This page has been archived and commenting is disabled.
Cashin Remembers Germany's Hyperinflation Birthday
Via Art Cashin of UBS,
Originally, on this day in 1922, the German Central Bank and the German Treasury took an inevitable step in a process which had begun with their previous effort to "jump start" a stagnant economy. Many months earlier they had decided that what was needed was easier money. Their initial efforts brought little response. So, using the governmental "more is better" theory they simply created more and more money. But economic stagnation continued and so did the money growth. They kept making money more available. No reaction. Then, suddenly prices began to explode unbelievably (but, perversely, not business activity).
So, on this day government officials decided to bring figures in line with market realities. They devalued the mark. The new value would be 2 billion marks to a dollar. At the start of World War I the exchange rate had been a mere 4.2 marks to the dollar. In simple terms you needed 4.2 marks in order to get one dollar. Now it was 2 billion marks to get one dollar. And thirteen months from this date (late November 1923) you would need 4.2 trillion marks to get one dollar. In ten years the amount of money had increased a trillion fold.
Numbers like billions and trillions tend to numb the mind. They are too large to grasp in any “real” sense. Thirty years ago an older member of the NYSE (there were some then) gave me a graphic and memorable (at least for me) example. “Young man,” he said, “would you like a million dollars?” “I sure would, sir!”, I replied anxiously. “Then just put aside $500 every week for the next 40 years.” I have never forgotten that a million dollars is enough to pay you $500 per week for 40 years (and that’s without benefit of interest). To get a billion dollars you would have to set aside $500,000 dollars per week for 40 years. And a…..trillion that would require $500 million every week for 40 years. Even with these examples, the enormity is difficult to grasp.
Let’s take a different tack. To understand the incomprehensible scope of the German inflation maybe it’s best to start with something basic….like a loaf of bread. (To keep things simple we’ll substitute dollars and cents in place of marks and pfennigs. You’ll get the picture.) In the middle of 1914, just before the war, a one pound loaf of bread cost 13 cents. Two years later it was 19 cents. Two years more and it sold for 22 cents. By 1919 it was 26 cents. Now the fun begins.
In 1920, a loaf of bread soared to $1.20, and then in 1921 it hit $1.35. By the middle of 1922 it was $3.50. At the start of 1923 it rocketed to $700 a loaf. Five months later a loaf went for $1200. By September it was $2 million. A month later it was $670 million (wide spread rioting broke out). The next month it hit $3 billion. By mid month it was $100 billion. Then it all collapsed. Let’s go back to “marks”. In 1913, the total currency of Germany was a grand total of 6 billion marks. In November of 1923 that loaf of bread we just talked about cost 428 billion marks. A kilo of fresh butter cost 6000 billion marks (as you will note that kilo of butter cost 1000 times more than the entire money supply of the nation just 10 years earlier).
How Could This All Happen?
In 1913 Germany had a solid, prosperous, advanced culture and population. Like much of Europe it was a monarchy (under the Kaiser). Then, following the assassination of the Archduke Franz Ferdinand in Sarajevo in 1914, the world moved toward war. Each side was convinced the other would not dare go to war. So, in a global game of chicken they stumbled into the Great War.
The German General Staff thought the war would be short and sweet and that they could finance the costs with the post war reparations that they, as victors, would exact. The war was long. The flower of their manhood was killed or injured. They lost and, thus, it was they who had to pay reparations rather than receive them.
Things did not go badly instantly. Yes, the deficit soared but much of it was borne by foreign and domestic bond buyers. As had been noted by scholars…..“The foreign and domestic public willingly purchased new debt issues when it believed that the government could run future surpluses to offset contemporaneous deficits.” In layman’s English that means foreign bond buyers said – “Hey this is a great nation and this is probably just a speed bump in the economy.” (Can you imagine such a thing happening again?)
When things began to disintegrate, no one dared to take away the punchbowl. They feared shutting off the monetary heroin would lead to riots, civil war, and, worst of all communism. So, realizing that what they were doing was destructive, they kept doing it out of fear that stopping would be even more destructive.
Currencies, Culture And Chaos
If it is difficult to grasp the enormity of the numbers in this tale of hyper-inflation, it is far more difficult to grasp how it destroyed a culture, a nation and, almost, the world.
