every government's favorite financial magic trick: creating money out of thin air.

You'll discover:

• How German princes turned silver coins into copper while keeping the same face value
• Why sophisticated merchants took years to catch on to obvious fraud
• The psychology of monetary delusion that repeats in every currency crisis
• Why this obscure crisis predicted every hyperinflation from Revolutionary France to Weimar Germany
• What medieval coin clipping teaches us about Fed policy and modern "money printing"
• Why real assets become king when paper promises fail

This is a blueprint for understanding monetary chaos. And if you think "this time is different," this episode will change your mind.

The German princes of 1621 thought they had discovered unlimited wealth. Instead, they discovered the eternal truth: there is no substitute for real value creation, honest money, and the patience to build wealth the hard way.

Those lessons remain as relevant today as they were 400 years ago.

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Transcript

SPEAKER_01: 0:00

Welcome back to the Timeless Investor Show. We will also be investigating the builders, people that built incredible things over history and the lessons we can learn from their stories. A week or so back, we did an episode on John Law. So that is a new series of discussions we're gonna have, which are on the villains, right? Or the cons, people that do really bad things. But another series type we're gonna have here is the crises, the crashes, the, you know, whatever, the great, interesting, terrifying, horrific, Thank you for watching. I want to start in the year 1621. The Thirty Years' War is bleeding treasuries across the Holy Roman Empire. German princes are desperate for revenue, but their peasants, their taxpaying populations, are completely broke. They cannot pay anymore. So they came up with what seemed like a brilliant solution. Improve their coins by making them more affordable. to produce. What could possibly go wrong? Well, the truth is that they accidentally created Europe's first hyperinflation crisis, crashed international trade, and taught the world a lesson about currency debasement that, to be honest, we are still learning today. And I just did an amazing interview in the last week. Check it out if you haven't seen it with Mario Anecco talking about the French Revolution piece we released recently and the history of central banking currency debasement. But the truth is, you can debase any currency. And we give a lot of heat today about debasing the dollar, printing, debt. But you can debase hard currency as well. And this is the story of that. This is the story of the Kipa and Wipa crisis, named after professional coin clippers who turned silver into copper and nearly, if not effectively, brought down an empire. So let's set the scene here. for this crazy story. It is 1618 and Europe has just plunged into what would become known as the 30 Years War. What started as a religious conflict between Catholics and Lutherans, the new Protestants, in the Holy Roman Empire quickly spiraled into a continent-wide catastrophe. Now, for those of you that don't know, the 30 Years War was one of the most destructive conflicts in European history, which honestly is saying a lot as there have been some very destructive conflicts in European history. An estimated four and a half to eight million soldiers and civilians died from battle, famine, or disease. Some parts of Germany reported population declines of over 50%. And frankly, it's not something we know about much. And I just want to put something in context here. World War II killed 60 million plus people. I may be misquoting the number. A lot of people. But that was in 1940. This was in 1618. I mean, the devastation in terms of population size, tremendous. Tremendous. And wars have a tendency to be expected. Very expensive, which if any of you read The Creature from Jekyll Island, fascinating book, the gateway drug, honestly, into hard currencies and anti-Fed thinking, but it's a great and illuminating read. You will know that one of his main arguments is that the Federal Reserve and central banks exist partially as a way for governments to finance wars. If democracies had to fund wars by taxing their citizens for the actual cost of the war, we would not have wars. Now, obviously, the Holy Roman Empire, not a democracy, not a concern. They could tax their citizens to death. But by 1620, treasuries across the German states were running dangerously low. Now, if you're a prince in 1621 and you need money, you have very limited options. You've already bled your subjects dry. You can borrow money. But who's going to lend to you when half of Europe is on fire? Or, or, You can get creative with your currency. See, back then, coins were not just tokens representing value, which is frankly what we use today, right? A nickel, a quarter. What are they? They're nothing. They have intrinsic value given by the government and by force of arms, but they weren't actually value. Coins were

