History's Most Expensive Mistake Is Happening Again

What a 2-foot-long rodent and a Confederate bond can teach us about today... Civil War hyperinflation... The Black Death's financial legacy... The great American devaluation... Why your dollars buy less every year – and what to do about it...

Editor's note: Today, we're handing the Digest over to Dr. David "Doc" Eifrig. Doc, as longtime readers know, has been writing for Stansberry Research for nearly 20 years as editor of Retirement Millionaire, Income Intelligence, and Retirement Trader.

He has one of the most fascinating backgrounds I (Corey McLaughlin) have ever come across. Doc worked on the options trading desk at Goldman Sachs in the 1980s, then left Wall Street to pursue medical school. Among other things, he became a board-eligible eye surgeon before eventually joining us in 2008.

Doc has also recently been announced as the permanent CEO of our parent company MarketWise. But he's just as passionate about sharing high-quality research and information with readers as he was two decades ago...

In one of his first orders of business as CEO, Doc spent the summer writing a "manifesto" about what he stands for... what he says has gone wrong with this country... and how you can – and must – solve the three fundamental dilemmas of American retirement.

You can hear more of those details in a brand-new presentation from Doc right here. And in today's essay, compiled from the August 1 and August 4 editions of Doc's free Health & Wealth Bulletin e-letter, Doc shares one of the threats coming after your portfolio.

In 1863, the Confederacy was desperate for capital...

The year before, it had lost control of the Mississippi River – the linchpin for its economic survival.

Wars take capital – and the Confederacy didn't have much. It didn't have the financial centers of the North or Great Britain. It didn't have a taxation system at the start of the war. Much of its wealth was tied up in the human beings its white citizens possessed as property, and no buyers outside of the American South considered slaveholding as anything but abhorrent.

The Confederacy tried to sell bonds, but winning the war looked like a long shot (and supporting the South was distasteful to many would-be bondholders), making it tough to raise money. If you were going to lend money to a nascent country headed toward failure with a currency likely to end up worthless... well, you wouldn't settle for a low interest rate.

Instead, the Confederacy offered cotton bonds – notes specifically backed by stores of cotton and redeemable at 6 British pence per pound. These found more buyers at comparatively modest interest rates of around 7% per year. That's because, ethical issues or not, English textile mills were relying on exported Southern cotton so they could keep churning out finished goods.

So the Confederacy blocked exports of its cotton through an embargo, starving the English textile industry. Prices soared, from 6 pence a pound to 27 pence. This drove the prices of bonds higher and put the Confederacy in a good position to sell cotton when it lifted the embargo.

But once the Confederates lost control of the Mississippi in New Orleans, they couldn't export cotton from a large swath of their territory. They couldn't pay their interest (also owed in cotton) or deliver the collateral.

As historian Niall Ferguson wrote in The Ascent of Money...

The Confederacy had overplayed its hand. They had turned off the cotton tap, but then lost the ability to turn it back on. By 1863 the mills of Lancashire had found new sources of cotton in China, Egypt and India. And now investors were rapidly losing faith in the South's cotton-backed bonds. The consequences for the Confederate economy were disastrous.

The Confederacy lost the Civil War for many reasons... The Confederates were on the wrong side of the wicked institution of chattel slavery. And they were, in no uncertain terms, treasonous traitors against their own country.

But one of the more mundane reasons simply comes down to money. Without cotton exports, they couldn't raise enough money to continue the fight.

The Confederacy had money, to be clear. It just didn't have valuable money. There was no shortage of "greybacks," a currency unbacked by any assets other than a promise from the failing Confederate government.

As the war progressed, the South printed $1.7 billion worth of greybacks... and inflation soared...

The North printed paper money, too, known as greenbacks. But a Union dollar was worth about 50 times that of a greyback by 1864. Prices in the North rose about 60% – but those in the South soared by 4,000%.

The printing of Confederate currency led to runaway inflation.

Inflation of the Confederate greybacks wasn't just caused by excessive printing, however. The value of the currency was often determined by news of the war. While the Currency Reform Act reduced the money supply by one-third, it sent prices up only 9.8%. Meanwhile, the loss at Antietam sent the greyback down 15% in a day. Gettysburg led to a 20% hit.

You can see these occurrences on the following chart (this is the same data in logarithmic scale to make the line easier to see)...

Even bad war news wasn't always enough to generate inflation for the Confederacy. On top of that issue, all types of goods were in short supply due to blockades and diverted production. The monetary supply of greybacks mattered, but so did many other factors.

Taken together, the eventual result was a true episode of hyperinflation, and it dealt a crushing blow to the Confederacy.

Here's another example: In the 1300s, a squirrel caused massive inflation in Europe...

The Tarbagan marmot – a 2-foot-long squirrel – lives in deep burrows near the base of the Himalayan mountains. It's a beautiful place... But few folks know it's a breeding ground for the bacteria that causes one of the world's most gruesome diseases.

The bubonic plague.

Back in the 1300s, when the marmot population was much greater, the marmot-to-flea-to-rat-to-flea (again)-to-human chain became extensive at just about the time that global trade was expanding. That created a world-altering situation that went unnoticed as it happened right in front of everyone near a boat...

When ships set sail from Asia for Europe and beyond, infected rats scampered up mooring lines... And when these ships pulled into their next port, they parked just long enough for a few rats to escape to shore.

Then the process repeated at the next city up the coast. The plague spread through trading routes.