People’s savings were suddenly worthless. Pensions were meaningless. If you had a 400 mark monthly pension, you went from comfortable to penniless in a matter of months. People demanded to be paid daily so they would not have their wages devalued by a few days passing. Ultimately, they demanded their pay twice daily just to cover changes in trolley fare. People heated their homes by burning money instead of coal. (It was more plentiful and cheaper to get.) The middle class was destroyed. It was an age of renters, not of home ownership, so thousands became homeless. But the cultural collapse may have had other more pernicious effects.
Some sociologists note that it was still an era of arranged marriages. Families scrimped and saved for years to build a dowry so that their daughter might marry well. Suddenly, the dowry was worthless – wiped out. And with it was gone all hope of marriage. Girls who had stayed prim and proper awaiting some future Prince Charming now had no hope at all. Social morality began to collapse. The roar of the roaring twenties began to rumble. All hope and belief in systems, governmental or otherwise, collapsed. With its culture and its economy disintegrating, Germany saw a guy named Hitler begin a ten year effort to come to power by trading on the chaos and street rioting. And then came World War II.
We think it’s best to close this review with a statement from a man whom many consider (probably incorrectly) the father of modern inflation with his endorsement of deficit spending. Here’s what John Maynard Keynes said on the topic:
By a continuing process of inflation, governments can confiscate, secretly and unobserved, an important part of the wealth of their citizens. By this method they not only confiscate, but they confiscate arbitrarily; and, while the process impoverishes many, it actually enriches some…..Those to whom the system brings windfalls….become profiteers.
To convert the business man into a profiteer is to strike a blow at capitalism, because it destroys the psychological equilibrium which permits the perpetuance of unequal rewards.
Lenin was certainly right. There is no subtler, no surer means of over-turning the existing basis of society than to debauch the currency. The process engages all the hidden forces of economic law on the side of destruction, and does it in a manner which not one man in a million is able to diagnose….By combining a popular hatred of the class of entrepreneurs with the blow already given to social security by the violent and arbitrary disturbance of contract….governments are fast rendering impossible a continuance of the social and economic order of the nineteenth century.
To celebrate have a jagermeister or two at the Pre Fuhrer Lounge and try to explain that for over half a century America's trauma has been depression-era unemployment while Germany's trauma has been runaway inflation. But drink fast, prices change radically after happy hour. And, tell Fed. Chairman Bernanke that it was the “German Experience” that caused many folks to raise an eyebrow when he alluded to the power of the “printing press” a few years ago.
It is why so many, including some of the FOMC, express concern about unintended consequences of each new wave of quantitative easing. (And, if you think no government would ever sponsor wild inflation to liquidate its debt, take a look at Zimbabwe.)
»
- 33548 reads
- Printer-friendly version
- Send to friend
- advertisements -
Profiteers? Wouldn't happen to be the guys who financed both sides would it?
The guys loaning us money are the good guys. The guys loaning money to evildoers are the Profiteers.
What wrries me more than price rises s whether we will have availability of basics.
International trade will collapse for maybe several years.
What do we actually produce anymore ?
Porn and pills.
The US produces enough shit to kill everybody on the planet. First one by one, then all at once.
The military industrial complex isn't just a psychological condition, it's the financial force behind the US economy.
I was watching Dark Legacy about JFK, the Americans Nazis and the CIA yesterday and that really nailed it shut for me regarding Nazi money and American Nazis.
Actually, it was a cynical ploy to pay off ridiculous sums in War reparations foisted upon the Germans at Versailles.
That's how it started, then it became a self-licking ice-cream cone.
He remembers that? Funny..he doesnt look older than 65... Well preserved.. Good drinks, no doubt!
Have any of you guys noticed that natural gas, and coal, are finally starting to catch a bid?
http://www.cmegroup.com/popup/mdq2.html?code=NGGLOBEXF3&title=January_20...
Nothiing like predictions of a little hypercold to stimulate energy prices ....
What delightful timing, eh?
U r about 4 months late. Lol
USA! USA! USA!
I'm glad to have a few Kruggerands, but if it gets this bad, how do you use one unless you're buying a big house or something? I'm buying more junk silver.
I'd consider buying some gas and other commodities but I fear the containers would cost too much for the investment.