SPEAKER_00: 5:26

value. Were value. Now, if you were a prince in 1621

SPEAKER_01: 5:40

and you needed money, you have very limited options. You can raise taxes, but you're subject to already being bled dry by the war. You can borrow money, but who is going to lend it to you when everybody needs money and half of Europe is on fire? Or you can get creative with your currency. You see, back then, unlike today, coins were not just representative tokens of value. They were value. A silver coin was worth something because it contained actual silver. Compare that to a quarter today or even a dollar piece or whatever. What is its value? It is plated. It is nothing. It is given value by the government saying it has value and you can use it to pay your taxes and by implicit trust of society that it has value. But silver had value and the more silver on a coin, the more value. Simple, right? But what if you could make coins that look the same but contained less silver? You could make mint more coins with the same amount of precious metal. Just a free money hack, right? Enter Das Kippa and Wippa. Excuse my German accent, but I just, you know, I have to honor my ancestry. So the term Kippa and Wippa literally translates to tipper and seesaw, named after the tools used to test and manipulate coins. These were not amateur counterfeiters working out of back alleys. These were professional operations, often sanctioned or directly employed by the princes themselves. Here's how it worked. First, they'd We'll be right back. Now it gets devious. They didn't just steal the silver and keep the debased coins. They took that clipped silver and used it to mint new coins. So from one original silver coin, they might create two or even three new coins with the same face value. Then came the whipping, the testing and sorting. They'd use scales and other tools to separate the good coins from the bad, often sending the good coins out of the territory while flooding the local market with the debased ones. And the math seemed to work beautifully. If you started with coins that were 90% silver and ended up with coins that were 30% silver, you could theoretically triple your money supply overnight. Every prince with a mint started doing it. And for a while, it actually seemed to work. What is fascinating to me about the Kipper and Whipper crisis is how long it took for people to catch on. We are talking about sophisticated merchants, international traders, people whose livelihood depended on understanding money. But there's something about currency debasement creates a kind of collective delusion. Everyone wants to believe that the money they're holding is worth what it says it's worth. Admitting otherwise means admitting you've been cheated and potentially losing everything. So merchants kept accepting the debased coins. They'd test them, sure, but the debasement was often subtle enough to pass casual inspection. Besides, if everyone else is accepting them, they must be legitimate, right? And this is the psychology we see in every monetary crisis. From the assignats of the French Revolution, to the hyperinflation of Weimar Germany, to modern quantitative easing. There's always a period where everyone pretends the obvious isn't happening. There was actually a story I wrote about a while back, the mines of Potosi in the Spanish Empire. Quick tangent, right? The Spanish Empire conquered this amazingly large territory and they got huge silver mines and gold mines. And there was a mines in Potosi in modern day Bolivia that were producing Spanish silver coins, but they were debasing the coin. The owners of the mines were making money off of it. And for a while, everybody assumed it was good, but eventually people started catching on. And this is the psychology we see often in most monetary crises. People take time to catch on because it's sort of unbelievable that the thing you're holding is not worth anything. One could argue, I don't want to get too conspiratorial here, but one could argue that U.S. currency is kind of going through that right now, right? I mean, there's a little bit of an understanding that we're printing money. I just saw that our national debt is increasing at a trillion dollars. Can't tell you the exact time period because I can't recollect it off the top of my head, but it took X number of years for us to raise a trillion dollars in debt. The next trillion was substantially less, and the next trillion was even less, and we're increasing at a trillion dollars and a very unhealthy clip. That is... That is debasement, right? And we are paying our own debt by printing it off. The value of the money we use is being debased. But I don't hear anybody out there saying, oh, my dollar's worth nothing, right? It's not worth nothing, not yet. There's some trust still. And the princes in Germany at this time convinced themselves they were being clever. They weren't stealing. They were optimizing. They were making the monetary system more efficient. They were innovating. Does that sound familiar? So by 1622, the scheme was becoming, Very difficult to hide. Coins that should have been identical were weighing dramatically different amounts. International merchants started refusing German silver altogether. Local princes began to... So by 1622, the scheme was becoming impossible to hide. Coins that should have been identical were weighing dramatically different amounts. Tough to avoid that, to ignore that. International merchants started refusing German silver altogether. The prices began to spike as people realized their money wasn't worth what they thought. By the way, really interesting. Again, side note, this is how the Spanish coin started to devalue and people started to realize merchants started to accept it at a lower value they started to not trust the value but and and it's fascinating it's like the you know the the open hand of the market like it just in individual microtransactions people start to realize something's wrong and they start to not accept it for what it was worth before fascinating human society and economics is fascinating but here's the thing about currency debasement the major problem is it's like a