The bubonic plague had many outbreaks over the centuries, starting as early as the plague of Justinian around 540 A.D. But the outbreak in Europe and Asia starting in 1347 earned the name "the Black Death" for good reason.

Since doctors at the time did not understand how the disease spread, it was largely unstoppable. Estimates suggest that as many as one-third of all Europeans died from the Black Death between 1347 and 1350. Tens of millions died overall from the plague in the 14th century, and world-population levels didn't rebound to preplague numbers for another 200 years.

You can imagine the social upheaval that such a wipeout caused. Many thought the world was ending, especially given the horrific nature of the deadly disease (of which we'll spare you the details).

The world, of course, didn't end... But the Black Death certainly left its mark on human history in many ways...

In the immediate aftermath of the Black Death outbreak, prices of all sorts of items fell. With so many people dying, there was less demand for staples of the European economy, like wheat and barley.

But soon after the height of the Black Death, prices doubled within a three-year period.

Pardon our love of obscure charts, but here's the price of wheat in England from 1346 through 1351, converted to cents per bushel...

After the initial decline in demand around 1347, the bigger problem for the European economy became the lack of available labor to till fields and tend to the mules or whatever other farm-related jobs folks had back then.

This led to a decline in available supplies and a rise in wages, both contributing to rapid inflation as the value of items went up and the value of money went down.

This "Black Death inflation" stands in contrast to many of the other historic episodes of inflation that have generally been studied...

It's often claimed that inflation only comes from the debasement of a currency through money-printing or other vast increases in the money supply.

But the truth is that analyzing inflation is difficult. No one – not politicians, economists, central bankers, or hedge-fund wizards – fully understands it. It comes from complex interactions between monetary and fiscal policy, the financial system, and the expectations of everyday people.

Today, the world during the bubonic plague doesn't seem so strange. We've lived through the global COVID-19 pandemic, and we saw the cost of everything – from housing to food – increase, alongside shortages of essential products.

Back in 2022 and 2023, inflation was the worst we had seen it in nearly four decades. We saw the biggest rise in inflation since 1982. To fight back, the Federal Reserve raised interest rates 11 times during those years.

Today, the threat of inflation is looming in the U.S. once again...

A recent poll found that 94% of Americans listed inflation as their top economic worry. And now President Donald Trump is publicly battling with Federal Reserve Chair Jerome Powell over Powell's refusal to lower interest rates at Trump's request.

Powell says he's keeping rates higher to mitigate inflation caused by Trump's tariffs. But Trump says lowering rates would boost the economy.

The truth is that no matter who's in charge, inflation isn't going anywhere anytime soon...

We're living through a great national devaluation.

Your money is worth less than ever before. Your labor is worth less.

You know what this devaluation feels like – in big and small ways across American life.

It's the little surcharges on restaurant bills... the packages on store shelves that get gradually smaller for the same price... and higher premiums for the same health insurance.

This devaluation has been happening for decades.

And while mainstream headlines focus on inflation and interest rates, we're experiencing a financial reset that erodes purchasing power and ruins traditional strategies like holding bonds and cash.

To help investors prepare, I'm introducing a new investment blueprint designed specifically for an era of currency devaluation.

Rather than rely on outdated approaches, this strategy centers on hard assets, select inflation-resistant companies, and a fully diversified portfolio to protect and grow wealth.

Don't sit still while your dollars lose value... Take action now. You can get all the details here.

New 52-week highs (as of 8/6/25): Agnico Eagle Mines (AEM), Altius Minerals (ALS.TO), Arista Networks (ANET), AutoZone (AZO), Barrick Mining (B), Alpha Architect 1-3 Month Box Fund (BOXX), WisdomTree Japan SmallCap Dividend Fund (DFJ), iShares MSCI Spain Fund (EWP), VanEck Gold Miners Fund (GDX), VanEck Junior Gold Miners Fund (GDXJ), GE Vernova (GEV), Kinross Gold (KGC), Lynas Rare Earths (LYSDY), Altria (MO), Newmont (NEM), OR Royalties (OR), O'Reilly Automotive (ORLY), Uranium Energy (UEC), Telefônica Brasil (VIV), and Wheaton Precious Metals (WPM).

In today's mail, feedback on yesterday's edition, which included an update on McDonald's (MCD) earnings... and another reply to Jim V.'s note in Tuesday's mail... Do you have a comment or question? As always, e-mail us at feedback@stansberryresearch.com.

"McDonald's slide didn't surprise me. We used to be regular diners there until they dramatically changed their dine in environment. After COVID most McDonald's made their dining rooms feel like we were secondary customers, catering to drive through and Uber Eats orders. They even removed playgrounds from a lot of them. Even though this quarter's earnings are better, we will not be returning there because of this." – Subscriber Ted B.

"I have spoken with several folks and if you're working for a living with the average wage coming in, you're not saving a dime and not buying much beef. Anyone who doesn't think it is tough in America needs to start trying to make an honest living." – Subscriber Russell W.

"I have to respond to Subscriber Jim V.'s reply in the 8/5/25 edition of The Stansberry Digest. 'I've never met or seen a politician more concerned about his constituents than himself.' In general, I agree with him but having met and served on his Presidential election team, I believe that [former Rep.] Ron Paul might be the only legitimate exception to that statement." – Stansberry Alliance member Steve R.

Here's to our health, wealth, and a great retirement,

Dr. David Eifrig, MD, MBA
Baltimore, Maryland
August 7, 2025