You use the gold to bribe the government officials who will control almost all the stuff worth owning that hasn't already been carted off by the planetary overlords.
There is really no mystery to when shit gets real, at least in my mind.
November 7, 2012.
All the fucknuts with their fingers plugging the holes in the dam will suddenly and quite merrily withdraw to their bunkers to watch le deluge.
Tell the Fed to Stop Printing and expanding their balance sheet....
http://www.federalreserve.gov/apps/contactus/feedback.aspx
I don't think Zimbabwe compares to the us in enough ways to be accurate... Same for Weimar ad the reichsbank
Really? Political system run by economic neophytes - check. Confiscation of property - check. Runaway money creation - check. Involvement in foreign wars - check. In what ways is Zimbabwe in 1999 not like the US today, except the Zim dollar is not a reserve currency?
Fuck you all bitchez. I'm gonna buy me my own central bank. And i do not care who makes your laws.
I should have made my handle "Weimar-aner"
Let's not forget the U.S. war profiteering, lies, and illegal financing that went into stealing defeat from the jaws of Germany's victory on the battlefield in the Great War.
It [the inflation] annihilated thrift; ; it destroyed incalculable moral and intellectual values. It provoked a serious revolution in social classes, a few people accumulating wealth and forming a class of usurpers of national property, whilst millions of individuals were thrown into poverty. It was a distressing preoccupation and constant torment of innumerable families; it poisoned the German people by spreading among all classes the spirit of speculation [emphasis added] and by diverting them from proper and regular work, and it was the cause of incessant political and moral disturbance. Professor Bresciani-Turroni in The Economics of Inflation as quoted by Marc Faber in Reflation, 2003
Sounds like today....
i read this article twice!!!
When the money becomes worthless or nearly so we will revert to what Lenin said. "One man with a rifle controls 100 without (a rifle)."
"Some sociologists note that it was still an era of arranged marriages. Families scrimped and saved for years to build a dowry so that their daughter might marry well. Suddenly, the dowry was worthless – wiped out. And with it was gone all hope of marriage. Girls who had stayed prim and proper awaiting some future Prince Charming now had no hope at all. Social morality began to collapse."
Silver and Gold, everyone will be wishing for silver and gold.
Get it while you can BITCHIZZ!
I liked the article but am curious why, in this digital age of "money" would anyone think they will actaully be printing bills, when all they really need to do is issue EBT style cards? Phase out phisical paper, replace it with plastic. It DOES make a trillion ever so much easier to carry.
Art remembered an image of contempt, and the canvas is now moved upon this generation, the image of the New Secular Global Fiat Derivative Order. Oddfellows are the artists of economic chaos, as of old, and the same spirit of contempt still has it's host(s) painting Israel and Jerusalem.
http://bible.cc/revelation/13-15.htm
Ask yourself
what picture shall your home be?
...is it a graven image?
...is it where you came from?
...New Jerusalem?
....or is it one in the same?
http://bible.cc/revelation/21-2.htm
You were so tempted
yeah, all the nations stand marked
sealed by the same offer
there is no choice
Time to rise or fall
http://www.biblegateway.com/passage/?search=Ephesians+6%3A12&version=KJV
Ask yourself
...are you gonna buy it?
...are you gonna trade it?
...are you gonna sell it?
...or are you going to find the lie is your home?
Ask yourself
yeeeeah
Can I take up arms to get there?
Can I pay with paper?
YEEEEEAH!
WOE!
Can I pay with gold?
oh no
Can I pay with gold?
woe woe
Can I pay with gold?
_________________BOOM$ZERO$BOOM#ZERO#BOOM%ZERO%BOOM_________________________
Long dramatic imagery, short analysis. It is assumed that hyperinflation was caused by deficit spending. This is not true. It was the collapsing exchange rate that reduced the value of the money supply, due to unpayable war reparations. The exchange rate went parabolic, not the ratio of expenditures to revenues.
Not true. You should (and Cashin should have) read When Money Dies by Adam Fergusson. The Weimar hyperinflation arose due to the French occupation of the Ruhr. The government urged all the workers there to go on strike against the French, and promised that they would still be paid. So the government is paying something like 20% of the workforce to not work. That's where the hyperinflation came from.
It's a good book for sure....one of the best I've read
The First World War.