drug once you start it's almost impossible to stop Because stopping means admitting what you've done. Admitting what you've done means your currency will collapse anyways. So instead of stopping, many princes double down. Also, they double down because they don't have a choice at this point. They have to do it. They have to keep it going. So if 30% silver worked for a while, maybe 20% would work too, or 10%. Some coins from this period contain less than 5% silver. And the results, unfortunately, for the German prince and their subjects were predictable and catastrophic. Prices exploded. In some regions, basic goods increased 300 to 600% in price over just two years. A loaf of bread that cost one silver coin in 1620 might cost six debased coins in 1623. But it wasn't, and it never is, it wasn't just the inflation. It was a complete breakdown of monetary trust. Nobody knew what anything was worth anymore. Merchants started demanding payment in specific types of coins from specific mints. International trade ground to a halt. The social consequences were even worse. Peasants who had saved their money found their savings worthless overnight. Wages couldn't keep up with prices. People who had worked their entire lives to accumulate wealth watched it evaporate. Riots broke out across the German states. Not just food riots, monetary riots. People literally attacking mints and demanding real silver. And guys, consider this on top of a devastating war happening at the same time. Talk about a hell of a time to be alive. Not a good time to be a German prince or a German prince's subject in this period. So by 1623, it was clear the system had to be reformed or the entire economy would collapse. But how, how, guys, do you figure out So the solution was brutal, but necessary. Most of the debased coins had to be recalled and melted down. New coins were minted with verified silver content and strict quality controls. International agreements were actually established to prevent future debasement. But the damage took decades to repair. Because you see, trust, once it's broken, is really hard to rebuild. Transcription by CastingWords Now, you might just be thinking this is just ancient history. We have central banks now, fiat currencies, sophisticated monetary policy. We'd never make such crude mistakes, or would we? Let's think about this pattern. Governments need money. Traditional revenue sources are insufficient. Someone comes up with a clever way to create money without raising taxes, which, to be honest, is the goal of all of our politicians. Because I always think this about democracy. It's one of the problems of democracy. The fundamental purpose of a policy in a democracy is to be reelected that is their job their job is to be reelected they want to be reelected and guess what doesn't get them reelected raising taxes so they create this other system to get around it and it works and it's like a drug and everybody loves it and we love it because we don't like having our taxes increased and def and inflation and deflation of currency is a silent invisible force that we just don't feel for a while right so like we don't realize we're paying we are paying a tax we just don't realize realize it but then people get overconfident and they push it too far markets figure it out everything collapses trust is destroyed recovery takes decades does any of this sound familiar to today because the kipper and whipper crisis wasn't unique it was the first documented example of a pattern that is repeated throughout history from the roman debasement utter diocletian to the astronauts of revolutionary france to the hyperinflation of weimar germany and yes i will add modern quantitative easing into the mix. I'm not saying they're all identical because they're not. Modern monetary policy is more sophisticated than medieval coin clipping, but the fundamentals here are very similar. By the way, this is not the first time I've talked about this topic. In this topic, I just keep putting my foot in it, this topic is one that just gets people riled up. There's an argument that clipping of currency and debasing of coin is not the same as modern fiat money printing. But my question is, what is the difference, right? What is the difference? If I debase a coin and I make two coins that are worth less, but everyone for a while thinks it's the same, there is no difference from the central bank printing money to pay debt. There is no difference. It's the same thing. Currency debasement is currency debasement. So when governments create money without creating corresponding value, markets do eventually figure it out. The question isn't really if they'll figure it out. The question is when and how painful the adjustment will be. So what does a 400 year old German monetary crisis teach us about investing today? First, understand these mechanisms. There is no such thing as free money. When governments or central banks create currency out of thin air, they are not creating wealth. They're just redistributing it. It's usually from savers to debtors, from the prudent to the leveraged. Think about this. Debt is a fixed rate instrument, okay? Like you get a 30-year mortgage, it is fixed in the dollar value that it was given at the day it was written. But if the Federal Reserve or any central bank is actively debasing fiat currency over time, then you are winning in two ways on your loan. You are winning because your rate is fixed and you are winning because the value of that loan is decreasing in real value over time at the same time. So what What happens when that happens, right? It encourages debt. The entire system encourages the use of debt because debt devalues over time. That is to the benefit of debtors. And it helps people that take on loans and it hurts people that save. Okay. So it creates bad dynamics. And people always ask me, what does this matter today? What does this matter? Well, most of our crises are debt crises, right? Like we mostly have debt crisis today. This entire system we live in exists to push that on people. reason they are understood to be an inflation hedge. Now, I want to be really clear. I'm not going to be Pollyanna-esque about this. If we have a currency crisis and collapse, real assets will also lose value. Let's just be very clear. It's not like they're a perfect antidote to this problem. But during the Kipper and Whipper crisis, people who owned land, buildings, and commodities, things with intrinsic value, did a lot better than those who held the base coins. That's why I focus on real estate. I also just like real estate. So everything I talk about is going to be why real estate's great. I admit I am biased. I will freely admit it. But there is some validity to what I'm saying. And this is why the timeless investor emphasizes hard assets, building companies, building equity, owning real things. Because when paper promises or debased coinage fail, and history shows they always eventually do, you want to own things that have a value independent of what the government says they're worth. The German princes of 1621 discovered what every government will eventually learn and have inevitably learned every time. You cannot create prosperity by debasing currency. You can create the illusion of prosperity temporarily. And when the illusion breaks, what do you want to hold as an investment? We are living through our own version of this story right now. Since 2008, central banks worldwide have created more money than in the previous century combined. The justifications sound different. Quantitative easing, Modern monetary theory, fighting deflation, deflation being bad. It's a big question too, by the way. Why does growth have to be accompanied by inflation? Why? We all believe it because that's what we're taught. That's what our finance protesters teach us. That's what the central bank tells us. All of my brethren who work on Wall Street and in major banks, just like I did, we're all told the same thing. There's a healthy level of inflation. We want a healthy level of inflation. Look at Japan. Japan is trapped because it's in a, deflationary spiral. But do they have to go together is a big question. I'm not going to answer it today on this podcast. I don't even have the answer, to be honest with you guys. I exist to explore these theses and express my perspective on them. I don't know, but I think there's some modern BS around the fact that inflation is necessary. But listen, the mechanics of what's happening today are surprisingly similar to what these German printers did 240 years ago. You create more currency units. You hope nobody notices the debasement. You promise it's temporary and controlled. You take on exorbitant debt and you pay it back with debased currency. I mean, think about that for a half second. Nobody's getting more ripped off than people that are buying the US 10-year treasury. Nobody. Nobody. You buy it and your money is worth less every single year. Why? That's the system we live in right now. Some thoughts on that too. I'm not going to get into it, but the Das Kippa and Wippa crisis reminds us how this story ends. Not necessarily with hyperinflation, I hope not, but with a loss of confidence, a repricing of assets, and a painful adjustment back to reality. The question is not really if the adjustment will come. History suggests it's relatively inevitable. The question is when and whether you'll be positioned to survive it. That's why I like to study these historical patterns. not because I think history repeats exactly, but because the fundamental dynamics of human nature, government incentives, and market forces remain remarkably consistent across the centuries. We are no different, no different from our Roman ancestors who liked watching blood sports. You know, I'm going to go way wide here, right? But like, what is cage fighting except a modern version of gladiatorial fights? And we love it. Do people in the audiences get excited when a cage fighter starts bleeding and keeps fighting? Yeah, they love it. How are we any different? How are you, my male listeners, any different from a caveman 7,000 years ago who was trying to prove himself to some female member of the tribe? We are no different, but we think we are. The only difference today maybe is education. And unfortunately, in my humble opinion, education is sort of deteriorating today. We are trapped in an ecosystem of less education less valuable education and social media, phones, AI sort of dumbing us down over time. And so like, you know, it's just, we're not that different. The tools have changed. The scale obviously changes. I mean, the world is vastly larger and more connected, but the patterns persist. And for investors who are willing to learn from history, these patterns offer valuable guidance about how to build and preserve wealth through inevitable monetary chaos. Because it's either we're in a period of monetary instability and decline or we're in a period of monetary stability. I don't know where we are right now. Where do you think? The Kipper and Whipper crisis lasted only a few years, but its lessons, to quote my main man, Marcus Aurelius and Maximus and Gladiator, echo through eternity. It showed us that currency debasement always seems like a clever idea until it doesn't work and the market figures it out. And it demonstrated that short-term benefits of monetary manipulation are always overwhelmed by the long-term costs. And it reminds us that when monetary systems fail, Thank you for listening to the Timeless Investor Show. If you found this deep dive into monetary history valuable, please subscribe and share it with someone who appreciates the timeless lessons that financial markets keep giving us. If you haven't done so yet, do me a favor. Please leave a review for the show. One star, two star, five star maybe. Leave a written review. It would be amazing. It's really helpful. Also, if you have a one or two star review, maybe don't leave it. You know, whatever. I mean, you know, good karma for you if you leave me a nice thing If you leave me a bad review, karma might come for you. I don't know. And remember, guys, in a world of paper promises and digital currencies, real assets remain the ultimate hedge against monetary chaos. Until next time, think well, act wisely, and build something timeless. Take care of yourselves.