What happened? World War I broke out in the summer of 1914. There are few people here my age who remember that. Now that war was waged on one side by Great Britain, France, and Russia; and on the other side by Germany, Austria-Hungary, and Turkey.
Within two years Germany had won that war: not only won it nominally, but won it actually. The German submarines, which were a surprise to the world, had swept all the convoys from the Atlantic Ocean. Great Britain stood there without ammunition for her soldiers, with one week’s food supply — and after that, starvation. At that time, the French army had mutinied. They had lost 600,000 of the flower of French youth in the defense of Verdun on the Somme. The Russian army was defecting, they were picking up their toys and going home, they didn’t want to play war anymore, they didn’t like the Czar. And the Italian army had collapsed.
Not a shot had been fired on German soil. Not one enemy soldier had crossed the border into Germany. And yet, Germany was offering England peace terms. They offered England a negotiated peace on what the lawyers call a status quo ante basis. That means: “Let’s call the war off, and let everything be as it was before the war started.” England, in the summer of 1916 was considering that — seriously. They had no choice. It was either accepting this negotiated peace that Germany was magnanimously offering them, or going on with the war and being totally defeated.
Stalemate in 1916; Zionists Offer to get USA into the War.
While that was going on, the Zionists in Germany, who represented the Zionists from Eastern Europe, went to the British War Cabinet and — I am going to be brief because it’s a long story, but I have all the documents to prove any statement that I make — they said: “Look here. You can yet win this war. You don’t have to give up. You don’t have to accept the negotiated peace offered to you now by Germany. You can win this war if the United States will come in as your ally.”
The United States was not in the war at that time. We were fresh; we were young; we were rich; we were powerful. They told England: “We will guarantee to bring the United States into the war as your ally, to fight with you on your side, if you will promise us Palestine after you win the war.”
In other words, they made this deal: “We will get the United States into this war as your ally. The price you must pay is Palestine after you have won the war and defeated Germany, Austria-Hungary, and Turkey.”
Now England had as much right to promise Palestine to anybody, as the United States would have to promise Japan to Ireland for any reason whatsoever. It’s absolutely absurd that Great Britain, that never had any connection or any interest or any right in what is known as Palestine should offer it as coin of the realm to pay the Zionists for bringing the United States into the war. However, they did make that promise, in October of 1916. And shortly after that — I don’t know how many here remember it — the United States, which was almost totally pro-German, entered the war as Britain’s ally.
I say that the United States was almost totally pro-German because the newspapers here were controlled by Jews, the bankers were Jews, all the media of mass communications in this country were controlled by Jews; and they, the Jews, were pro-German. They were pro-German because many of them had come from Germany, and also they wanted to see Germany lick the Czar. The Jews didn’t like the Czar, and they didn’t want Russia to win this war. These German-Jew bankers, like Kuhn Loeb and the other big banking firms in the United States refused to finance France or England to the extent of one dollar. They stood aside and they said: “As long as France and England are tied up with Russia, not one cent!” But they poured money into Germany, they fought beside Germany against Russia, trying to lick the Czarist regime.
Now those same Jews, when they saw the possibility of getting Palestine, went to England and they made this deal. At that time, everything changed, like a traffic light that changes from red to green. Where the newspapers had been all pro-German, where they’d been telling the people of the difficulties that Germany was having fighting Great Britain commercially and in other respects, all of a sudden the Germans were no good. They were villains. They were Huns. They were shooting Red Cross nurses. They were cutting off babies’ hands. They were no good. Shortly after that, Mr. Wilson declared war on Germany.
USA Railroaded into World War I; Balfour Declaration.
The Zionists in London had sent cables to the United States, to Justice Brandeis, saying “Go to work on President Wilson. We’re getting from England what we want. Now you go to work on President Wilson and get the United States into the war.” That’s how the United States got into the war. We had no more interest in it; we had no more right to be in it than we have to be on the moon tonight instead of in this room. There was absolutely no reason for World War I to be our war. We were railroaded into — if I can be vulgar, we were suckered into — that war merely so that the Zionists of the world could obtain Palestine. That is something that the people of the United States have never been told. They never knew why we went into World War I.
After we got into the war, the Zionists went to Great Britain and they said: “Well, we performed our part of the agreement. Let’s have something in writing that shows that you are going to keep your bargain and give us Palestine after you win the war.” They didn’t know whether the war would last another year or another ten years. So they started to work out a receipt. The receipt took the form of a letter, which was worded in very cryptic language so that the world at large wouldn’t know what it was all about. And that was called the Balfour Declaration.
The Balfour Declaration was merely Great Britain’s promise to pay the Zionists what they had agreed upon as a consideration for getting the United States into the war. So this great Balfour Declaration, that you hear so much about, is just as phony as a three dollar bill. I don’t think I could make it more emphatic than that.
Versailles.
That is where all the trouble started. The United States got in the war. The United States crushed Germany. You know what happened. When the war ended, and the Germans went to Paris for the Paris Peace Conference in 1919 there were 117 Jews there, as a delegation representing the Jews, headed by Bernard Baruch. I was there: I ought to know.
excerpt from
http://qbitblog.wordpress.com/2009/08/27/benjamin-h-freedman-a-jewish-de...
you type well for being 114 years old
The eastern European Jews, who form 92 per cent of the world’s population of those people who call themselves Jews, were originally Khazars. They were a warlike tribe who lived deep in the heart of Asia. And they were so warlike that even the Asiatics drove them out of Asia into eastern Europe.
They were phallic worshippers, which is filthy and I do not want to go into the details of that now. But that was their religion, as it was also the religion of many other pagans and barbarians elsewhere in the world. The Khazar king became so disgusted with the degeneracy of his kingdom that he decided to adopt a so-called monotheistic faith — either Christianity, Islam, or what is known today as Judaism, which is really Talmudism. By spinning a top, and calling out “eeny, meeny, miney, moe,” he picked out so-called Judaism. And that became the state religion. He sent down to the Talmudic schools of Pumbedita and Sura and brought up thousands of rabbis, and opened up synagogues and schools, and his people became what we call Jews.
And further, the Talmud teaches that whenever you take an oath, vow, or pledge, you are to remember the Kol Nidre prayer that you recited on the Day of Atonement, and you are exempted from fulfilling them. How much can you depend on their loyalty? You can depend upon their loyalty as much as the Germans depended upon it in 1916. We (the US) are going to suffer the same fate as Germany suffered, and for the same reason.
As long as Dick Cheney goes with you "we're" good
what? he'd look great in a little moustache and tight leather pants
We all underestimate the desire for power of the top 500 families in the US and UK.
Working hypothesis:
Money & finance are functions of imperial strategy. The outcome (deflation, inflation) will be manipulated and depends on the intended result.
E.g.
Objective 1 = reactionary regime in Germany after WWI
--> no allied confiscation of German war bonds from absentee owner class at Versailles.
Objective 2 = radicalization of German masses
--> no redemption controls of German war bonds / no capital flight controls --> hyper inflation
Objective 3 = rebuilding German industry and military for WWII against communism
--> Dawes plan funded by easy money policy in the US
Objective 4 = installing the programmed disposable dictator
--> implosion of Creditanstalt Bankverein (tied to the City through numerous intricate contracts)
Objective 5 = encourage the disposable dictator and stake the post war claims
--> US direct investment in Third Reich through Ford Motor, Dupont, and Dow Chemical (never mind that profits could not be repatriated in the 1930s).
Possible application to the present:
Objective = Sino Russian war
--> regime change in either country through Harriman-like sponsorship of new disposable dictator and deflation to get him into place.
what are you guys talking about ...uncle ben said "there is no inflation"... F Ben
Hey Ben try eating and fueling up your car. What % of your weekly paycheck goes towards that....oooohhh thats right the current measurments of inflation CONVENIENTLY excludes food and energy....YEAH cause reduced prices for flat panels is a real measure....how many tv's do you buy in a month vs how much gas, milk, bread...
According to a recent CareerBuilder survey, 40 percent of all Americans live paycheck to paycheck all of the time, and 77 percent of all Americans live paycheck to paycheck at least part of the time. -August 17th, 2012
Great Job Ben you did make history....the worst person for premoting the american dream in the history of our country
images funny images funny images Natural images Natural images funny sms strange images sky funny cartoon images funny images funny images of animals funny birthday images funny images of people 3d images background images love images flower images cartoon images baby images halloween images dog images cat images